Develop and Implement a Financial Plan

Develop and Implement a Financial Plan

Develop and Implement a Financial Plan

Developing and implementing a financial plan should be realistic a definitive timeline. For example, assume that Jennifer age 26 earns $28,000 annually and wants to save $15,000 for a down payment on a home within the next three years. She needs a specific financial plan to attain her goal. In this case, Jennifer has $250 deducted from her salary each month, which I s automatically deposited into a savings account. She has also cut back on the purchase of clothes, entertainment, and vacations and saves the money instead. She avoids impulse  buying  and pays off her credit card balances each month to avoid paying exorbitant rates of interest. ln addition, Jennifer used to spend an average of $5 daily to buy lunch at a nearby restaurant; to save money; she now takes her lunch to work (“brown bagging”) rather than eating out. At the end of three years, Jennifer has accumulated $15, 000 and has attained her goal. Her success is due to a realistic financial plan with a definite time limit.

In the preceding example, we discussed only one financial goal. A more comprehensive financial plan with numerous financial goals may require the assistance of professionals. A Chartered Life Underwriter (CLO), Certified Financial Planner (CFP), or Chartered Financial Consultant (ChFC) can provide valuable assistance to help you identify your financial goals and to develop effective strategies for attaining such goals. Competent insurance agents can recommend the right type and amount of life and health insurance, disability income insurance, homeowners insurance, and auto insurance to meet your insurance needs. A competent and ethical account executive of a brokerage firm can provide valuable advice on the various types of investments to meet your investment goals. Finally, you may need an attorney to draft a will or other trust documents, especially in estate planning.


The Benefits of Finance Planning

The Benefits of Finance Planning

The Benefits of Finance Planning

Financial planning offers numerous benefits to consumers. The major benefits include the following:

Attainment of financial: Financial planning can help you attain your financial goals. These goals, as noted, may include accumulating a fund for retirement, providing financial security for yourself and your family, establishing a college education fund for the children, buying your own business, or getting out of debt.

A Higher standard of living: Financial planning can also increase your standard of living Standard of living refers to the goods, services, and luxuries that you can purchase with your present income. Obviously, raising your income is one way to raise your standard of living. For example, if you earn $50,000 annually, you can buy more food, clothes, housing, travel, entertainment, and other goods and services than someone who earns only $10,000 a year.

However, financial planning can increase your standard of living even if your income does not increase substantially. Because of lack of financial knowledge, you may be spending more than is necessary for needed goods and services. For example, you may be paying an exorbitant rate of interest because of high credit card debts and impulse buying; you may be paying more for automobile, homeowners, life, and health insurance than is necessary; you may have to declare bankruptcy if you cannot pay catastrophic medical bills; and you may be paying higher than necessary federal and state income taxes. In addition, some people invest in highly speculative investments and incur substantial losses. Still others fail to plan for retirement and experience a reduced standard of living after retiring. Financial planning can help you avoid these mistakes and thus increase (or maintain) your standard of living.

Protection against major risk. Financial planning can give you the knowledge you need to protect yourself against major risks that can result in great economic insecurity. These risks include the risk of premature death, insufficient income during retirement, poor health, unemployment, destruction or damage to your home and personal property because of natural disasters, and a lawsuit for damages because you have injured someone.

Saving for Specific Needs

Saving for Specific Needs

Saving for Specific Needs

When looking to the future a common financial goal is to save money for specific needs. Consumers typically save for a wide variety of reasons. A survey by Merrill Lynch showed that retirement is the major reason for saving, followed by a desire for financial security for the family and children. Saving for college and a home or to pay a title loans Atlanta is also important to many consumers.

It is also desirable to save for an unexpected emergency. Consumer experts typically recommend that you accumulate a liquid emergency fund equal to four to six months of take-home pay. Thus, if your monthly take home pay is $1,500, you should have a liquid emergency fund of $6,000 to $9,000. An emergency fund is especially important with respect to the risk of unemployment. Most workers will become unemployed several times during their working careers. A liquid fund of four to six months of take-home pay can substantially reduce the painful financial shock and economic insecurity that result from unemployment.

