MR. AND MRS.

WILKINSON

October 14, 2014

Dennis Goral, CFP
Greg Nelson, CFP
Kevin Walker, CFP
Nhat Pham, CFP
DKGN Financial Services

Table of Contents
Client Goals and Basic Information ............................................................................................................................................... 2
Statement of Financial Position ...................................................................................................................................................... 3
Statement of Income and Expense .................................................................................................................................................. 4
Expense Distribution .................................................................................................................................................................... 5-6
Financial Ratios ............................................................................................................................................................................ 7-8
Question 1 .......................................................................................................................................................................................... 9
Question 2 ........................................................................................................................................................................................ 10
Question 3 ........................................................................................................................................................................................ 11
Question 4 ........................................................................................................................................................................................ 12
Question 5 ........................................................................................................................................................................................ 13

Client Goals and Basic Information

Todd Wilkinson

Age: 35
Occupation: Sales Executive
Annual Salary: $96,000

Sarah Wilkinson

Age: 28
Occupation: Part-time Teacher
Annual Salary: $76,000

Children

Two children (Ages 3 and 8)

Meet/exceed important financial ratios

Emergency Fund Ratio: 3-6 Month Goal

Current Ratio: 1-2 Months Goal
Housing Ratio 1: 28% Goal
Housing Ratio 2: 36% Goal
Savings Rate: 10-12% Goal

Financial Goals
Pay Off Debt
Establish College Funds
Plan for Retirement

Statement of Financial Position

Mr. and Mrs. Wilkinson
Balance Sheet
Assets
Current Assets
JT Bank CD
JT Savings Account
JT Checking

Liabilities

3,000
2,300
2,000
7,300

Total Current Assets

Investment Assets
H 401(k) Account
W 401(k) Account
H Roth IRA
JT Brokerage Account

108,657
65,581
4,295
3,700

Total Investment Assets

Personal Use Assets
JT Primary Home (VALUE)
JT 2010 Infiniti E35
JT Harley Davidson
JT Furniture
JT 2007 Jeep Patriot
JT Boat
JT Jewelry
Total Personal Use Assets
Total Assets
H = Husband
W = Wife
JT = Joint

Current Liabilities
JT BB National CC
JT Sears CC

364,280
553,813

11,437

Total Current Liabilities

Long Term Liabilities

JT Primary Mortgage
JT Infiniti Loan
JT Student Loans H
JT Harley Davidson Loan
182,233 JT Jeep Auto Loan
Total Long Term Liabilities

271,980
38,500
21,000
12,300
9,000
8,000
3,500

5,237
6,200

178,000
42,000
37,380
18,000
8,500
283,880

Total Liabilities

295,317

Total Net Worth

258,496

Total Liabilities and Net Worth

553,813

Statement of Income and Expenses

CASH INFLOWS
Todd's Monthly Salary
Sarah's Monthly Salary
Dividend/Interest Income*
Total Cash Inflows
CASH OUTFLOWS
Savings
Dividend/Interest Reinvestment*
Todd's 401(k) contributions
Sarah's 401(k) contributions
Cash Savings Contribution
Todd's Roth Contributions
Total Savings
Debt Payments
Personal Residence (mortgage)
Infiniti Payment
Jeep Payment
Harley Payment
BB National Credit Card Payment
Sears Credit Card Payment
Student Loan Payment
Total Debt Payments

Mr. and Mrs. Wilkinson

Year ending December 31, 2013
Totals
Living Expenses
$96,000
Cable
$72,000
Alarm System
$480
Internet
$168,480 Gas
Cellphone
Water
Entertainment
$480
Child Care
$3,600
Home Repairs
$3,600
Groceries
$7,200
Dining Out
$2,760
Hobbies
$17,640 Club Dues
Dry Cleaning
Charity
$21,234
Landscaping
$5,376
Maid
$3,360
Parking and Tolls
$2,100
$2,340
$2,400
$3,360

