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RattFM i-vi-hr2/20/071:02 PMPage iRATTINER’S REVIEW FOR THE CFP CERTIFICATIONEXAMINATION, FAST TRACK,STUDY GUIDESECOND EDITIONJeffery H. RattinerJohn Wiley & Sons, Inc.
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RattFM i-vi-hr2/20/071:02 PMPage iRATTINER’S REVIEW FOR THE CFP CERTIFICATIONEXAMINATION, FAST TRACK,STUDY GUIDESECOND EDITIONJeffery H. RattinerJohn Wiley & Sons, Inc.
RattFM i-vi-hr13/6/073:18 PMPage iiThis book is printed on acid-free paper .Copyright 2007 by Jeffrey H. Rattiner. All rights reserved.Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.Wiley Bicentennial Logo: Richard J. Pacifico.No part of this publication may be reproduced, stored in a retrieval system, or transmitted in anyform or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise,except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, withouteither the prior written permission of the Publisher, or authorization through payment of theappropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers,MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests tothe Publisher for permission should be addressed to the Permissions Department, John Wiley &Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online athttp://www.wiley.com/go/permissions.Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best effortsin preparing this book, they make no representations or warranties with respect to the accuracy orcompleteness of the contents of this book and specifically disclaim any implied warranties ofmerchantability or fitness for a particular purpose. No warranty may be created or extended by salesrepresentatives or written sales materials. The advice and strategies contained herein may not besuitable for your situation. You should consult with a professional where appropriate. Neither thepublisher nor author shall be liable for any loss of profit or any other commercial damages, includingbut not limited to special, incidental, consequential, or other damages.For general information on our other products and services, or technical support, please contact ourCustomer Care Department within the United States at 800-762-2974, outside the United States at317-572-3993 or fax 317-572-4002.Wiley also publishes its books in a variety of electronic formats. Some content that appears in printmay not be available in electronic books.For more information about Wiley products, visit our Web site at http://www.wiley.com.Library of Congress Cataloging-in-Publication Data:Rattiner, Jeffrey H., 1960Rattiner’s review for the CFP certification examination: fast track study guide / Jeffrey Rattiner. —2nd ed.p. cm.Includes bibliographical references and index.ISBN: 978-0-470-05455-0 (pbk.)1. Certified Financial Planner Examination—United States—Study guides. 2. Financial planners—United States—Examinations—Study guides. I. Title. II. Title: Review for the CFP certificationexamination. III. Title: CFP certification examination.HG179.5.R38 2007332.024—dc222006034377Printed in the United States of America10987654321
RattFM i-vi-hr2/20/071:02 PMPage iiiCONTENTSAcknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vChapter 1 General Principles of Financial Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Chapter 2 Insurance Planning and Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Chapter 3 Employee Benefits Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109Chapter 4 Investment Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133Chapter 5 Income Tax Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189Chapter 6 Retirement Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253Chapter 7 Estate Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401iii
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RattFM i-vi-hr2/21/0712:15 PMPage vACKNOWLEDGMENTSFirst and foremost, I would like to thank my family for their inspiration.I want to express my gratitude to Jacob Gold for his assistance in the Retirement Planning section, Dino Brantolinofor his assistance in the Estate Planning section, and Samantha Weston for her assistance in the Financial Planning section.I wish to also acknowledge and thank all of my Financial Planning Fast Track students for providing me with workinginsight into their study habits in preparing for the CFP Certification Examination and, in helping me orchestrate a clearcut approach that facilitates learning. Especially, the following students from my NYU March 2006 class who developedthe enclosed retirement chart:Gustavo ArceVictoria FilletAmy HandelmanMill HarrisSeth D. MarcusElizabeth McNeillyChristine ParkMichael PohlmannMartin PooleNancy G. SlutskyRobert StutchBest of luck to all my students!Jeffrey H. Rattiner, CPA, CFP , MBAv
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Ratt01 001-050-hr2/20/0711:02 AMPage 1CHAPTER 1GENERAL PRINCIPLESOF FINANCIAL PLANNING1