Although saving for specific needs and having an emergency fund are extremely important, many Americans have little or no savings. Saving is a low priority item for many Americans.

Shows that household savings in the United States as a percent of disposable personal income (personal income less personal taxes) averaged only 4.6% in 1993, last among our major international competitors.

Protection of family and Property

Another important goal of financial planning is the protection of your family and your property against a certain risk that create economic insecurity. Risk traditionally has been defined as uncertainty concerning the occurrence of a loss. Certain risk can create great economic insecurity for individuals and families. These risks include (1) premature death of a family head in which the family’s share of the deceased breadwinner’s earning is lost forever; (2) insufficient income during retirement and reduced standard of living; (3) poor health and catastrophic medical bills and the attendant loss of earned income and (4) (4) pay high interest on commercial truck title loan.

Retirement Planning

Retirement planning

Retirement planning

Retirement planning is an important financial goal for looking a comfortable future before you get a semi title loan. Most workers want to be financially independent and have a comfortable retirement.

Although most workers are eligible for social security benefits, for average income workers, social security retirement benefits will replace only about 43% of their gross earnings in the year prior to retirement. Thus, most retired workers will need additional income just to maintain their present standard of living during retirement. You can obtain additional income by having a separate retirement program and, if available, by participating in a private pension plan sponsored by your employer.

Although retirement planning is important, many workers are not saving enough to retire comfortably. A study by Merrill Lynch showed that the baby boom generation (those born between 1946 and 1964) has saved only about 35% of the amount needed just to maintain the standard of living in retirement that they have attained during their working years.

In addition, the amount of financial assets accumulated by older workers on the threshold of retirement is relatively small, especially for minority workers. The Rand Corporation analyzed the amount of financial assets owned by older households and individuals ages 51-61. The study showed that in 1993, the median amount of financial assets owned by middle-aged white households was only $17,300. For middle-aged blade households, the median amount of financial assets owned was only $400, and for Hispanic households, only $150 these amounts are small. Thus, any supplemental retirement income will also be small. As a result, such workers will likely be faced with a reduced standard of living after retirement.

The preceding data show that many workers are inadequately prepared for retirement. Saving for retirement should receive greater emphasis in a financial plan even if the amounts saved are relatively small. Because of the powerful effect of compound interest, small amounts saved regularly can accumulate to substantial; amounts over a long period. For example, if you save and invest only $10 monthly in a growth stock mutual fund in a tax-deferred retirement plan and earn an average annual return on 10%, you will accumulate more than $22.000 at the end of 30 years then you can get an Atlanta car title loan.

Minimizing Taxes

Minimizing Taxes

Minimizing Taxes

 Another important financial goal is to minimize the taxes that you pay for your semi truck title loans. Consumers pay a wide variety of taxes, many of which are hidden. These taxes typically include state and federal income tax, state and local sales tax, federal estate tax, property tax, gasoline tax, telephone tax, and numerous additional taxes. These taxes overall consume a large part of your total income. An average income worker can easily spend 40 percent or more of his or her total annual income on taxes in all forms. Thus, an important financial planning goal is to minimize the amount of taxes that you must pay, which then increases the amount of income available for saving and investing.

Estate Planning

Estate planning is another important part of a total financial plan. Estate planning is a process for the conservation and distribution of a person’s property and wealth after he or she dies. The general objectives of estate planning include conserving estate assets after death; distributing property according to the decedent’s wishes; minimizing federal estate and state inheritance taxes; providing liquidity to pay the costs of estate settlement; and providing for the financial needs of surviving family members.

View of Financial Planning Over the Life Cycle

The following section provides a brief overview of some important financial factors that you should consider in the development of a financial plan over your life cycle. It sets the stage for specific financial planning recommendations that will be discussed.

