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LMs BIF CFP Review > Gen Prin: All Other > Flashcards

Gen Prin: All Other Flashcards

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CFP® flashcards
1
Q

Fin Aid. EFC expected family contribution
Memorize %s

A

Assets and income in STUDENT’s name is more punitive.

Student assets 20%
(exc Able under 100k excluded)
Student income 50% of amount above 9,410

Parents assets 5.64%
Parent income 22-47% after deduction protected amount

Home equity and retirement assets NOT count

2 year lookback

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2
Q

Education funding overview

A

See snapshot BIF page

If others will contribute more wait until years three or four

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3
Q

Education. Step 2 education
Interest rate to use
learn shortcut

A

shortcut is Ex. 8 port, 3 ed infl
8-3 / 1.03

((1+Rp) / (1+Ed inflation rate)- 1) *100

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4
Q

Federal securities legislation thru 1940

A

Sec of 1933. Primary markets

Sec of 1934. 2ndary mkts
Also established SEC

Glass-steagall. Created FDIC Separated commercial and investment banking.

Fancy glass buildings separate and insure that money

Maloney act 38. OTC mkts
Over the counter like baloney

Federal bankruptcy act of 1938.
Provides for liquidation of hopelessly troubled firms and provides for reorganization of troubled that might survive

Investment COMPANY act of 1940 Extended security laws to INVESTMENT companies/MUTUAL FUNDS

Investment ADVISORS act of 1940
Advisors must register
Required registration for, and regulated activities of, investment advisors

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5
Q

Federal securities regulation after 1940

A

Mccarran- Ferguson act of 45
Insurance to be regulated at the state level
Remember Karmen’s auto insurance trial in Texas

Securities investors protection act 1970. Est SPIC.. cash up to $250 and up to $500 in securities and cash

Insider trading and securities funds enforcement act of 1988

Gramm Leach Billy act 1999
Privacy info. Remember BG and no meetings in PRIVATE

Us Patriot act of 2001. KYC bc of terrorism money laundering
Requires broker dealers and others to have internal policies procedures controls to meet the end kyc know your customer mandate as an effort against funding terrorism by money laundering

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6
Q

Credit score makeup
List categories and %s

A

CALMN
35% Credit history
30% Amounts owed
15% Length of credit history
10% credit Mix
10% New credit

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7
Q

Credit scores - FICO

A

Below 580 is poor

At these or above
580 fair
670 good
740 very good
800 exceptional
850 max

Or remember 580 then Plus 90 then plus 70 then plus 60

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8
Q

Economy. Expansion and contraction indicators

A

Early expansion
Policy stimulative

Mid
Policy neutral

Late
Policy contractionary

Contraction
Policy eases

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9
Q

Fin Ratios

A

Roa and roe are EAT

Debt to equity is long-term debt

Debt ratio is TOTAL debt to
Total ASSETS

Tie. Ebit/int exp

For below use 120000,10000
Inventory turnover
Cogs/avg inv

Days to sell
365/turnover

See picture for more

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10
Q

Acceptable investments for emergency fund

A

Cash, checking and savings,cds, money market mutual funds, t bills, cash value life insurance, lines of credit

I’m surprised at
home equity loans
Cv life
Takes time to get these

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11
Q

Fin Aid. Grants

A

Pell and FSEOG
Need based
undergrad only

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12
Q

Fin Aid. Direct subsidized loans

A

needs based
undergrad only
USDOE pays interest
- while in school
- 6 months after (grace period)
- and while in deferrment

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13
Q

Fin Aid. Direct UN subsidized

A

NOT needs based
all levels (Grad, undergrad)

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14
Q

Fin Aid. PLUS loans

A

non need, all levels
PLUS is to parent
grad PLUS is to student
CANNOT have adverse credit history
Max = cost of attendance less other fin aid rec’d

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15
Q

Fin Aid. Work study

A

EmployERs must match fed & state $

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16
Q

Able plans (529 Able)
What affects eligibility for public benefits?
How was it UNlike a college 529

A

Eligible if disabled or blind before age 26. Must be on SSI, SSID or have dis cert from a Dr

UNlike 529
Contributions limited to 18k
Only ONE account per person
Elig ind is always BEN and OWNER

Amt over 100k affects eligibility for public benefits
SSDI, SNAP, HUD, FAFSA, Medicare/aid

Can roll 529 college into Able

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17
Q

Fin Aid. Maximize

A

If getting gifts from others, first USE UP students, then parents. B/c you get more aid once your income and assets are down.

