Richard Erling Charles Heldridge

Taylor Kirk James Morgan

Mario and Meredith Sanchez Financial Guidance Profile

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Table of Contents

Statement of Income and Expenses 3 Balance Sheet 4 Housing Ratio 1 5 Housing Ratio 2 6 Ratios Compared 7 Emergency Fund Ratio 8 Debt to Total Assets 9 Net Worth to Total Assets 10 Current Ratio 11 Monthly Payments 12 CFP Fees and Responsibility 13 Financial Record Keeping 14 Refinancing Your Home 15 Insurance 16 Settlement Options 17

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3

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Housing Ratio 1 displays the ratio of all Principle, Interest, Taxes, and Insurance (PITI) that encompasses your salary. Simply put, for every dollar you earn, about fifteen cents is dedicated to the PITI. Housing Ratio 1 should never exceed 25%. Your housing ratio 1 is far below the recommended limit of 25%.

14.81%

100%

Housing Ratio 1

HR 1 Salary

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Housing Ratio 2 is composed of Housing Ratio 1 as well as other monthly debt payments that include automobile loans, student loans, bank loans, etc. Basically, Housing Ratio 2 costs about $0.28 of each dollar you earn on a monthly salary. Housing Ratio 2 should never exceed 36% of monthly salary. Your housing ratio 2 is far below the recommended limit of 36%.

27.96%

100%

Housing Ratio 2

HR 2 Salary

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This page displays the amount of money monthly (percentage wise) that is spent on housing (analyzed in two forms) and the amount of money monthly put into savings. The savings ratio displayed here is not at an adequate level considering you have three financial goals that require a saving ratio of 15% or more.

14.81%

27.96%

10.67%

46.57%

Ratios

Housing Ratio 1 Housing Ratio 2 Savings Ratio

Total Salary

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This is your Emergency Fund Ratio (E.F. Ratio). This displays how many months worth of salary is saved in the instance that both of you lose your income. You currently have a little over three months worth saved at this point. The optimal amount to have saved is between three to six months.

0%

100%

200%

300%

400%

500%

600%

6 Months

EF Ratio

3 Months

600%

316.61% 300%

Emergency Fund Ratio

Emergency Fund Ratio

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This is a diagram that displays the total amount of debt you have to the total amount of assets you own. Simply put, this is showing you that over 55% of the total assets you is still owed to creditors. The 55% is appropriate, even if it may seem to be relatively high. This ratio is commonly high for younger people at or about 80%, where as it is commonly low for those nearing retirement at or about 10%.

44.25% 55.75%

Debt to Total Assets

Total Assets Debt

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This chart is a complement to the previous chart, the Debt to Total Assets chart. This chart is displaying the total amount of net worth you have in comparison to the total amount of assets you own. The percentage of debt from the previous chart added to the percentage of net worth on this chart should equal to 100%.

44.25% 55.75%

Net Worth to Total Assets Ratio

Net Worth Total Assets

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This chart shows the your ability to meet short-term obligations. Your Current Ratio is at 40.81%. This is not good considering that a larger current ratio implies more liquidity and may have a greater ability to pay liabilities as they come due. The goal is to have a current ratio that is greater than or equal to 1.

40.81%

59.19%

Current Ratio

Cash & Cash Equivalents Current Liabilities

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This chart displays the amount of money that is being spent on your three highest expenses. Your highest expense is discretionary expenses which include going out to eat, hobbies, maid, etc. Discretionary expenses are expenses that you do not need to spend money on in order to survive. Your second highest expense is your vehicle payments and third highest is credit card payments.

33.99%

3.29%

7.53%

55.19%

Monthly Payments

Discretionary Cash Flow Credit Card

Vehicle

Income

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CFP Fees and Responsibility

At this point I would like to address the concerns you mentioned in our initial discussions. Specifically, you were uneasy about commission charges and some of the stories you have heard regarding the financial services industry.

Unlike many “financial planners” in the financial services industry, I am a Certified Financial Planner (CFP). There are a series of educational requirements for becoming a CFP, the first of which is a bachelor’s degree. Following that, an aspiring CFP must complete an educational program overseen by the CFP board. In addition, they must pass the CFP examination after completing these programs. Still, before a CFP can actually become certified, they must have at least two years of experience helping people create financial plans. The CFP certification next to my credentials means that I have met both the educational and experience requirements, and am ready to help you with your financial plan.

