FIN 3144 Financial Planning Case Facts
Sheldon and Amy Cooper
Sheldon and Amy Cooper have come to you, a financial planner, for help in developing a plan to
accomplish their financial goals. The Coopers realize they have not done the best job managing
their finances and keeping records and have decided to seek professional advice. You have
explained the financial planning process to them, and as a result, they have asked that your
plan include the next step to further consider or implement your various recommendations and
ideas. Assume today is January 1, 2020.
Personal Background and Information
Sheldon Cooper (Age 37)
Sheldon is the owner and manager of Big Joey’s Bar and Grill (Big Joey’s), a small neighborhood
bar that is open Monday through Saturday from 4:00 pm to midnight and closed on Sundays.
Sheldon inherited the bar four years ago from his uncle Joey. Although academically capable,
Sheldon briefly attended State University but did not graduate, choosing instead to work
alongside his uncle. Sheldon has always had an entrepreneurial spirit, and he likes owning the
bar and carrying on his uncle’s legacy. Joey was a star running back on the State University
football team. Big Joey’s is somewhat of an institution among State University students and also
quite popular among local residents.
Amy Cooper (Age 37)
Amy works as an elementary school educator at Anytown Private Elementary School, located a
few blocks from the Coopers’ home. She has been employed by the school for 15 years. She
graduated from State University and met Sheldon at Big Joey’s during her senior year.
Sheldon and Amy have been married for 11 years. They both plan to retire in 25 years. They
have three children and do not plan on having any more.
Children
Bradley, age 10, attends Anytown Private Elementary School and is in the fourth grade.
Brea, age 5, also attends Anytown Private Elementary School and is in kindergarten on a halfday schedule. Brea spends Monday through Friday afternoons during the school year at an
excellent day care center owned and operated by good friends of the Coopers. The center also
offers an academic enrichment program for the children.
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Anytown Private Elementary School provides a 50% tuition discount for enrolled students who
are children of faculty and staff members of the school.
Blaire, age 2, attends the same day care center as Brea nine hours a day, Monday through
Friday, and also benefits from the enrichment program for her age group.
The cost of the day care for Brea and Blaire is paid by the couple, but Brea is receiving
additional instruction in French. The additional cost of $200 per month for Sara’s French class
was paid for by Amy’s aunt, Belle, who was a strong proponent of children learning foreign
languages, until her death.
The Coopers were close to Aunt Belle, naming the children with names beginning with the
letter “B” as a tribute to her. When she died last October, she bequeathed the following to her
great-nieces and great- nephew:
•
Bradley—Municipal bonds that had an FMV of $50,000 at Aunt Belle’s death and a basis
to Aunt Belle of $20,000
•
Brea—Preferred stocks that had an FMV of $48,000 at Aunt Belle’s death and a basis to
Aunt Belle of $10,000
•
Blaire—A nonqualified, single premium tax-deferred annuity, which Aunt Belle
purchased for$10,000 20 years ago and which had an FMV at her death of $40,000
Amy has asked you what lump-sum would need to be invested today to fund the children’s
future college costs. She asked you to assume each child will begin college at age 18 and
graduate in four years. Assume current costs are $23,000 per year and are expected to increase
by 4% per year. Any inherited funds will not be considered for college funding at this time. The
Coopers would like you to use the 7% investment return assumption that is referenced under
Investment Data for this goal. They would also like you to assume all funds will be invested in a
Section 529 plan.
Grandparents
Sheldon’s mother, Doreen, age 62, was widowed four years ago when her husband died at age
60. Her living expenses total $1,100 per month, and her only income is $600 a month from
Social Security and $500 a month from Sheldon and Amy.
Doreen has a partnership long-term care policy that she purchased 10 years ago. The policy had
a maximum coverage amount of $100,000, which grew to $125,000 with its inflation protection
rider. The policy includes provisions for both nursing home care and home health care. The
Coopers assume they will need to assume responsibility for the premium payments in the near
future. Sheldon has been concerned about several aspects of his mother’s health and has asked
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how her developing health issues relate to making a claim on her long-term care insurance
policy. He mentioned his mother is developing macular degeneration in her eyes, and he wants
to know what percentage of her sight she must lose as a qualifying medical condition under
long-term care insurance.
Amy’s mother, Roberta, age 70, is a lifelong resident and citizen of Brazil and is fully supported
by Amy and Sheldon. The Coopers contribute $300 each month to support Roberta.
