Financial Planning Cycle 1. Gather Data 6. Review financial plan 2. Identify goals 5. Implement financial plan 3. Identify financial issues 4. Prepare financial plan Source: Financial Planning Association of Australia www.fpa.asn.au
FINANCIAL BUILDING BLOCKS Social Legacy Gifts Gifts to to Charity Charity or Family Family Legacy Estate Liquidity Education Funding Business Continuity Financial independence Income Protection Medical Care Planning Disability Income Protection Retirement Income planning
Components of a Financial Analysis 1. Your Networth - Considers your Assets and liabilities 2. Your Cashflow - Considers your Income and Expenses 3. Risk - What is the impact of Disability, Critical Illness and Death to your spouse and family? 4. Education Plan - What amount is required for a child s tertiery education and how does one achieve this? 5. Retirement Plan - What income is required to provide your desired retirement lifestyle?
Components of a Financial Analysis Calculating Networth 1. Consider total Assets - Cash/Near Cash - Invested Assets - Personal Use Assets 2. Consider total Liabilities - Current Short Term Liabilities - Long Term Liabilities TOTAL ASSETS TOTAL LIABILITIES = NETWORTH
Components of a Financial Analysis Calculating Cashflow 1. Consider total Income - Salary - Bonus - CPF 2. Consider total Expenses - Family, utilities, children - Taxes, loans etc TOTAL INCOME TOTAL EXPENSES = CASHFLOW
Outline of Financial Plan Money Needs in the Event of Death/TPD Education Planning for children Accumulating a Retirement Fund Providing for Medical and Long Term Care Estate & Legacy Planning Business Planning Making a Will
Fundamental references on the Financial Calculator 1. PV - Present Value 2. PMT - Regular payments 3. INT - Interest 4. N - Time 5. FV - Future Value
Risks to consider as one approaches retirement Medical Expenses Hospitalisation and Critical Illness Retirement Income Disability Income Long Term Care Income for Dependents
Calculating Your Life Insurance Needs Current and Future Financial Obligations _ Personal, spouse earnings, savings, investments, CPF, life insurance already owned = Life Insurance Needed
Basic Insurance Coverage Provided Under CPF DPS Dependent Protection Scheme Medishield Medical Insurance for Hospitalisation and Surgical Needs Eldershield Provides for Long Term Care Benefits
Types of Insurance to consider Medical Insurance - Have you upgraded your Medishield coverage? Long Term Care Insurance - Do you have Eldershield? Have you upgraded your Eldershield coverage? Critical Illness Insurance - Provides payout upon diagnosis of a critical Illness Accident Insurance - Provides payout upon Accidental Death, Disability or Dismemberment
Some Terminologies Term Insurance - Protection only for a fixed time period. No cash accumulation. Permanent Insurance - Combination of Protection and Cash Accumulation for a fixed time period or whole of life
THE LEVERAGE OF LIFE INSURANCE TODAY 1 Annual Premium (Capital Transfer) YOU Cash Value Reflected as an Asset 2 3 Insurance Company Upon Diagnosis of Major Illness Tax Free Lump Sum for Medical 4 Your Retirement Income Your Golden Years 5 If You Die Prior to Retirement Income Tax-Free Death Benefit to Family and for Estate Taxes
INVESTMENT & INSURANCE STRATEGY These are the ground rules for building a firm foundation for your family s financial future. SPEC. GROWTH SAVINGS PROTECTION RULE I. Protect first that which you can least afford to lose your potential earning power. RULE II. Always have a cash cushion to fall back on for emergencies and opportunities. RULE III. Save as much as you can starting as soon as you can. RULE IV. Diversify. The best investment is the one that provides you with the most money when you need it the most.
Options for Retirement Income Savings Annuities Investments consider Time Horizon, Risk Tolerance and Inflation Passive Income eg rentals etc
The Longer You Wait.. $1M Start Year 1 Delay till Year 10 Year 20.. THE STEEPER THE CLIMB!
Think Long Term
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