There are a series of different licenses that allow a financial planner to work with clients. The series 6 and 7 licenses allow a planner to receive compensation with either a fee-based or commission-based fee structure. Many of your concerns about planners with commission-based charges must be considered when dealing with these type of licenses. You’ll notice I don’t have either one of these licenses attached to my name. I hold a series 66 license, which mandates that its holder receive fee-based compensation only. A licensee with a series 66 is not allowed to charge based on commission. My license actually prevents me from working on commission or directly selling you any type of securities, removing a major conflict of interest. In addition, this license comes with a fiduciary requirement as a registered investment advisor. Basically, this fiduciary requirement mandates that a financial planner act with the client’s best interests in mind, rather than their own interests. This requirement is backed and enforced by the CFP Board.

The horror stories you reference actually don’t involve true financial planners. Unfortunately, the CFP designation is not well regulated at this time, so many can legally claim to be financial planners without having actually completed the requirements to become a CFP Professional. However, you can determine who the real financial planners are by looking at the CFP designation and the licenses next to their name. For example, I have the CFP designation and a Series 66 license, which signals that not only am I an accredited CFP Professional, but I have a fiduciary responsibility as a registered investment advisor.

Ultimately, most of your concerns are addressed by the requirements of my accreditation and license. Becoming a CFP Professional requires an educational requirement beyond a bachelor’s degree and an experience requirement of at least two years of working directly with clients to create financial plans. The license I hold requires me to put your interest firsts and will not allow me or any colleagues with the same license to charge on commission. When it comes to your financial plan, your needs will come first in every step of the process.

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Financial Record Keeping

Since you are concerned with financial record keeping, here are a few steps that should help you organize and secure your confidential financial information:

1. Collect all your financial documents together and store them in an accessible yet protected place. A fireproof safe would be an ideal location for these documents. If you want to keep paperless records, set up a file system on your computer (and back it up on a secured device).

2. Organize all financial information into separate files. Some suggested examples for these files:

· Financial/legal advisors (names, contact information) · Your financial goals – children’s college funds, retirement plan, and debt

repayment plan · Bank accounts – include your savings, checking, and CD accounts here · Investment information – investment portfolio information · Information and documentation for personal use assets – everything listed

on the balance sheet under personal use assets (home, boat, vehicles, etc) 3. Take measures to protect your financial information from identity theft. · Shred all documents before disposal. · Do not carry around sensitive information (such as your Social Security

number) on your persons. Keep that information in a safe place at all times. · Install antivirus software and keep your computer updated at all times to

protect electronic information. · Use strong passwords to protect online information (use different

passwords for different accounts). 4. Update and recognize financial information periodically to reflect changes.

Source list:

http://personalfinanceinsider.com/financial-records-101-financial-recordkeeping-made-easy/

http://www.forbes.com/sites/financialfinesse/2013/06/27/how-to-protect-your-financial-privacy/

https://www.consumer.ftc.gov/articles/0272-how-keep-your-personal-information-secure

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Refinancing Your Home

15 year 4.2% loan is $1391

per month HR1: 12% HR2: 25% Savings Ratio:

10% Lifetime Savings:

Over $150,000

30 year 4.6% loan is $951

per month HR1: 8% HR2: 21% Savings Ratio:

18% Lifetime Savings:

Over $60,000

Both of these options have their benefits and their fallbacks. The 15 year option does increase the overall monthly expense and does decrease the housing ratios and savings ratio dramatically, but the lifetime savings increase to $150,000. The 30 year option does decrease the overall monthly expense and increase the housing ratios and savings ratio, but the lifetime savings will only be $60,000. FC CFP recommends the 30 year option out of the two due to the increase in the savings ratio (which would exceed the 15% minimum recommendation) and it will still increase the lifetime savings. Note: both monthly payments do not include interest, taxes, and insurance.

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Insurance A split limit policy of $50k/$100k/$50 for liability

limits and $500 deductibles means that Mario and

Meredith are covered for up to a maximum of $50k

for bodily injury coverage per person, $100k for total

bodily injury coverage per accident, and $50k in

total property damage liability coverage per

accident.

Mario and Meredith will only have to pay the first

$500 in damages, the insurance company will cover

the rest, up to $50,000.

Having your home covered 100% of its actual cash

value and the replacement cost coverage means

that the house is completely covered in the event of

a loss or some kind of disaster.

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Settlement Options In regards to your last question; the Federal Deposit

Insurance Corporation (FDIC) recently raised the standard insurance amount from $100,000 to $250,000 per depositor, per insured bank, for each account ownership category. Meaning if you were to want to not take any risks and put them in a savings or checking account, you could open two individual accounts (one for each of you) with $200,000 each, and one joint account—at another bank—with $400,000; the FDIC would insure the full $800,000.

FDIC insurance covers all deposit accounts, including: · Checking accounts · Savings accounts · Money market deposit accounts · Certificates of deposit

The FDIC does not cover investment products such as: · Mutual Funds · Annuities · Life insurance policies · Stocks · Bonds · Money Market Funds It also does not cover any deposits at non-FDIC-

insured institutions.

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