Economic Information
The Coopers expect inflation to average 2% annually, both currently and for the long term. They
also expect Amy’s salary to increase 5% annually, both currently and long term.
The net income from Big Joey’s for the last three years was $76,000, $59,600, and $57,500,
respectively. Sheldon expects net income from Big Joey’s to increase at 3.5% annually, both
currently and over the long term.
Current mortgage rates are 3.5% for 15 years and 4.125% for 30 years. Closing costs would be
3% of the amount financed and would be paid at closing from separate funds (not rolled into
the mortgage).
Current Mortgage Rates
Term
15-year
30-year
10/1
5/1
Type
fixed
fixed
adjustable
adjustable
Rate
3.500%
4.125%
3.250%
2.750%
3
Insurance Information
Life Insurance
Policy 1
Insured
Policy provided through
Face amount
Type
Cash value
Annual premium
Beneficiary
Contingent beneficiary
Policyowner
Settlement options
Amy
Employer
$50,000
Term (group)
$0
$102 (employer paid)
Sheldon
Three children
Amy
None
Policy 2
Sheldon
State Lake
$150,000
Whole life
$21,250
$2,361
Amy
None
Sheldon
Life annuity
Amy also has an accidental death and dismemberment policy through her employer. She is
covered for $100,000 under this policy. She pays a premium of $68 per year for this coverage.
Health Insurance
All family members are covered under a group health plan maintained by Amy’s employer. The
plan is a major medical policy with an annual family deductible of $500. After the deductible is
met, the plan pays 80% of the next $10,000 of covered medical expenses and 100% thereafter
for the balance of the calendar year. Amy’s school district also offers a flexible spending
account (FSA) for health and child care expenses, but Amy has never contributed. She has asked
you to explain how an FSA works and what the benefit of participation would be to their
finances. She has asked you to calculate any tax savings they would derive.
Dental Insurance
Sheldon, Amy, and the children have dental insurance offered through Amy’s employer. The
premium is $416 annually.
Disability Insurance
Sheldon has a personal disability policy with an own-occupation definition that provides a
benefit of $2,000 per month disability income and has a 180-day elimination period. The policy
was purchased from a local insurance agency. This policy covers both accidents and sickness
and has a benefit period of five years. Sheldon’s annual premium is $600.
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Amy has an own-occupation policy that provides a benefit of 65% of gross pay and has a 90-day
elimination period. The policy covers both accidents and sickness until age 65. The annual
premium is $1,000. The premium is paid entirely by her employer as an employee benefit. She
has the option to receive a higher benefit by paying the premium for the increase.
Homeowners Insurance
The Coopers have an HO-3 policy with a $250 deductible, a dwelling coverage of $97,000, an
80% coinsurance requirement, and a current yearly premium of $1,239. There is $100,000
liability coverage per occurrence.
Automobile Insurance
The Coopers own one vehicle and lease another. They carry the same automobile coverage on
both.
Insurance on Both Cars
Type
Personal auto policy
Liability
$100,000/$300,000/$50,000
Medical payments
$5,000 per person
Physical damage, own car
Actual cash value
Uninsured motorist
$50,000/accident
Collision deductible
$100
Comprehensive deductible $250
Premium (per year)
$2,180
Investment Data
NOTE: In the investment holdings tables in this section, the X with a line above represents the
average return for the holding.
The Coopers indicate their tolerance for investment risk is a 7 on a scale of 1 to 10 (1 being the
most risk averse). They expect to be more conservative as they get closer to retirement.
For all of their financial planning goals, they are comfortable assuming a projected annual
return of 7% on their investments and retirement assets. The risk-free rate is 2.5%, and the
market rate of return (benchmark return) is 12.41%.
