Financial Checkup. Use this Checkup to: Get Organized Identify the Gaps in Your Financial Life Work More Effectively With Your Financial Advisor

Transcription

1 Financial Use this to: Get Organized Identify the Gaps in Your Financial Life Work More Effectively With Your Financial Advisor

2 Table of Contents Financial Topics: Page Investments General Investments Retirement Investments Education Funding Estate Planning Insurance & Protection Cash Management Financial Organization Tools: Net Worth Calculation Worksheet Document Locator Form Securities products and services are offered through Prudential Securities Incorporated, a Prudential company. Prudential Financial is a service mark of The Prudential Insurance Company of America, Newark, NJ, and its affiliates. Neither Prudential nor its affiliates are legal or tax advisors.

3 Welcome to Your Financial! Completing Your Financial We have created the Financial to empower you and your Financial Advisor to communicate and work together more effectively. Here are a few tips on how to best complete your checkup: Don t consider this checkup as a test. There are no scores, no passing or failing grades. The questions are designed to focus your thinking on many of the critical elements that should be addressed in building a sound financial plan. Concentrate initially on those financial topics that are important to you today. You may then wish to review those areas where you expect to have a need in the future. Use the questions in each section as a sort of checklist of your financial situation. Identify those areas where you have gaps in your existing plan by checking the appropriate box. If you are unsure about how to answer one or more of the questions, make a note to ask your Financial Advisor to help you understand these issues. Don t forget the two worksheets included at the back of the booklet. Determining your net worth is a great exercise in analyzing your current situation a fundamental step in successful financial planning. The Document Locator Form can help you organize and keep track of your records. Once you have completed your Financial, share your findings with your Financial Advisor. Solicit advice and guidance. Ask for help. Schedule a phone or in-person meeting to review your results. While working together, use your Financial as the first step in a process to reaffirm the strategies you already have in place, or to develop and implement the necessary action steps to meet your needs. 1

4 Investments General Topic 1 No matter what your investment goals are, there are fundamental activities you can take to better position yourself for long-term success. Have you identified your specific objectives? Are your assets allocated properly for your tolerance for risk? Do you invest on a regular schedule? Financial 1) You have clearly identified your investment objectives and the time horizon to reach those objectives ) You currently have a formal investment plan in place and have reviewed it with your Financial Advisor in the past 12 months ) You have an asset allocation strategy consistent with your objectives, time horizon and tolerance for risk ) You have reviewed your current asset allocation and are not over- or underweighted in any asset category ) You are comfortable with your current risk exposure to the market ) You invest on a disciplined, regular schedule rather than trying to time your investments according to the market s activity ) You have significant unrealized gains and/or losses and are unsure whether/how to take action now ) You have a significant lump sum of funds available to invest, but are unsure how to proceed Take Action Now Get organized: Collect all of your financial statements (brokerage, mutual fund, 401(k), etc.) for the latest quarter Review your portfolio: Share your statements with your Financial Advisor and ask for a complete review of your investment holdings Consider reallocating your assets: Review your objectives, time horizon and risk tolerance with your Financial Advisor. Adjust your holdings to bring your portfolio in line with your optimal allocation... Review your last federal tax return with your Financial Advisor. Determine whether certain tax-advantaged investments, such as municipal bonds, may be appropriate for your portfolio... 2

5 Investments Retirement Topic 2 Securing a comfortable retirement is the number-one priority for most investors. Unfortunately, all too often other financial obligations relegate retirement savings to the back of the line. On average, we will spend one-third of our lives in retirement. Do you have a strategy in place to help you achieve your retirement dreams? Financial 1) Saving for re t i rement is your primary investment objective ) You have established a retirement savings program such as a 401(k) and/or IRA for you and your spouse ) You fund these programs through regular contributions up to the maximum allowed ) Recent market performance has you worried that you may have to postpone your retirement and/or change your retirement goals ) Your planned retirement savings often must be allocated to more pressing needs ) You have planned for your spouse s retirement if you die or become disabled... 7) You have reviewed your IRAs and determined whether a traditional or Roth IRA is best for you ) If you are currently retired, you have a strategy for taking distributions from your investments to maximize your income needs Take Action Now Take an inventory of your current retirement investments and review them with your Financial Advisor. Review estimates of your projected pension and Social Security retirement benefits Review your retirement goals and time horizon with your Financial Advisor. Ask for an analysis of whether you are on track to meeting your needs Understand the retirement savings opportunities for your spouse Consider a pay yourself first strategy to invest in retirement savings each month as part of your regular bill-paying process

6 Investments Education Funding Topic 3 Since 1990, college costs have been increasing at a rate almost twice that of inflation. The cost of a 4-year college education at a public institution in 2002 is approaching $12,000 per year, with private colleges nearing $26,000 per year for tuition, room and board, and other fees. How will you manage these expenses? (Source: The College Board, New York, NY) Financial 1) You have established an education savings plan for each of your children and/or grandchildren ) You have determined the amount necessary for each child to cover his or her expected level of education expenses ) You invest automatically each month toward your education goals ) You understand the funding alternatives, such as Section 529 Plans, UGMAs, and state-sponsored tuition plans, and have determined which plan(s) are best for your situation ) You have reviewed your insurance protection to ensure that your children s education will be covered if your and/or your spouse s income is not available to fund their education ) You have reviewed the borrowing options (such as home equity loans and student loans) available for college funding and incorporated these options into your overall strategy ) You have spoken with a Financial Advisor and your tax professional about the tax implications of your education funding strategy ) You have spoken with each of your children/grandchildren and discussed the amount of education expenses they will be expected to contribute Take Action Now Understand what it will cost to educate your children in today s dollars, and estimate what it will cost when your child reaches college age. Ask your Financial Advisor to help you gauge the monthly level of savings needed to fund this future expense Consider funding a portion of these expenses through a Section 529 Plan or Education IRA Include in your estimates the option of borrowing to fund the expense. Consider home equity loans, student loans, and/or other education-related loan programs Discuss with your children their responsibilities in funding their education. Get them involved as soon as possible in the process