$1,260
$468
$1,200
$3,600
$1,560
$960
$4,800
$14,400
$2,400
$6,000
$4,800
$3,600
$1,800
$1,920
$4,200
$3,600
$4,800
$540
Total Living Expenses

Insurance Payments
Life Insurance
$40,170 Auto Insurance

$61,908
$1,200
$3,216

Total Insurance Payments

Taxes
Total Taxes (FICA AND INCOME TAX)
Total Taxes
Total Savings, Expenses and Taxes
NET DISCRETIONARY CASH FLOW
* Dividend/Interest Income and Dividend/Interest Reinvestment are multiply by four as we assume your family will receive or reinvest quarterly

$4,416
$800
$800
$124,934
$43,546

Expense Distribution

Non-Discretionary Expenses
Total: $4648

Discretionary Expenses
Total: $4234

11% 1%

8%

8%

Lifestyle

Insurance
8%

Utilities
72%

27%
28%
30%
3%
4%

$3,355.00
$500.00
$380.00
$368.00
$45.00

Work
Cellphone

Groceries
Parking and Tolls

Debt Payments
Groceries
Utilities
Insurance
Parking and Tolls

House Expenses

Debt Payments

Lifestyle
Child Care
House Expenses
Charity
Work
Cellphone

Child Care
Charity

$1,250.00
$1,200.00
$1,144.00
$350.00
$160.00
$130.00

The Wilkinsons spend a total of $8,882 per month, with $4648 of those expenses being non-discretionary, and $4234 of those expenses being
discretionary.
Looking at the pie chart for non-discretionary expenses, there are two main takeaways. Debt payment makes up the vast majority of expenses under
this category. Debt payments include mortgage payments, car payments, credit card, and student loan payments. Notably, making up 11 percent of
non-discretionary expenses are groceries. This puts into perspective for the client how much money is going towards food, not including eating out.
Looking at the chart for discretionary expenses, it is clear that there are a few categories that dominate the amount of money spent. Lifestyle expenses
take the majority of discretionary spending at 30%. These expenses include entertainment, eating out, hobbies, and club dues. All of these the
Wilkinsons would be easily able to reduce if the situation requires. Following behind lifestyle expenses are childcare and house expenses. These
include childcare tuition, cable, alarm system, home repairs, etc. All of these expenses are ultimately optional, but are a bit harder to reduce as
compared to the lifestyle expenses. Even so, they make up a large portion of discretionary expenses and must be watched to ensure the client isnt
spending too much in these categories.

Financial Ratios
Emergency Fund Ratio:

&

7,300
= .
4,648

Current Ratio:
=

&

7,300
= .
11,437

Housing Ratios:

1,777
= .
14,120

Savings Ratio:
=

18,600
= 0.1098
169.440

3,723
= .
14,120

7
The Wilkinsons are in good shape financially speaking. They have both weaknesses and strengths when ratio analysis is put into place.
Weaknesses:
The emergency fund ratio is a measure of, in months, how long the client can meet living expenses with their current assets. Taking into account their
current assets and non-discretionary expenses, they would be able to meet those obligations for 1.57 months. The target benchmark for this ratio is
between 3 and 6 months. Therefore, it can be observed that the Wilkinsons are below the target and are in a weaker position in terms of emergency
funds. A similar situation arises with the current ratio. The current ratio is a measure of the clients ability short term obligations (debt related). The
target ratio is 1-2, however the client is currently at .64. This represents another weaker area for the client. However, by increasing the emergency
fund, the current ratio would also improve. Saving more into money market accounts and savings accounts can accomplish this goal.
Strengths:
Performing debt analysis of the clients current position reveals a great strength. The first housing ratio calculated measures how much of the
Wilkinsons current income is spent on housing costs. The target percent is 28%, whereas the Wilkinsons current percentage is only 12.6%. The
second housing ratio calculated is a reflection of how much income is spent towards housing and all other debt payments. The target percentage is
36%, while the Wilkinsons percentage is 26.4%. These numbers present a great strength for the Wilkinsons, since more money is able to go
towards retirement savings, living expenses, food, etc. As a result, they are in a better financial position if any catastrophic events were to occur. In
addition, the Wilkinsons savings rate is approximately 11%, when the target is 10-13%. This represents that the client is doing a good job saving
money already.
Overall, the client is in a good financial position. Although the emergency fund ratio and current ratio are below the target, this can be easily
alleviated over the course of a few months to a year. It is beneficial to the Wilkinsons that a lower than average amount of income is going towards
housing, resulting in a better financial position to save more and improve the current and emergency fund ratios

