3rd Bac - Financial Plan

 Financial Plan

 

A financial plan is a comprehensive statement of an individual's long-term objectives for security and well-being and a detailed savings and investing strategy for achieving those objectives. A financial plan may be created independently or with the help of a certified financial planner.

In either case, it begins with a thorough evaluation of the individual's current financial state and future expectations.

The Fundamentals of Financial Plans

Understanding the Financial Plan 

Whether you're going it alone or with a financial planner, the first step in the creation of a financial plan involves getting together a lot of bits of paper or, more likely these days, cutting and pasting numbers from various web-based accounts into a document or spreadsheet.

The following steps in creating a financial plan may, of course, be completed by an individual or a couple.

Calculating Net Worth 

You're about to learn your current net worth. List all of the following:

  • Your assets: This may include a home and a car, some cash in the bank, money invested in a 401(k) plan, and anything else you own of value.
  • Your liabilities: These may include credit card debt, student debt, an outstanding mortgage, and a car loan. In some cases, you may have access to a grace period or moratorium. 

Your total assets, minus your total liabilities, equals your current net worth.

Types of ASSETS

Current business assets

Cash
Marketable securities
Accounts receivables
Inventory
Leased office equipment
Bank accounts
Saving Accounts
Contractor payments
Royalties
United States Treasury bills
Stocks
Nontrade receivable
Raw materials
Insurance payments
Notes receivable

Noncurrent business assets

Office furniture
Property
Land
Machinery
Computer equipment
Parts and supplies
Leasehold improvement
Human capital
Brand names
Easements
Broadcast licenses
Patents
Trademarks
Permits
Supplier contracts
Copyrights
Domain names
Franchise agreements
Intellectual property
Landing rights
Goodwill
https://www.indeed.com/career-advice/career-development/examples-of-assets

Types of LIABILITIES
Noncurrent liabilities

Deferred credits
Contingent liability as a result of special circumstances
Retirement benefit payments

Current liabilities

Wages owed to employees
Interest payments for short-term credit purchases
Dividend payments to shareholder

Accrued liabilities

Compensation owed to employees
Outstanding loans
Payroll taxes
Customer Deposits
Pension plan benefits

Interest Payable
Mortgage payable
Salaries payable
Unearned revenue

Types of EQUITY ACCOUNTS

Determining Cash Flow 

You can't create a financial plan without knowing where your money is going every month now. Documenting it will help you see how much you need every month for necessities, how much might be left for saving and investing, and even where you can cut back a little (or a lot).

One way to get this done is to skim through your checking account and credit card statements. Collectively, they should be a fairly complete history of your spending. If your expenses vary a lot seasonally, it's best to go through an entire year, count up all the expenditures in each category, and then divide by 12 to get an average monthly estimate of your spending. This way, you won't underestimate or overestimate what you spend on utilities, or forget to account for holiday gifts or a vacation.

https://www.investopedia.com/terms/c/cashflow.asp


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