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Stocks
Shares Stock
400
A
100
B
1000
C
𝑋̅
6%
15%
-5%
𝛽
1.25
0.85
2.55
𝜎
11%
9%
15%
𝑅2
85%
65%
50%
𝑃/𝐸
26.74
16.52
N/A
Dividend Yield
3.0%
0.7%
N/A
Basis
$8,000
$3,000
$2,000
Total
Fair Market Value
$11,000
$6,100
$1,700
$18,800
Mutual Funds
Shares Fund Style
112
246
143
A
B
C
LB
SG
LB
𝑋̅
alpha
13% 0.59%
11% -1.41%
12% -0.41%
𝛽
𝜎
𝑅2
1.02
1.09
0.89
10%
12%
13%
98%
70%
83%
Front-End Expense
Load
Ratio
0%
0.14%
0%
0.07%
0%
1.22%
Basis
$1,500
$4,200
$4,000
Total
Fair Market
Value
$2,625
$5,100
$5,875
$13,600
Mia’s Section 403(b) Plan (TSA)
Shares
Fund Style
2696
TSA
LG
𝑋̅
alpha
11.5% -0.91%
FrontEnd Load
1.43 9% 94% 0%
𝛽
𝜎
𝑅2
Expense
Fair Market
NAV
Ratio
Value
1.00%
11.60 $31,331
Total $31,331
Amy has asked you to comment on her TSA plan performance. Specifically, she wants to know
how well the fund is performing relative to what is expected using CAPM. Also, she is
concerned that the fund may not be performing well enough to justify the portfolio’s risk, as
measured by beta. Therefore, she wants you to analyze the portfolio’s risk versus the overall
market.
She also has asked what maximum contribution she can make to the plan for 2020.
Sheldon’s IRA
Shares
440
170
66
Stock
Dividend Yield
𝛽
𝜎
𝑃/𝐸
𝑋̅
D
6.7% 1.06 5% 28.45 3.8%
E
13.6% 1.81 9% 13.42 3.0%
F
7.2% 1.10 7% 18.11 2.5%
Basis
$7,900
$2,200
$6,000
Total
Fair Market Value
$10,340
$12,200
$5,402
$27,942
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Sheldon wants to make a $4,000 contribution to his IRA. He wants to purchase Stock G using
the entire contribution. The stock has an expected rate of return of 8% over the next five years.
He would like to know the expected rate of return of the new portfolio, including this stock
(Stock G), if his existing holdings continue to perform at a rate equal to their average rate of
return. Also, will this new portfolio return exceed the rate of return he wants to assume for
planning purposes, as stated in the Investment Data section of the case?
Income Tax Information
Their marginal income tax rate is currently 22% for federal income taxes. There is no state
income tax in the Coopers’ state of residence. Sheldon and Amy file their income tax return as
MFJ, but they have never hired a professional to complete their income tax returns. They admit
they are not the best record keepers and typically procrastinate, and then have to rush to file
on time.
Retirement Information
The Coopers plan to retire in 25 years, when they are 62 years old. They would like to have a
retirement income equal to 80% of their preretirement income, in today’s dollars, adjusted for
expected compensation increases as stated to age 62. For planning purposes, the Coopers wish
to assume they each will receive $25,000 per year at FRA from Social Security. They assume
they can earn 7% per year on invested retirement assets. They expect to be in retirement for 25
years. They want to know what amount of capital will be necessary to accumulate to
supplement their assumed Social Security benefits, starting at age 62. Assume all savings for
this goal will be in a tax-deferred retirement account. Do not subtract existing savings in this
calculation, as at this time they simply are interested in the sum total.
Amy has a Section 403(b) plan through Anytown Private School District. She has been
contributing 5% of her salary since she began working there 15 years ago. The school district
matches 25% of Amy’s contributions, up to an employer maximum contribution of 2% of salary.
Her estate is currently designated as the beneficiary. Amy also is a participant in a state teacher
retirement plan, but she does not wish to consider the plan in their retirement estimates.
Sheldon has an IRA through his bank. He opened the account 10 years ago and has been
contributing $3,000 each year since 2010. Before 2010, he contributed $2,000 annually. He
always contributes on January 1 of the year in question. His estate is the beneficiary of the IRA.
Sheldon would like to start maximizing his retirement savings. He has heard he may be able to
contribute more for retirement if Big Joey’s establishes an employer-sponsored retirement
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plan. Based on research he has done thus far, Sheldon has narrowed his choices for a
retirement plan for Big Joey’s to a SIMPLE IRA or a SEP IRA.
Gifts, Estates, Trusts, and Will Information
The Coopers have not done much estate planning and currently have simple wills leaving all
probate assets to each other.
