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MTHEL 131 Class Note Lecture 3

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University of Waterloo
Mathematics Electives
David Kohler

[Sept. 28, Lecture 3] 1 * If a person wants to retire at 60 years old, and has $70,000/year of income Data put into formula: 1. Death? (when) 2. Money needed at retirement - Capital 3. Current income/expenditure 4. Current saving/investment 5. How to save? 6. Expect retirement income? * Financial planners help him to calculate how much money he needs to set aside every month. He needs $681/month: Wants to go there: $681/month Gap Current $50/month saving/investment: Actually heading toward there (may not know): 60 years old Financial planners: 1. Identify the gap; 2. What it would take to close it to nothing (in this case the answer is $681/month) Before start to recommend the produces, planners need to clearly indentify the gap exists, and then know what the produce is recommended. Right now, if he can’t save $681/month, he either retires later or has less than $70,000 income annually. In this case, it would be investment produce recommended. Other cases would be insurance produce. Another important step in financial planning process to clearly identify our goals is to start to keep score of your financial situation. [Sept. 28, Lecture 3] 2 - Keeping track of own personal net worth= list of thing owned-debt owed - Financial asset: any type of investment - Have numbers and figures make it simpler Financial Planning Process - Financial Planning Process is dynamic, always changing, goes around into circle Defining Financial Planning Process involves 6 steps 1. Develop the relationship, have the client share with you the goal and objective (understand what is going on) 2. Collect personal financial data from client 3. Analysis of personal financial data (after client left) 4. Formulation of a plan/recommendation 5. Implementation of the plan 6. Ongoing reviewing/Monitoring 2 main questions need to be answer when we take about life insurance 1. How much coverage is appropriate for me? 2. What kind
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