7 Estate Planning Topic 4 It is an all-too-common misconception that proper estate planning is only for the very rich. You should develop an estate plan to ensure that upon death, the assets you have worked so hard to acquire are distributed in the manner you desire. Sound tax planning is also a must, since the amount of taxes you pay is possibly the largest financial obligation you face each year. Have you discussed these issues with your Financial Advisor? Financial 1) You and your spouse have a will in place and review it regularly to make sure it is current ) You have conducted a review of all of your assets and determined the amount of your estate ) You have had regular conversations with your family about how you would like your estate handled upon your death ) You and your spouse have identified all of your important documents and made arrangements for these documents to be accessible to designated family members if the need arises ) You have met with your Financial Advisor, lawyer and/or estate planning professional to discuss establishing a formal estate plan ) If you are a business owner, you have plans in place for the continuation or sale of your business upon your death ) You have considered a strategy of tax-efficient gifting to loved ones and/or charities you designate as part of your overall estate plan ) Your estate plan includes strategies that will help ensure your heirs will have adequate funds to pay your estate s tax obligations Take Action Now If you and your spouse do not have a will, make creating one a priority today Ask your Financial Advisor to help you document the current value of your estate. Knowing where you stand today is essential in building a solid estate plan. (You may wish to use the worksheet on page 8 for this.) Discuss with your Financial Advisor whether your estate would benefit from the incorporation of appropriate trust vehicles

8 Insurance & Protection Topic 5 Knowing the level and type of risk protection that is right for you and your family is critical when building a comprehensive plan to reach financial security. Insurance can be a complicated and uncomfortable subject. Take the time to ask your Financial Advisor about how you can put an effective insurance and risk protection plan in place. Financial 1) You have provided for your family s lifestyle in the event of your death or disability ) You have completed a comprehensive analysis of your insurance needs in the past 12 months ) You have included an analysis of your disability insurance and long-term care needs into your overall protection strategy ) You have considered how insurance can augment your estate planning strategy... 5) If you are a business owner, you have included adequate coverage to ensure your business s continuity ) You have included in your insurance strategy the potential obligation to assist your parent(s) if they require long-term care, such as a nursing home ) If you are retired and/or medically incapacitated, you understand how you may access the value of your insurance while you are still alive Take Action Now Take an inventory of your current insurance coverage, including disability insurance. Share this information with your Financial Advisor Make sure all of your beneficiary information is current Make sure you include insurance coverage for your spouse, even if he or she does not work Speak with your Financial Advisor about long-term care insurance for you or an elderly pare n t... 6

9 Cash Management Cash management is the process of matching your monthly or yearly income against expenses. It is critical to take a hard look at your spending and borrowing patterns in order to gain control over your money. Topic 6 Financial 1) You and your family have created a budget that tracks your expenses against all sources of income each month ) You plan all major domestic purchases (car, vacations) well in advance and allocate funds toward these expenses from income, not from money set aside for other goals (such as retirement) ) You include a regular contribution to savings and/or investments in your budget each month of at least 10% of your income ) You track the amount of interest you pay each month on your credit cards ) You have reviewed your home mortgage and calculated the benefits/savings from refinancing and/or shortening the length of your mortgage ) You have established budget levels for each of your children to help them learn how to manage their expenses ) You take advantage of the opportunity to pay bills electronically, helping you keep your budget in place ) If you are on a fixed income, your distributions (such as Social Security) are automatically transferred into a centralized account for convenience and better record-keeping Take Action Now Eliminate all unnecessary credit cards you and your family carry Ask your Financial Advisor to provide you with information on lending services Speak with your family about establishing a budget. Focus on helping your children learn how to manage their expenses

10 Net Worth Calculation Worksheet For Your Records This worksheet is designed to help you determine your current net worth, an important step in successful financial planning. Write down the value of everything you own (these are your assets) and everything you owe (these are your debts or liabilities). Then subtract your total liabilities from your total assets. This is your net worth. Your Jointly Community Assets You Spouse Owned Property Total Checking accounts $ $ $ $ $ Money market accounts Savings accounts Certificates of deposit Stocks Bonds Mutual funds 401(k) plan Pension plan IRAs, SEPs, Keoghs Your home Other real estate Art, collectibles, jewelry Life insurance cash value Car Total assets $ + $ + $ + $ = $ (A) Liabilities Mortgage $ $ $ $ $ Credit-card debt Student loan(s) Home-equity loan(s) Auto loan(s) Margin loan(s) Personal loan(s) Total liabilities $ + $ + $ + $ = $ (B) Need Help? Call your Financial Advisor! $ + $ + $ + $ + = $ (A) $ + $ + $ + $ + - $ (B) (A-B) = Net Worth $ 8

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12 July 2002 A MKT100