8
STATEMENT OF ANNUAL CASH FLOWS
Sheldon and Amy Cooper
For the year ending December 31, 2019 (and projected for 2020)
INFLOWS
Sheldon's net income - Big Joey's (Schedule C)
Amy's salary
Dividend income
Checking interest income
Savings interest income
Certificate of deposit
Rental property income (Schedule E)
Total inflows
$ 76,000
57,200
777
130
400
275
$ 22,000
$ 156,782
OUTFLOWS
Planned savings
Amy's Section 403(b) plan
Sheldon's IRA
Total planned savings
Ordinary living expenses
Mortgage (principal and interest)
Homeowners insurance premium
Church donations - cash
Auto lease
Auto loan principal and interest
Gas/oil/maintenance
Auto insurance payments (both cars)
Credit card payments
Federal income tax and FICA
Property taxes on residence
Utilities
Telephone
Life insurance premiums (Sheldon)
Accidental death and dismemberment
Parental support
Health insurance
Dental insurance
Child care paid to day care provider
Private school tuition
Disability income insurance premiums (both)
Vacation expense
Entertainment expense
Food
$
$
2,860
3000
5,860
$ 10,267
1,239
6,000
4,000
7,800
2,400
2,180
6,200
19,931
2,657
2,400
1,600
2,361
68
9,600
4,592
416
4,500
12,000
1,600
6,000
3,250
6,250
9
Clothing
Rental property expenses (Schedule E)
Total ordinary living expenses
5,000
$ 22,000
$ 144,311
Total outflows
$ 150,171
Net cash flow surplus
$
6,611
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STATEMENT OF FINANCIAL POSITION
Sheldon and Amy Cooper
January 1, 2020
Assets
Cash/cash equivalent
Checking account
Savings account
Total cash/cash equivalent
JT
JT
$
$
Invested assets
Certificate of deposit
Savings bonds
Mutual funds
Individual stocks
Amy's inherited IRA
Amy's Section 403(b)
Sheldon's IRA
Big Joey's
Rental property
Life insurance cash value
Total invested assets
JT
JT
JT
JT
Amy
Amy
Sheldon
JT
Amy
Sheldon
Personal use assets
Primary residence (including land)
Jewelry
Jeep Grand Cherokee
Baseball card collection
Total personal use assets
JT
Amy
JT
Sheldon
$
$
5,000
4,000
13,600
18,800
100,000
31,331
27,942
138,000
84,000
21,250
443,923
$
125,000
8,000
24,000
2,400
159,400
$
620,823
$
8,200
11,000
98,836
Total liabilities
$
118,036
Net worth
$
502,787
Total liabilities and net worth
$
620,823
Total assets
Liabilities
Credit cards
Auto loan
Home mortgage
$
5,200
12,300
17,500
Replacement value of house is $115,000
Ownership: JT - JTWROS property; other wise, owned by individual listed.
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The couple wants to become more knowledgeable about financial statements and reports and
have asked you to explain how the following transactions in the upcoming year would impact
their net worth:
•
They pay off $5,000 of their credit card debt using the money from their savings
account.
•
Their mutual fund portfolio increases by7%.
•
Sheldon buys $1,000 of sports memorabilia for $800 using funds from their checking
account.
•
Amy buys a used sports car for $25,000 with no down payment and financing at 3.9% for
60 months on the balance.
Notes Regarding Assets and Liabilities
Big Joey’s
Big Joey’s is located one block off the local college campus and has been in business for 32
years. Joey had a tax basis in the bar of $10,000. The fair market value at the time of Joey’s
death was listed at $40,000. Sheldon believes the value was an estimate by Joey but is not sure.
Two years ago, Sheldon executed a legal document making Big Joey’s joint property with Amy.
Sheldon has done some refurbishing of the bar at a cost of $30,000. The building and property
are currently valued at $78,000. Sheldon states the bar (business and property) could be sold at
a fair market value of $138,000 and thinks the value will increase at 3.5% per year.
Big Joey’s is staffed primarily by students working part time a few hours a week, with none
working more than 500 to 600 hours per year. Some students work a couple of years before
graduating. Sheldon also employs a full-time grill cook and a full-time bar manager, each
earning $35,000 per year. The fare is simple at Big Joey’s, but the students and locals love the
charcoal grilled burgers, hot wings, and drink specials. Many locals have encouraged Sheldon to
expand operating hours to include lunch service. In his later years, Joey only wanted to work
evenings, and thus far, Sheldon has not changed the operating hours.
When Sheldon inherited Big Joey’s, he also inherited a collection of sports memorabilia from
the football program, mostly dealing with Joey’s time on the team.