8
Question 1
There are a few ways that a financial planner can charge a client. Some of the fees are:

Commissions paid to the financial planner

A percent of the clients account value
A combination of fees and commissions
An hourly rate for financial advice
A flat financial planning fee to provide a specific analysis
A quarterly or annual retainer fee to provide ongoing financial planning

Both of the clients are very sensitive to commission charges and expenses. It would be recommended that the Wilkinsons would need a
financial planner so that they do not get off track on their finances. Charging the Wilkinsons base on commission would be not in their best interest.
Based on the Wilkinsons preferences, it is evident that a hourly rate would be most appropriate for their needs. It is understood that the Wilkinsons
have heard horror stories about financial planners, but there is a distinct difference between those who claim to be financial planners and those who
are Certified Financial Planners. To become a CFP, the candidate must first complete an education requirement that includes achieving a certain
amount of coursework in the field, in addition to a bachelors degree from an accredited university. After completing the necessary coursework, the
candidate must pass the CFP examination, which tests the planner in all aspects of financial planning. Even after passing the exam, the future planner
must also have hands-on experience in the financial industry that is substantial enough to warrant being trusted to work alone with clients. After these
criteria are met, a background check is performed that makes certain of the candidates ethical standards. Once the check is completed, all
requirements have been satisfied to become a designated CFP. Even after certification, the CFP must continue to uphold the CFP ethics, and also
must take part in continuing education requirements to remain certified. Above all, a CFP has a fiduciary responsibility to the client. This means that
the CFP will always put the clients interests before their own.

9
Question 2
Financial record keeping is essential for keeping up with personal finance. First, it is important to divide the financial records into separate
files. Active file contains all records that are current within the last three years. Dead storage contains records that are older than three years but still
may come useful. After dividing your records accordingly, the decision of choosing a storage location for the records is very crucial. When deciding
on a storage location the most important aspects are accessibility and security. There are four popular storage locations with different benefits. The
safest and the least accessible is a safe deposit box. The most accessible location is an online storage but also contains the most risk due to hackers
having access. Keeping hard copies at home is also a choice; but if there is a disaster, like a fire, the records could be easily lost. Lastly, storing
records on a hard drive is a great location for storage and is very accessible. The best recommendation for storage is a combination of different
locations in order to have easy accessibility when needed and also always have a safe backup location for security.

Managing Household Records. (2014, October 8). Retrieved October 11, 2014, from http://www.usa.gov/Topics/Money/Personal-Finance/Managing-HouseholdRecords.shtml
Where To Keep Your Important Financial Records. (2011, January 20). Retrieved October 11, 2014, from http://money.usnews.com/money/blogs/mymoney/2011/01/20/where-to-keep-your- important-financial-records
The Importance of Keeping Good Financial Records. (2011, April 13). Retrieved October 11, 2014,
keeping-good-financial-records/

from http://rsc-web.com/2011/04/13/the-importance-of-

10
Question 3
Monthly payments without taxes and insurance would be the lowest if the 30-year at 4.6% refinance is taken at $912.51. If current mortgage
is kept there are 22.1 years left on it and $160,745.26 total interest that would be paid by the end of the loan. If the 15-year mortgage at 4.2% is
chosen, then $62,220.80 total interest plus $5,500 refinancing cost would amount to $67,720.80 total cost. If the 30-year mortgage at 4.6% is chosen,
then $150,503.60 total interest plus $5,500 refinancing cost would amount to $156,003.60 total cost. The 15-year mortgage with the 4.2% is the
preferred option. Since it is financially possible for the client to increase the monthly payments, they will save at least $80,000 on total interest
making this the best possible choice.
Mortgage Ratios
Current Mortgage
Original Loan Amount
Interest Rate
Term
Current Loan Balance
Monthly Mortgage Payment (P,I)
Monthly Taxes and Insurance
Total Monthly Mortgage Payment (PITI)