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18
Q

Education credit LLC

A

Up to $2,000 PER RETURN
20% of max 10k
Tuition and fees req for att only

NOT refundable (up to 1k of AOC is)

ALL years of post sec ed AND for courses to acquire or improve skills

Do not need to be degree seeking

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19
Q

Education credits. AOC

A

Per student. can have multiple on one return.
Partially refundable (40% up to 1k)
Must NOT have felony drug conviction
Tuition, req fees, and materials needed for course of study (books, computers usually)

PHASEOUT
(Upper Limit - AGI) / phaseout range 20k for MFJ * amount otherwise qualify for NOT max

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20
Q

Exam tip. Education
Don’t “double dip”

A

Select answer that has only ONE tax advantaged account b/c we do not know how much $ and if there is enough for multiple

so if answer has cking, gift, 529. ok
but if cking, gift, 529, AOC - don’t select it UNLESS given amts and know there is enough. CFP checking to see if you know you can’t double dip

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21
Q

College funding

A

MIght not have to do all parts, read carefully.

Step 1. Compute cost of 1st year in future $

Step 2. Compute PV of the 4 years at beg of Year 1.
Set to BGN mode, annual
Rate is adj for ed infl - see sep card
years is 4 or # IN college
PMT is step 1 amount
Compute PV

Step 3. Compute amount to save. watch for annual, monthly, beg or end of period deposits for mode and n
n = years *12 if monthly
FV is the PV you calc in step 2
CPT PMT or PV if lump sum

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22
Q

Coverdell
Income limits
Annual limits
When. Two ages….

A

-Income limits. Phaseout starts at 95/190
-Contribute B4 age 18 or sp needs
- use by age 30
-Limited to 2k/year
-Invest in anything at brokerage vs only mf at 529
-K-12 $ no $ limit and can use for tutoring, uniforms etc

Like 529:
Completed gifts not in donor’s estate
Assets of PARENT for Fin Aid
NQ w/d penalties apply
tuition, fees, books,R&B
Nq dist prorated bw earnings and basis

23
Q

529 college

A

-No income limit
-No age restrictions
-No $ limit and can elect 5 yr superfunding for gift tax
-ONLY MFs allowed for investments (vs coverdell anything in your brokerage)
-Only up to $10k for K-12 (vs coverdell no limit)

24
Q

FDIC ownership category

A

up to 250 per ownership category

Single includes sole prop
Joint per co-owner
Retirement
Corporation, partnership
Revocable trust per ben
Irrevocable trust per noncont ben
Employee benefits
Government officials per official

Remember to take their percentage of those joint ones

25
Q

Bankruptcy

A

On record 10 years exc ch 13 7 yrs

26
Q

Business cycle

A

Expansion “recovery”
Contraction

Most notably what is happening with GDP and unemployment

Contraction

27
Q

Early expansion is characterized by

A

GDP and employment rebound
Credit begins to grow
Profits grow rapidly
Policy is stimulative
Inventories are low and sales improve

28
Q

Late expansion

A

Growth moderates
Credit tightens
Earnings under pressure
Policy contractionary
Inventories grow and sales growth falls

29
Q

Contraction

A

Falling activity
Credit dries up
Profits decline
Policy eases
Inventories and sales Fall

30
Q

GDP

A

Total market value of a country’s income and output of goods and services produced by all the people and companies in the US

Important because it indicates the pace of growth or decline of the economy relative to history
Determines which sectors are over or underperforming
Can compare the size and growth rate of economies throughout the world

31
Q

Real GDP

A

Excludes imports, inflation, transactions were money changes hands but no goods or services are produced, excludes income of US citizens working abroad excludes profits earned by us companies in foreign countries