After you finish college or school and are earning an income, get into the habit of saving money. One basic rule is to save at least: 10% of your gross income. You could save part or all of your next pay raise. The money you save should be deducted automatically from your paycheck by payroll deduction; that way you reduce the temptation to spend the money. In addition, resist the temptation to spend money recklessly by the overuse of credit cards. Younger consumers tend to spend a disproportionate amount of their income on new clothes, costly vacations, and new technology (such as cellular phones). They typically finance such expenditures by using credit cards that carry high-interest rates. In addition, you should carefully evaluate the decision to purchase a new vehicle that has high monthly payments. High monthly payments on a credit card will leave little or no discretionary income available for saving and forces you to get a car title loans in Atlanta.

Kicking The Credit Card Habit

Credit Card habit

Credit Card habit

Why do you need a fistful of credit cards? They are heavy. They make your wallet bulge. They cost money.  You can’t remember how much you have charged on them. Now that even the hoi polloi carry gold cards, prestige lies in flashing a plain vanilla card. For an even bigger thrill, pay cash.

As a status symbol, the credit card is finished. It is now just a transactions workhorse and having too many of them says you are dumb. Assuming, as I do, that you want to get out of debt and build some saving, plastic ought to serve a single purpose: convenience. You put it down instead of writing a check or paying cash. At the end of the month, you pay the bill.

Not that you are perfect. You will still stretch the occasional bill over two or three months; maybe at Christmas or after a vacation. But your goal is never to charge any more than you can easily repay. For the twenty-first century, debt is out.

How to get rid of consumer debt;

It is so simple that I am almost embarrassed to mention it. Don’t borrow anymore. That is all there is to it. Say to yourself, “Today, I am not going to put down a charge card for anything.” When you buy something, pay cash or write a check.

Tomorrow, say the same thing: “I am not going to put down a charge card for anything. I am not even going to borrow $10 from a friend.” Take it slowly, one day at a time. It is like stopping smoking. You will be nervous at first; you won’t see how it is possible to live; you will suffer relapses and sneak a new debt or two. But when you get up every morning, renew your pledge. To make it easier, quit carrying credit cards.

I hear you saying, “I can’t get along without a credit card.” Of course, you can. You can pay by check or debit card. On trips, you can use traveler’s check. You may have to show a credit card to rent a car. But when you bring the car back, pay the bill by personal check or travelers check.  (If the rental agent won’t take your personal check, pay by card and immediately make out a check to the credit card issuer; pay this bill the moment it arrives.)

Naming an Executor

The executor or, in many states, personal representative sees that your will is carried out. It is tiresome, detailed, time-consuming, thankless job. You are doing no favors for the person you name. All the property has to be tracked down and assembled (no easy job if you did not keep good records). Creditors notified. Heirs dealt with tactfully. Arguments settled. Bills and taxes paid. Property appraised and distributed or sold. Life insurance claimed if it is payable to the estate. Investments managed until they can be distributed to their new owners. Final accounting to be made, to the heirs and, perhaps, to the courts.

The executor usually works with a lawyer, so you do not need an expert in estate law or high finance. You need virtues that are much harder to find. An executor has to be willing, reliable, well organized, honest, responsible about money, fair-minded, and sensitive to the worries of the heirs. The usual practice is to ask able heirs (or friend) to do the job. If you name a professional executor a bank or a lawyer include a family member as co-executor, just to keep things moving along. Get permission before putting down someone’s name. If money is misspent or errors made, the executor can be held personally responsible.

A friend or family member usually doesn’t ask for compensation. But you should specify this in the will; otherwise, they may claim the commission allowed by law, even though you expected them to serve for nothing. (In large estates, it may be cheaper for a family member to take a commission than to take the same amount of money as an inheritance. The income tax on the commission may be lower than the death tax on the net estate.)

When banks or attorneys are executors, however, they may charge, and charge, and charge sometimes by the hour, sometimes a fixed fee, sometimes a percentage of the assets in the estate that goes to probate. Your estate will pay less if you keep the executorship at home and let your family hire a lawyer by the hour or by the job. (Executors should shop lawyers, asking more than one what they will charge; like any other business people, lawyers cut fees for jobs they want and that they know are up for bid. Your family may not even need an attorney.

