cash flow management Flashcards
Practice Standard 1
understand clients personal and financial circumstances
Practice Standard 2
identify and select goals 🥅, prioritize goals
financial and investment strategies are based on the client’s what
client’s capacity and willingness to assume risk 😬
identifying potential goals
-discuss assessment of personal financial circumstance
- effect one goal may have on another
apply reasonable assumptions/estimates to goals (things that affect goals)
life expectancy 🏥, inflation rates 💲, tax rates , investment return, other material estimates and assumptions
selecting and prioritizing goals
discuss any goals that might seem unrealistic 🧐
goal’s must be consistent with client’s what
values, attitudes, expectations, time horizons
goals and objectives provide
focus 👓, purpose, vision and direction➡️for the planning process
objectives must be
clear and measurable, relevant to the scope of the ENGAGEMENT
discussion of goals must be
documented
financial goals can be paid for by
- committing current assets and resources
- relying on future income/earnings
clients w/o sufficient resources to meet goals must
reprioritize, refine or eliminate goals, reposition assets or redirect income
EXTEND timeframe
A goal is
a global 🌎statement of a CLIENTS personal or financial PURPOSE
broader and more encompassing than objectives
an objective is
definite financial target that SUPPORTS a goal
want 1.5 mil in retirement so objective is accumulating 250k in roth
wants are
desires or pleasures
needs are
required to sustain life
first step in goal setting process (what does client do?)
-have client write down 📝personal and financial goals as specifically as possible
-HOW will the goal be attained
goal timeframes
short term < 2 years
intermediate 2-10 years
longterm > 10 years
first question to ask in cash flow analysis
does the client have ENOUGH CASH and LIQUID ASSETS assets available for EMERGENCY 🚨 fund & meet ongoing expenses?
2nd step in goal setting process think calendar
assign dates/timelines to goals
“Fresh Start”
increases a person’s chance of achieving their goals, new year, new month, birthday
3rd step in goal setting process think money
determine current dollar amount to fund each goal
what happens when you have a shortfall to meet your goal
savings strategy must be developed using cash flow mgmt and and budget to generate addtl savings
planned savings are what type of expense on cash flow/budget?
fixed
How many goals selected for immediate action?
no more than 4
Should you look at each goal in isolation?
No - goals may be independent or interrelated. One strat beneficial to one goal may be detrimental to another goal. May have to work on goal 1 then Goal 2 etc.
“pay yourself first”
structured strategy to help save more on a regular basis
Emergency fund should be invested in what type?
NAV = 1 or very close to 1
3 categories of cash flow
operations, investing, financing
How can you tell which accounts are covered by FDIC?
look at who owns the accounts - joint and solely owned accounts are insured up to 250k
