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		YOUR FINANCIAL PLAN: Getting Started On A Secure Future
		This Financial Guide tells you how to begin the financial planning process. It provides worksheets to help you find out where you are financially and where you want to be in the future. It will help you identify your goals, determine your net worth and cash flow, plan to achieve your goals as well as begin to put your plan into action.

TABLE OF CONTENTS

Identify Your Goals
Determine Your Net Worth
Determine Your Cash Flow
Plan To Achieve Your Goals
Establish How Much You'll Need
Put The Plan Into Action
INFOSOURCES

Financial security derives not only from acquiring more money, but from planning. A solid financial plan can alleviate financial worries about the future and ensure that you will meet your financial goalswhether they relate to retirement, asset acquisition, education, or just vacations.

This Financial Guide allows you to take the first step towards a solid plan. By following the instructions and guidelines contained in it, you can find out where you are now and how you can put your plan into action.

There are many ways to approach setting up a financial plan. The one outlined in this guide is just one of a number of approaches. Your financial advisor can assist you in setting up the financial plan that best meets your particular situation and needs.

IDENTIFY YOUR GOALS

Spend some time thinking and talking with family members about what you would like to achieve financially. What would make you and them happy? What would be fulfilling? Would you like to start your own business? Retire early? Acquire a vacation home? Pursue a hobby? Travel?

Perhaps youd like to change careers, and youll need money to finance an education in a different field. Or perhaps youd like to have a large amount of money to give to your favorite charity. Once youve got some idea of what youd like to accomplish, fill out the Goals Worksheet below.

• The "Goals" section should state what youd like to accomplish. Be as specific as possible, e.g., instead of writing "Acquire a bigger home," write "Acquire a home with at least 12 rooms in Anytown."
  
• The "Amount" needed should be an estimate of the amount of money youll need. For instance, to retire early, you might estimate that youll need a $400,000 nest egg by the time you reach age 50, or to buy a vacation home, you might estimate that youll need a $50,000 down payment.
  
• hoteles b&b LagosThe "Target Date" section should include the approximate yearor, in the case of short-term goals such as a vacation in the current year, the monthin which you would like to achieve your goal.

DETERMINE YOUR NET WORTH

Your financial plan should include an inventory of the existing financial resources youll be using to achieve the goals you decided on above.

Fill out the personal statement of net worth below. This will enable you to estimate the value of everything you own, minus the value of your debts. When asked for a value, use what the property would fetch if you sold it todayits market value.

It may take some time to do this, but the effort will be worth it.  This is the foundation for your financial plan.

FINANCIAL STATEMENT

Date:_______________

This statement should be reviewed to determine which assets are available to achieve the goals you listed above. If most of your net worth is tied up in your home and personal use assets (such as furniture and cars), you may not be able to achieve your goals. Which assets are available to invest towards your goals? Are they sufficient? If not, you may need to liquidate other assets or start a savings plan out of your cash flow to come up with the necessary funds.

DETERMINE YOUR CASH FLOW

Once youve completed the net worth statement, fill in the cash flow statement below. This will give you an estimate of what you earn per yearyour salary, investment income, and retirement incomeand what your current expenses are. To fill out this form, it will help to have on hand your check register and one years worth of credit card receipts.

Heres why the cash flow statement is so important: Once you know how much is coming in and how much of it is going out in the form of expenses, you can start to make adjustments in your discretionary expenses in order to meet your saving and investment goals.

Period:     _________    to     ___________

Note: Omit one-time, non-recurring items as they should not be used for budgeting or future planning.

How much cash flow is available to accumulate assets for the goals identified above? Is it sufficient in combination with your available assets from your net worth statement? If not, you need to examine the above expenses in detail and cut back on those which are discretionary until sufficient cash flow is identified.

PLAN TO ACHIEVE YOUR GOALS

Now that you know what your goals are and have an idea of your financial resources, its time to begin making a plan.

Financial Safety Net

Determine the funds youll need in case of a disaster or emergency. Coverage of such contingencies comes from insurance and from an emergency fund.

You should have a fund of three to six monthswell leave the number of months to your judgment--worth of living expenses to tide you over in case you lose your job or have unexpected bills. The emergency fund should be kept in an accessible account: a money market account is good for this purpose.

Life Insurance

Make sure your coverage is adequate. You should have enough coverage, should a catastrophe occur, to ensure your family would continue to enjoy the same level of income it does currently.

Disability insurance is intended to replace lost income due to the occurrence of illness or accident. Consider whether you need to provide coverage for your family.

Its important to make sure these types of policies provide adequate coverage. If not, an accident or other catastrophe could wipe out a large portion of your assets or cash flow and you may be unable to achieve your goals.

ESTABLISH HOW MUCH YOULL NEED

Once you have covered your insurance and emergency-fund needs, you can start working towards your financial goals.

Go back to your Goals Worksheet (above) and enter the goal in the Worksheet below. For each goal, estimate the "Cost Of The Goal," i.e., the cost of achieving that goal. For instance, if you want to retire at age 55, estimate the nest egg youll need to accumulate by then. (Dont bother accounting for inflation right now; this is just an estimate.)

Then fill in the "Amount On Hand," i.e., the amount you have already saved for that purpose. For instance, if you have $10,000 in a mutual fund IRA, you might wish to allocate that amount to your retirement nest egg.

Next, write in the the "Amount Still Needed." Then, fill in the "Years To Target Date", i.e.,  the year you want to achieve your goal. Finally, enter the "Intended Yearly Savings," the amount you need to save each year (the "Amount Still Needed" divided by the "Years To Target Date").