More Living Trust Facts

Trust facts

Trust facts

The states have different title loans rules and taxes affecting trusts, so see a lawyer if you move. Your trust document should specifically allow for a change of state so the laws that govern the trust can change, too. Otherwise, the laws (and taxes) of your former state apply unless you get a court order allowing a change.

There’s a lot of legwork involved in transferring property into a trust. Your lawyer will prepare the new deed for your real property, as well as transfer letters for assets held by your bank, broker, and other financial connections. But you will have to follow up.

Don’t make the trust the beneficiary of your 401(k) or Individual Retirement Account. If you died, that whole sum of money would go into the trust and be taxed right away. By contrast, a spouse or other individual beneficiary can roll the 401(k) into an IRA and take payments over many years. That spreads the taxes out.

You can name the trust beneficiary of your life insurance policy. The proceeds would then go into the trust to be distributed as you directed. Before doing this, however, married people should ensure that a surviving spouse will have plenty of ready cash in case there is a delay in getting the trust paid out.

Your trust should define what it means to be disabled, requiring a successor trustee to handle your affairs. For example, “I shall be deemed to be disabled when two physicians licensed to practice medicine in my state sign a paper stating that I am disabled and unable to handle my financial affairs.” The same language can be used to determine when your disability has passed.

To change the terms of a living trust, you prepare a written amendment. Don’t scratch in the changes on the trust document; they won’t be accepted. In some states, the amendment has to be signed and, maybe, witnessed just like a will. But in most states, a notarized signature will do.

A married couple should ask an experienced estate-planning lawyer (not a lawyer or insurance agent who is hard-selling trusts) whether they need one trust or two. In community property states, it is common to have a single trust document for all the property; each spouse’s separate property interests are segregated within the trust; at the death of the first spouse, the trust divides into multiple trusts include the title loans.

Estate Foreclosure

Estate Foreclosure

Estate Foreclosure

The majority of the states limit the mortgagee’s right to a deficiency judgment. Some limitations are procedural. For example, many states impose strict notice requirements and the time limits on the mortgagee. Failure by the mortgagee to comply with these limitations can destroy the right to obtain a deficiency judgment.

Likewise, failure to comply with “one action” rules also can destroy the mortgagee’s right to the deficiency judgment. Under such rules, the mortgagee’s only remedy on default is foreclosure, and he must obtain any deficiency judgment incident to the foreclosure proceeding. Two justifications are often cited for this rule: One is to protect the mortgagor against the multiplicity of actions when the separate actions though theoretically distinct, are so closely connected that normally they can and should be decided in one suit.

The other is to compel a creditor who has taken a mortgage on the land to exhaust his security before attempting to reach any unmortgaged property to satisfy his claim.

Similar restrictions sometimes apply to the power of sale foreclosures. In such situations, the exercise of the power of sale is a condition precedent to a subsequent action at law for a deficiency. Some commentators refer to this restriction as the “security first” principle.

There are also important substantive limitations on deficiency judgments. As a result of the depression of the 1930’s many state enacted “fair value” legislation and most of this legislation is still in force. Fair value statutes usually define the deficiency as the difference between the mortgage debt and the fair value of the foreclosed land, rather than as the difference between the mortgage debt and the foreclosure sale price of the land. Depending on the statute, a court or a jury may determine the fair value. Most of these statutes were designed to deal with depression conditions when foreclosure sales typically yielded nominal amounts. This legislation, however, also assumes that even in a stable economic climate, a forced sale of real estate will yield a price significantly lower than otherwise would be obtained by private sales.

Closely related to the fair value approach are the appraisal statutes used in a few states. This legislation requires the court or the person conducting the foreclosure sale to appoint an appraiser, who determines the value of the property. For example, in south California, a statute reduces the deficiency by the difference between the foreclosure sale price and the appraisal amount.