Once you know your financial position as indicated in your
Financial Plan, the next stage is an analysis of your financial habits. Similar
to proper health habits, practice proves that adopting proper financial behavior
is critical to building wealth in the long-term and dealing with financial emergencies
if required. The Financial Plan is based on an analysis of each client's financial
conduct based on five key principles, otherwise known as The Five Fundamentals of
Fiscal Fitness ©.
The Five Fundamentals are:
1. Save at least 10% of annual income income - We will
measure whether you are living within your means and how well you are balancing
future needs against current ones. To fund your future needs you must save and invest
at least 10% of everything you earn.
2. Have sufficient liquidity - - We will measure your
ability to pay bills and fund variable short term cash flow needs. This includes
your ability to survive three catastrophic events within a six month period and
make mortgage payments for 24 months.
3. Fully funded pensions - we will measure your utilization
of qualified tax shelters.
4. Buy the right house for your budget and be a savvy real
estate investor -We will assess if you own the appropriate size home and measure
positive financial leverage and inflation protection. Furthermore, we will measure
your diversification among three major asset classes of Interest Earning, Real Estate,
and Equities. Each class provides major economic functions:
- Leveraged Real estate serves as an inflation protection,
- Interest earning provides safety & deflation protection, and
- Equities enable growth during times of prosperity.
5. Pay off credit cards and consumer debt - We will
measure your consumer (or "bad") debt.
Example Result from Financial Plan Report
Tax and Investment Advantages
Another important part of the Financial Plan is an analysis
of the money you "waste" by not taking full advantage of tax shelters and more efficient
investment vehicles. Maximizing the tax shelter offered by the US Government with
respect to money deposited into retirement plans is the safest and fastest way to
increase your wealth.
Investments are also an area where great savings can be achieved.
By choosing more efficient investment vehicles and reducing the costs of managing
your money, you can accumulate significant wealth. The Financial Plan provides you
with key advice related to tax and investment savings. Our report will indicate
the huge amounts you can potentially save over one year, ten years, and until retirement.