$ 200,000.00
6.6%
30 Years
$ 178,000.00
$
1,277.32
$
499.68
$
1,777.00

15-year Mortgage Refinance

Loan Amount
Interest Rate
Term
Monthly Mortgage Payment (P,I)
Monthly Taxes and Insurance
Total Monthly Mortgage Payment (PITI)

$ 178,000.00
4.2%
15 Years
$
1,334.56
$
499.68
$
1,834.24

30-year Mortgage Refinance

Loan Amount
Interest Rate
Term
Monthly Mortgage Payment (P,I)
Monthly Taxes and Insurance
Total Monthly Mortgage Payment (PITI)

$ 178,000.00
4.6%
30 Years
$
912.51
$
499.68
$
1,412.19

11

Mortgage Refinance Cost

Total Interest + Refinance Cost
15 Year Mortgage Total Interest + Refinance cost
30 Year Mortgage Total Interest + Refinance cost
Current Mortgage Total Interest (from today)

$ 67,720.80
$ 156,003.60
$ 160,745.26

Monthly Payment
$2,000.00
$1,800.00
$1,600.00
$1,400.00
$1,200.00
$1,000.00
$800.00
$600.00
$400.00
$200.00
$0.00
Current Mortgage
15-year Mortgage
30-year Mortgage

5,500.00

Monthly Mortgage Payment

(P,I)
$1,277.32
$1,334.56
$912.51

Total Monthly Mortgage

Paymnet (PITI)
$1,777.00
$1,834.24
$1,412.19

12

Total Interest + Refinance Cost

$180,000.00
$160,000.00
$140,000.00
$120,000.00

$100,000.00
$80,000.00
$60,000.00
$40,000.00
$20,000.00

$0.00
15 Year Mortgage Total
Interest + Refinance cost

30 Year Mortgage Total

Interest + Refinance cost

15 Year Mortgage Total Interest + Refinance cost

30 Year Mortgage Total Interest + Refinance cost
Current Mortgage Total Interest (from today)

Current Mortgage Total

Interest (from today)

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Question 4
Todd and Sarah auto insurance policy cost is $268 dollars a month. If they were to get into a car accident and need their vehicle repaired,
they would have to pay the $500 deductible per accident. The policy is a split limit policy which is $50k/$100k/$50k. The first $50k is total personal
coverage from the insurance company which includes any bodily injury for one person. The $100k is maximum amount that the insurance company
would cover for bodily injury regardless of how many person involve. Any amount over $100k, the insured driver would have to cover out of pocket.
The last $50k is property damage coverage. Any damage done to someone elses property the insurance company would cover up to $50k per vehicle
accident. The Wilkinsons currently have two vehicles and one motor-cycle insured.
Todd and Sarah also have a boat worth $8,000 which is uninsured. We would recommend getting their boat insured if they use it quite often or if they
live in a neighborhood with a high crime rate. It would cost less than $20 a month to insure and they would be protected if anything happens to them
or their boat. The coverage would cover bodily injury and property damage liability pay for the cost of repairs to another boat and medical payments
and lost wages to another boater after an accident.
Todd and Sarah have a home insurance in their home monthly mortgage payment. They are currently paying $499.68 a month for home insurance,
mortgage insurance, and taxes. What this means if they were to default on their housing payment they mortgage insurance would cover the amount
still owed on the house. The home insurance is coverage of their home and other structures attached to it if gets damaged. The amount of coverage
varies based on their policy. Homeowners insurances can also cover personal, bodily injuries, and medical depending on what state they live in and
the coverage amount. They can also have their home protected with homeowners insurance if the house becomes uninhabitable by unforeseen events
(example: fire or mold) or weather that occurs and damages the house. The Wilkinsons house value is currently at $271,980 and their current policy
only covers this amount. We as financial planners would recommend getting a better more in-depth coverage of their home in the event that any
random events or personal injuries happen to them.
The Wilkinsons family currently has a life insurance monthly cost of $100. An average life insurance policy at the age of 40 usually cost about
$350 a year and it would offer $500,000 to the beneficiaries upon the policy holders death. Todd and Sarahs policy should at least be covering their
liabilities of $295,317. We would recommend Todd and Sarah getting their life insurance policy and further examining in greater detail to see how
much they are covered.