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Residence
The Coopers purchased their home six years ago and financed a mortgage of $104,000 over 30
years at 9.25%. The house is a two-story with three bedrooms and brick exterior. It has a pool
and a large, open backyard.
Rental Property
The rental property, which is valued at $84,000, consists of a small retail building across town. It
is in a poor location and is currently a break-even proposition, as income equals expenses. Amy
acquired the property from Aunt Belle three years ago as a gift. Belle had a basis in the property
of $20,000 ($5,000 for the land and $15,000 for the building) and paid a gift tax of $24,000 on
the transfer. The annual exclusion was not available for this gift. At the time of the gift, the
property had a fair market value of $60,000. Belle died last December, and at the time of her
death, the property was valued at $84,000. Amy has taken depreciation on the property in the
amount of $4,308.
Before Belle’s death, Amy would never dispose of the rental property for fear of offending
Belle. However, now the Coopers are interested in selling the property and investing the
proceeds for retirement or for college funding. There is a tenant in the same strip mall who
would buy the property for $84,000.
Sheldon has also been approached by Ted, the owner of the building directly next to Big Joey’s,
offering to exchange his building for the Coopers’ rental property. Ted’s building has a current
fair market value of $100,000. Opening up the common interior wall of Ted’s adjoining building
would allow Sheldon to expand Big Joey’s and double the seating capacity. Remodeling the
space to convert to restaurant space would require an investment of approximately $75,000. In
the exchange, the Coopers would assume a small mortgage of $16,000.
Sheldon is interested in acquiring Ted’s property.
Additional Development
Sheldon called you and said Ted was going to request information from you on the income and
expenses for the rental property. Due to several vacated spaces, the current information is not
as favorable as it was two years ago. Sheldon asked you to “help him out” by informing Ted that
the firm that does the accounting is running behind, and only the information from 2018 is
available to share (although 2019 is, in fact, available). This would be favorable to the Coopers,
but you wonder if complying with his request would violate any CFP Board principles or rules.
Please reference specific information contained in the Standards of Professional Conduct in
your response.
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Financial Plan
for
Sheldon and Amy Cooper
Presented by
Your full name
Your work title (you can make up one)
Your work address (you can use USF address or make up one)
Your work phone number (you can make up one)
Your email address (use your usf email)
January 1, 2020
Table of Contents
Executive Summary
Disclaimer
Letter of Engagement
Contact Information
Family Information
Employment Information
Personal Statement of Cash Flows
Personal Statement of Financial Position
Explanation of Financial Planning Process
Assumptions
Goals
Recommendations
I. Saving for Education Planning
II. Long-term Care Insurance
III. FSA and Tax Saving
IV. Retirement Plans Performance
V. Financial Statements and Net Wealth
VI. CFP Board’s Standards of Professional Conduct
Additional Observations
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Executive Summary
Briefly comment on the financial position of the Coopers based on your analysis of their financial
statements. List their strengths and weaknesses.
Disclaimer
This plan provides a general overview of some aspects of your personal financial position. It is designed to provide
educational and/or general information and is not intended to provide specific legal, accounting, tax, or other
professional advice. For specific advice on these aspects of your overall financial plan, you should consult with your
professional advisors. Asset or portfolio earnings and/or returns shown or used in the plan are neither intended to
predict nor guarantee the actual results of any investment products or particular investment style.
IMPORTANT: The projections or other information generated in this report regarding the likelihood of various
investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of
future results. Additionally, please note that information in this report is based upon financial information input on the
date above; results provided may vary over time and with subsequent uses.
Letter of Engagement
Dear Mr. and Mrs. Cooper,
This engagement letter is intended to outline the specific terms of the financial planning engagement
between Your name and Sheldon and Amy Cooper. Please be assured that all information that you provide
to me will be kept strictly confidential. During the financial planning engagement it may, on occasion, be
necessary to consult with other third-party professionals at which time I would obtain your written
permission to disclose your personal information.
