Cash Flow Management

Question 1

Emergency fund for two-income household vs single indivdiual

Answer 1

• 6 months of nondiscretionary expenses for SINGLE
• 3 months for two-income household

Question 2

Home equity line of credit

Answer 2

• These lines of credit are PREESTABLISHED with a bank or lending institution.
• Client does NOT have to use the lona, but the line of credit is available if needed
• Interest may be deductible ONLY IF:
  
  • IT is used to buy, build, or improve the client’s home that secures the loan

Question 3

What should clients do first, create emergency fund or pay off credit card debt first?

Answer 3

Pay off credit card debt first, because the interest received in savings account is much less than the interest you are paying on credit card debt… so you should pay off the higher interest shit first

Question 4

Adjusting cash flow for tax liability - Explain Qualified Charitable Distributions (QCD)

Answer 4

• These are for clients who have annual, charitable goals and are subject to RMD
• These clients should consider QCD to improve cash flow by reducing taxes.
• QCDs are donation made DIRECTLY FROM IRAs to qualified charities and they COUNT TOWARD RMDs and are NOT TAXABLE