14
Question 5
After reviewing all Ms. Nancys debts and analyzing her financial possibility to pay off debt faster, we come up with two payment plans:
A/ Original payment plan with and without Power Payments:

Creditor

# of payments

With Power Payments

Total paid

Interest Paid

Without Power Payments

# of payments
Total paid

Interest Paid

American
Express

27

$4,035.94

$535.94

27

$4,035.94

$535.94

Visa

31

$7,303.32

$1,303.32

33

$7,320.89

$1,320.89

Student Loan

72

$37,207.88

$7,485.88

109

$38,625.55

$8,903.55

Auto Loan

48

$30,992.58

$2,504.58

48

$30,992.58

$2,504.58

Home Equity
Loan

64

$54,462.34

$9,696.34

118

$59,365.00

$14,599.00

Payoff Time:
Total Paid:
Total Interest:

6 years Payoff Time:

$134,002.06 Total Paid:
$21,526.06 Total Interest:
Time Reduction:
3 years 10 months
Amount Saved:
$6,337.90

9 years 10 months
$140,339.96
$27,863.96

15
A/ New payment plan with Power Payments and additional $300/monthly
Creditor

With Power Payments

# of payments
Total paid

Interest Paid

Without Power Payments

# of payments
Total paid

Interest Paid

American
Express

16

$3,911.40

$411.40

27

$4,035.94

$535.94

Visa

13

$6,507.91

$507.91

33

$7,320.89

$1,320.89

Student Loan

60

$36,310.63

$6,588.63

109

$38,625.55

$8,903.55

Auto Loan

48

$30,992.58

$2,504.58

48

$30,992.58

$2,504.58

Home Equity
Loan

52

$52,040.33

$7,274.33

118

$59,365.00

$14,599.00

Payoff Time:
Total Paid:
Total Interest:

5 years Payoff Time:

$129,762.85 Total Paid:
$17,286.85 Total Interest:
Time Reduction:
4 years 10 months
Amount Saved:
$10,577.11

9 years 10 months
$140,339.96
$27,863.96

16

Payment Plan Comparision

$145,000.00

$140,339.96
$140,000.00
$135,000.00

$130,000.00

$134,002.06
$129,762.85

$125,000.00
$120,000.00
$115,000.00
$110,000.00
$105,000.00
$100,000.00
With extra payments and power payments

With power payments but no extra payments

Without power payments and extra payments

Through observation of the graph we would see that if Ms. Nancy committed to a payment plan, she would save $10,577.11 and reduce the payment
time by 4 years and 10 months to 5 years. The original amount of time she needed to pay off her debt without help is 9 years and 10 months. It is
important to pay off her debt as soon as possible, because the longer time and money is spent on paying debt, the less time and money she will have
to save towards retirement
All she has to do is instead of spending extra $300 monthly; use it to pay off the debt using the PowerPay method. This method means after you
already paid off one debt, the monthly payment from that loan is applied to the next debt, continuing to apply monthly payments from paid off debts
to other debts until all are paid. By having the commitment to do so, Ms. Nancy will also have a better habits of allocating her money into the right
place and a little investment into her future plan.