As discussed at our initial meeting, this engagement will include all services required to develop a
comprehensive financial plan. These services will specifically include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
reviewing and prioritizing the goals and objectives of your current financial situation, including
a statement of financial position, statement of cash flows, budget, and income tax analysis;
developing a financial management strategy, including financial projections and analysis;
assessing exposure to financial risk and developing a risk management plan;
completing a retirement planning assessment, including financial projections of assets required
at the estimated retirement date;
assessing estate net worth and liquidity and developing an estate plan to ensure estate planning
objectives are met;
identifying tax-planning strategies to optimize financial position;
integrating and prioritizing all strategies outlined above into a comprehensive financial plan;
presenting a written financial plan that will be reviewed in detail with you;
developing an action plan to implement the agreed upon recommendations;
referring to other professionals, as required, to assist with implementation of the action plan;
managing the implementation of the financial plan;
monitoring financial performance in relation to the financial plan;
reviewing and assessing assumptions incorporated into the financial plan given ongoing
changes in the economic, political, and regulatory environment;
determining necessity to revise financial plan;
reviewing current investment portfolio and developing an asset management strategy; and
designing recommendations to meet your stated goals and objectives, supported by relevant
financial summaries.
This will be an ongoing professional relationship. At a minimum, we will meet on an annual basis to ensure
the plan is still appropriate for you. If you should wish to terminate this engagement at any time, you must
notify me in writing. Any fees incurred to that date will be accrued and payable in full.
My engagement fee is $x,xxx plus applicable taxes for the initial financial plan and one year of monitoring.
Payment terms include $xxx payable upon acceptance of this engagement, with the balance due upon
presentation of the comprehensive financial plan. Subsequent to the first year, our meetings will be subject
to a fee of $xxx per hour. Please be advised that I do not receive a referral fee from any other professional(s)
to whom you may be referred.
In order to ensure that the comprehensive financial plan contains sound and appropriate financial planning
recommendations, it is your responsibility to provide complete and accurate information regarding all
aspects of your personal and financial situation, including objectives, needs and values, investment
statements, tax returns, copies of wills, powers of attorney, insurance policies, employment benefits,
retirement benefits, and relevant legal agreements. This list is not all inclusive and any other relevant
information should be disclosed in a timely manner.
Form ADV Part 2A is available for review and will be provided to you at the time a formal fee-based or
discretionary account is established.
1
You are responsible for ensuring that any material changes to the above noted circumstances are disclosed
to your financial planner on a timely basis because they could impact the financial planning
recommendations. If the scope or terms of the financial planning engagement are subject to change, they
should be documented in writing and mutually agreed upon by all parties of the engagement.
I wish to advise you that I have no known conflicts of interest in the acceptance of this engagement. I
commit that I will advise you of any conflicts of interest, in writing, as they should arise.
I have read, understood, and accept the terms outlined in this engagement letter.
Sheldon Cooper
Client – Sheldon Cooper
Amy Cooper
Client – Amy Cooper
Your name
Financial Planner
12/31/2019
Date
12/31/2019
Date
12/31/2019
Date
Contact Information
Planner Contact Name
Title
Address
City, State, Zip
Office
Fax
Email
Website
Client Name(s)
Address
City, State, Zip
Cell #1
Cell #2
Email
Sheldon and Amy Cooper
123 Thorn Lane
Anytown, FL 34567
(727) 123-456
(727) 456-789
sacooper@mail.com
Family Information
DOB(s)
Marital Status
Children & Ages
Sheldon 1/1/1982, Amy 1/1/1982
Married
Bradley, age 10
Brea, age 5
Blaire, age 2
Employment Information
Occupation
Employer
Annual Income
Sheldon Cooper
Owner, Manager
Big Joey’s Bar and Grill
$76,000
Amy Cooper
Educator
Anytown Private Elementary School
$57,200
Personal Statement of Cash Flows
STATEMENT OF CASH FLOWS
Sheldon and Amy Cooper
For the year ending December 31, 2019
(and projected for 2020)
INFLOWS
Sheldon’s net income Big J’s (Schedule C)
Amy’s salary
Dividend income
Checking interest Income
Savings Interest income
Certificate of deposit
Rental property income (Schedule E)
Total inflows
$76,000
57,200
777
130
400
275
$22,000
$156,782
OUTFLOWS
Planned savings