Add up the "Intended Yearly Savings," i.e., the yearly amounts you need to save, in the extreme right-hand column. Look back at the "Savings" amount in the expense portion of your cash flow statement (above). How much are you currently saving? How does this compare with how much you need to save to meet your goals?

Most people find that the amount they are saving is inadequate.

• Pay yourself first. Save and invest at least 10% of your after tax income.
• If possible, earn more or spend less. Put a stop to discretionary spending.

You might also want to take another look at your goals. Perhaps they need to be modified or the target dates need to be deferred.

PUT THE PLAN INTO ACTION

Make a savings plan. How will you save the amounts you have targeted? Will you have them deducted from your paycheck? Will you deposit them into a savings account each month?

Once youve accumulated a chunk of savings for each goal, youll need an investment strategy. For each goal, determine how much risk you are willing to take with your savings. This will depend on how much of the money you can afford to lose, how essential the goal is, and your own risk preferences.

You may have read recently about asset allocation, and wondered whether an investor such as yourself needed to worry about this concept. The answer is a resounding yes. Asset allocationnot fund or security selection, not market timingis the most important factor in determining how much money you make on your investments. In fact, according to Nobel-Prize-winning research, asset allocationthe type or class of security owned--determines 90% of the return. The remaining 10% of the return is determined by which particular stock, bond, or mutual fund you select, and when you decide to buy it. In short, asset allocation and diversification are the cornerstones of good investing.

Here, in a nutshell, are important investors:

1. Come up with your financial profile. Your financial profile is the translation of your goals, risk threshold, and time horizon into a graph or curve, using a computer program. The three factors we just mentioned are plotted on a graph according to the programs formulas. Its important to use a good computer program because of the complexity of the task.
2. Find the right mix of "asset classes" for your portfolio. The right mix of asset classes will balance each other in a way that will give the most possible return for the amount of risk you are willing to take. Using computer programs, asset allocation professionals will determine the proper mix of assets for your financial profile. Over time, the ideal allocation for you will not remain the same; it will change as your situation changes, or in response to changes in market conditions.
3. Choose investments from each class, based on performance and costs.

These concepts are discussed further below.

What Is Asset Allocation?

Asset allocation says that the type or class of security you own is much more important than the particular security itself. Asset allocation is a way to control risk in your portfolio. The risk is controlled because the six or seven asset classes that the well-balanced portfolio contains will react differently to changes in market conditionse.g., to inflation, rising or falling interest rates, or a recession.

Asset allocation should not be confused with simple diversification. Suppose you diversify by owning 100 or even 1,000 different stocks. You havent done anything to control risk in your portfolio because chances are that those 1,000 stocks all come from only three different asset classessay, small-cap stocks, large-cap stocks, and international equities. Those classes will react to market conditions in a similar waythey will generally all either go up or down after a given market event.

At the same time as it lowers risk, asset allocation maximizes returns. This is because the proper blend of six or seven asset classes will allow you to benefit from the returns in all of those classes.

How Does Asset Allocation Work?

Using computerized formulas, asset allocator's take down information they glean from a questionnaire you have filled out. This information gives them what they need to become familiar with your needs, constraints, and unique circumstances. The following factors should become apparent from the questionnaire.

• Your risk threshold (how much of your capital you are willing to lose during a given time frame),
• Your goals (whatever financial planning goals you and your family want to achieve), and
• Your investing time horizon (mainly, your age and retirement objectives).

In addition, the professional needs to consider how wealthy you are, what your income tax bracket is, how much of your portfolio needs to be kept liquid, and how often withdrawals will be made from the portfolio.

The allocators goal now is to come up with the right blend of six or seven asset classes, in the right percentages, that will match your financial profile--your risk profile and time horizon.

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Related FGs

• DISABILITY INSURANCE: What To Look For

• DISABILITY BENEFITS: How To Get All You're Entitled To

• CAR INSURANCE: 10 Cost-Cutters To Save You Money

• HOMEOWNERS' INSURANCE: How To Get The Best Coverage and Value

• ASSET ALLOCATION: How To Diversify for Maximum Return

External Sites

• Saving and Investment Strategies are offered by the Securities and Exchange Commission. 
• Social Security Administration provides a guide to Social Security retirement benefits.
• Develop a Financial Plan with Consumer's Almanac.
• A Financial Health Checkup is offered by Quicken. 

Financial Calculators

• How much car can I afford?
• How long will it take to pay off my credit cards?
• How much do I need to save for college?
• How long will it take to save for a major purchase?
• Simple loan calculator.
• How much can I borrow?
• What interest rate would I need?
• How long would it take to pay off a loan?
• What would my payments be?

Home Financing

• Should I refinance my home mortgage?
• What would my payments be for a fixed rate loan?
• What would my payments be for an adjustable rate loan?
• What would my payments be for a balloon loan?
• Should I rent my home or buy?
• Which loan is better, Fixed or Adjustable?
• What would I save if I make extra payments?
• How much house can I qualify for?
• How much house can I afford?
• Advanced mortgage calculator.

Saving For College

• Financial Aid Worksheet

• How do colleges rank?

• College Savings Calculator

• Parent Debt Calculator

• Parent Loan Repayment Calculator

• Student Loan Calculator

• Expected Family Contribution Calculator

• How much money will I have for college?

Books And Other Publications

• Larry Burkett, The Complete Guide to Managing Your Money, (Budget Book Service, 1996), ISBN 0884861325.
• Jane Bryant Quinn, Making the Most of Your Money, (Simon & Schuster,1997), ISBN 0684811766.
• C. Frederic Wiegold, Editor, The Wall Street Journal Lifetime Guide to Money, (Hyperion, 1997), ISBN 0786861320.

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