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Exit Planning: Conducting a Personal Financial Analysis

     Copyright (c) 2014 Joseph M. Maas

An important step in planning an exit strategy is analyzing your retirement, personal wealth (investments, savings, property, anticipated pensions and social security income) and determining the total value of your present-day wealth, and your wealth upon retirement. Also, a discussion needs to take place between you and your financial planner to determine the lifestyle you want to have in retirement.

Once this is known, the gap between what you have now and what you want in retirement can be measured, and a plan to bridge this gap can be established to help you attain your financial goals. Right now, however, begins a discussion on quantifying your current personal wealth.

Your Personal Financial Analysis

An analysis of your personal finances will provide you and your financial planning team with the facts about the current value of your immediate resources. Your salary, your spouse's salary, savings' accounts, portfolio investments, real estate, and other material assets will be measured to determine your current financial worth. Your liabilities will also be measured, and they may include such items as a mortgage, credit card balances, and other loans. The difference between your assets and your liabilities is, of course, your net worth. By understanding your net worth, we can understand the value of your resources in dollars, which helps us later with determining how to structure an investment plan designed to achieve the financial goals you've set.

There are six key areas to study when conducting an analysis of your personal financial circumstances.

1. Retirement planning: Planning for retirement is a serious and complex activity because so much is at stake, there are very limited and unlikely second chances, and you are planning for a future based on your best guess work. As mentioned earlier, many Baby Boomers have had to extend their retirement date by several years because of the lengthy recession.

Food and gas prices continually threaten to increase, air travel has become more costly, senior care facilities steadily grow more expensive, and 20 years ago health and technology advances could barely be foreseen to both extend our lifetime and change the work and social patterns of our daily lives. All these issues and more are likely to cost a lot, so living in the undetermined future requires very careful planning to have the resources that will allow you to enjoy life in a world that can only be barely glimpsed today.

2. Estate planning: You'll want your estate to distribute as much of your assets as possible to your heirs, and avoid family fights. The plan must ensure your legacy is not lost to creditors, predators, or squandered by your children. Estate tax can reduce your assets substantially, so smart planning will make sure your intentions and wishes are fulfilled.

3. Insurance planning: Insurance protects you and your loved ones from the financial risk of unexpected events, and also provides financial security from anticipated costs such as long term care. Whether you need special insurance for your business or profession, or the standard insurances of liability, property, life, health and disability, insurance can protect your financial well-being when circumstances require stability.

4. Tax planning: Local, state and federal governments levy taxes to operate their various programs, and fortunately there are many incentives available that reduce the tax burden. Typically, taxes are the greatest expense to a person's net income, so knowing how to apply tax reduction incentives can be a huge benefit to building financial strength.

5. Investment planning: Investment planning enables the investor to employ current resources toward building and securing future funds, which can then be used to purchase major assets like real estate, starting a business, or availability for retirement. Inflation is only one of several risks that can erode the value of your investments, so using the services of a financial planner to assure that your portfolio is properly balanced, and maintained in balance over time, is essential.

6. Real estate review: Analyzing your real estate and calculating the property's future value can be complicated. Real estate can be a major portion of your personal assets value, so determining the value correctly, both today and in the future, will provide an accurate representation of your net worth. These are the six categories your financial planner will study to assist you with understanding the value of your personal assets, and assessing the potential for achieving your financial goals. Once the unknown becomes known, a plan and progress toward achieving the plan becomes possible.

Article Source:

Is your company worth enough to secure your retirement? If you're not sure, then you need to develop an exit plan which includes conducting a personal financial planning analysis. For more information, check out financial planning expert Joseph M. Maas' new book "Exit Insight: Getting to Sold!" available online

Posted on 2014-06-13, By: *

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