Amy’s Section 403(b) plan
Sheldon’s IRA
Total planned savings
$ 2,860
3,000
$ 5,860
Ordinary living expenses
Mortgage (principal and interest)
Homeowners insurance premium
Church donations—cash
Auto lease
Auto loan principal and interest
Gas/oil/maintenance
Auto insurance payments (both cars)
Credit card payments
Federal income tax and FICA
Property taxes on residence
Utilities
Telephone
Life insurance premiums (Sheldon)
Accidental death and dismemberment
Parental support
Health insurance
Dental insurance
Child care paid to day care provider
Private school tuition
Disability income insurance premiums (both)
Vacation expense
Entertainment expense
Food
Clothing
Rental property expenses (Schedule E)
Total ordinary living expenses
Total outflows
$10,267
1,239
6,000
4,000
7,800
2,400
2,180
6,200
19,931
2,657
2,400
1,600
2,361
68
9,600
4,592
416
4,500
12,000
1,600
6,000
3,250
6,250
5,000
$22,000
$144,311
$150,171
Net cash flow surplus
$6,611
Statement of Financial Position
STATEMENT OF FINANCIAL POSITION
Sheldon and Amy Cooper
January 1, 2020
Assets
Cash/cash equivalents
Checking account
Savings account
Total cash/cash equivalents
Invested assets
Certificate of deposit
Savings bonds
Mutual funds
Individual stocks
Amy’s inherited IRA
Amy’s Section 403(b)
Sheldon’s IRA
Big J’s Rental
property
Life insurance cash value
Total invested assets
JT
JT
$5,200
12,300
$17,500
JT
JT
JT
JT
Amy
Amy
Sheldon
JT
Amy
Sheldon
$5,000
4,000
18,800
13,600
100,000
31,331
27,942
138,000
84,000
21,250
$443,923
Personal use assets
Primary residence1
(including land)
Jewelry
Jeep Grand Cherokee
Baseball card collection
Total personal use assets
JT
Amy
JT
Sheldon
Total assets
125,000
8,000
24,000
2,400
$159,400
$620,823
Liabilities
Credit cards
Auto loan
Home mortgage
$ 8,200
11,000
98,836
Total liabilities
$118,036
Net worth
$502,787
Total liabilities and net worth
$620,823
1
Replacement value of house is $115,000.
Ownership: JT - JTWROS property; otherwise, owned by individual listed.
Explanation of the Financial Planning Process
Define our relationship. In this step, we fully explain the services to be provided, how we are compensated, and any
sources of compensation. We also discuss each of our expectations regarding the roles we will have during the personal
financial planning process. The way decisions will be made is clarified, and we discuss the duration of our relationship.
Gather information; set goals and expectations. Here, we gather your financial information and other data needed to
create a personal financial plan. We also assist you in identifying and prioritizing your goals.
Analyze your current financial status. Next, we identify your financial strengths and weaknesses to prepare to make
recommendations.
Develop and communicate recommendations. Once we determine your financial status, a financial plan is developed.
The plan is customized with recommendations based on your needs, goals, and objectives. We will meet with you to
discuss my recommendations and the various options you may have to meet these needs, goals, and objectives.
Implement the recommendations. A financial plan is only helpful if action is taken on the recommendations. Here,
we assist you in either implementing the recommendations or in coordinating their implementation with the other
knowledgeable professionals.
Monitor the recommendations. Over time, your financial and family circumstances may change. Current economic
conditions may change as well. Therefore, we provide periodic reviews of your financial plan at agreed upon intervals
to ensure that you are in the process of meeting your financial goals.
Assumptions
List all assumptions you have used for your recommendations such as interest rate, inflation, rate
of return, etc.
Goals
Briefly list the goals you would like to accomplish for your clients in this recommendation.
Recommendations
I. Saving for Education Planning
Briefly restatement the question/request the Coopers have.
Analysis, Recommendations and Detailed Support
Show your response here.
II. Long-term Care Insurance
Briefly restatement the question/request the Coopers have.
Analysis, Recommendations and Detailed Support
Show your response here.
III. FSA and Tax Saving
Briefly restatement the question/request the Coopers have.
Analysis, Recommendations and Detailed Support
Show your response here.
IV. Retirement Plans Performance
Briefly restatement the question/request the Coopers have.
Analysis, Recommendations and Detailed Support
Show your response here.
V. Financial Statements and Net Wealth
Briefly restatement the question/request the Coopers have.
Analysis, Recommendations and Detailed Support
Show your response here.
VI. CFP Board’s Standards of Professional Conduct
Briefly restatement the question/request the Coopers have.
Analysis, Recommendations and Detailed Support
Show your response here.
Additional Observations
List any items you think that may help the family to improve their financial position to be
addressed in the future.
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