32
Q

GDP formula

A

Y=C+I+G+(X-M)
C equals consumer spending
I investment made by industry
G is government spending
X is exports
M imports

Or it might say NE for net exports

33
Q

Law of supply and demand

A

It’s what will CAUSE PRICES to rise or fall

If supply is greater than demand prices will fall
If demand is greater than supply prices will rise

34
Q

Law of supply

A

An increase in the price will increase the supply because suppliers are willing to supply to consumers when prices are higher

35
Q

Law of demand
Consumer side

A

Inverse relationship between price and quantity demanded
Price goes down quantity demanded goes up

36
Q

Monetary policy
Used to influence the demand side

A

Controls the money supply
Influences lending rates
May slow down or stimulate the economy

Controlled by the Fed. Tools
-Discount rate the rate at which member banks borrow from the Fed
-Reserve requirement percentage of deposits that must be held on reserve
-Open market activities fed buys and sell securities in the open market and also said some margin percent under regulation t

Fed goals
Maintain sustainable long-term growth
Maintain price levels
Maintain full employment

37
Q

Supply vs demand

A

Supply of a particular good depends on
Price
Cost of production including labor
Level of technology

Demand depends on
Price
Prices of other goods especially substitutes
Consumers income and tastes

38
Q

FisCal policy

A

Congress controls
Taxation expenditures and debt management

Congress goals
High employment
Sustainable growth
Stable prices
Tools are spending and taxation

39
Q

Deficit spending

A

Instead of stimulating the economy it can have the opposite effect through the impact to the bond market

40
Q

Prime rate

A

When this is an option regarding monetary policy it is most likely wrong
It can be influenced by the discount rate but is not set by the Fed

41
Q

Financial statements

A

Remember that the personal balance sheet has assets at fair market value

I think they just give us a balance sheet and a cash flow

42
Q

Home buying ratios

A

Front end. Mortgage debt servicing ratio
Piti\gross income <=28%

Back end. Total debt or debt repayment ratio
(Piti+other debt)/Gross income
<=36%

Consumer debt <=20%
Non housing debt divided by net income

43
Q

Emergency fund planning

A

Rules of thumb
Two income household the norm is 3 months or 6 months if both are at the same company

One income household Norm is 6 months

44
Q

Priority. Rule of thumb

A

Usually number One financial planning priority is emergency fund

Except if young children life insurance and guardianship

Or except if you have so much debt you can’t save then pay off the debt is priority

45
Q

Consumer credit protection laws

A

Consumer credit protection act
Equal credit opportunity act
Fair credit REPORTING act
Fair credit BILLING act
Fair debt collection practices act

46
Q

Which org oversees all things debt

A

Consumer financial protection bureau
CFPB

47
Q

Mortgage financing

A

Conventional and FHA do not have funding fees
VA and USDA have no down payment and no PMI
FHA has PMI for 11 years or life of the loan. What??
USDA has fixed only
FHA requires three and a half to 20% down
VA has 2.3 to 3.6% funding fees but waived for disabled

See picture for conventional VA FHA USDA

48
Q

Mortgage in a case study

A

Look to reduce years and rates, when possible

The argument of taking on the lower monthly payment through a longer or variable rate mortgage and investing the balance makes two huge assumptions
The discipline of the investor
The return of the investor

49
Q

Mortgage calculations

A

Make sure that when points rolled into the mortgage balance
You account for them in your calculations

50
Q

Financial aid alternatives

A

Home equity loan
Life insurance cash value
Qualified plans
Defer admission
Community college

Also see tier 3 Roth ira, traditional ira, mutual funds

51
Q

Risk tolerance questionnaire

A

Helps to identify the loss aversion bias. Where losses are perceived as more severe than an equivalent gain

52
Q

How are 529 and Coverdell distributions treated for financial aid

A

They are NOT added back as income on a financial aid application

53
Q

What is an automatic stay
And what is halted or not

A

An order to creditors to halt action
It stops foreclosures of property repossessions and sales of property while repayments are made

It does not stop child support, alimony or criminal suits

Criminal suits are not halted

LMs BIF CFP Review (10 decks)

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