Ratt01 001-050-hr22/20/0711:02 AMPage 2Chapter 1 General Principles of Financial PlanningTOPIC 1: FINANCIAL PLANNING PROCESS1. Purpose, benefits, and componentsA. The purpose of financial planning is to provide sound, coordinated financial advice toindividuals and their families.2. StepsA. Establishing client-planner relationships sets the expectations of the parties and lays thegroundwork for developing the trust necessary for successful financial planning(1)(2)(3)(4)(5)Identifying the service(s) to be providedDisclosing the financial planning practitioner’s compensation arrangement(s)Determining the client’s and the financial planning practitioner’s responsibilitiesEstablishing the duration of the engagementProviding any additional information necessary to define or limit the scope of the processB. Gathering client data and determining goals and expectations. A financial plan is only asgood as the data collected and the assumptions on which that data are based. Bothquantitative and qualitative data are used to establish a client’s goals and objectives.(1) Quantitative data tells you where the client is and what it will take to get the client to aspecific financial goal.(2) Quantitative data is found using a fact-finding questionnaire. Qualitative data tells youwhy the client wants to reach the goal, what will make him or her work toward it, andwhat the client is not likely to do. Qualitative data is obtained by conducting a goals andobjectives interview.(3) Goals are broad-based projections of a client’s aspirations. For example, a client’s goalmay be to retire rich.(4) Objectives are quantifiable ways of achieving goals over a specified time period. Forexample, saving 5 million by age 65 is an objective, whereas retiring rich is the goal.C. Determining the client’s financial status by analyzing and evaluating his or her generalfinancial status, special needs, insurance and risk management, investments, taxation,employee benefits, retirement, and/or estate planningD. Developing and presenting the financial planE. Implementing the financial planF. Motivate the client. Draw on outside experts as needed.G. Monitoring the financial plan(1) Evaluate the performance. Review changes in client’s circumstances and tax laws.Revisit other steps as necessary.3. Responsibilities(1) Financial planner. Evaluate client needs, explain financial planning concepts and clarifyclient goals, analyze client circumstances and prepare financial plans, and implementand monitor financial plans.(2) Client. Express concerns, hopes, and goals; do not procrastinate; be honest with youranswers to questions; live within your current income and do not live up to or beyond it; beopen to formulating a financial plan and identifying strategies to reach goals and objectives.(3) Other advisors. The planner may seek out the help of others when implementing thefinancial plan. Their responsibilities fall within the realm of their expertise.
Ratt01 001-050-hr2/20/0711:02 AMPage 3Topic 2 CFP Board’s Code of Ethics3TOPIC 2: CFP BOARD’S CODE OF ETHICS AND PROFESSIONALRESPONSIBILITY AND DISCIPLINARY RULES AND PROCEDURESThe following contains wording from both the Code of Ethics and Professional Responsibility andDisciplinary Rules and Procedures ( 2006 by Certified Financial Planner Board of Standards,Inc.). It is strongly suggested by this author that all candidates for the CFP examination read theirown copies of the original Code of Ethics and Professional Responsibility and Disciplinary Rulesand Procedures. These materials can be obtained from the CFP Board’s Web site at www.CFP.net.1. Code of Ethics and Professional ResponsibilityA. Preamble and applicability(1) The Code of Ethics and Professional Responsibility (Code of Ethics) has been adoptedby the Certified Financial Planner Board of Standards, Inc. (CFP Board) to provideprinciples and rules to all persons whom it has recognized and certified to use the CFPcertification mark and the marks CFP and CERTIFIED FINANCIAL PLANNER .(2) This Code of Ethics also applies to candidates for the CFP certification who areregistered as such with CFP Board.B. Composition and scope(1) The Code of Ethics consists of two parts: Part I, “Principles,” and Part II, “Rules.”(a) The Principles are statements expressing in general terms the ethical and professionalideals that CFP Board designees are expected to display in their professional activities. As such, the Principles are intended to provide a source of guidance for CFPBoard designees.(b) The Rules describe the standards of ethical and professionally responsible conductexpected of CFP Board designees in particular situations.(2) Because of the nature of a CFP Board designee’s particular field of endeavor, certainrules may not be applicable to that CFP Board designee’s activities.C. Compliance—The CFP Board requires adherence to this Code of Ethics by all CFP Boarddesignees.D. Terminology(1) Client denotes a person, persons, or entity who engages a practitioner and for whomprofessional services are rendered.(2) CFP Board designee denotes current certificate, candidates for certification, andindividuals who have any entitlement, direct or indirect, to the CFP certification marks.(3) Commission denotes the compensation received by an agent or broker when the same iscalculated as a percentage on the amount of his or her sales or purchase transactions.(4) Compensation is any economic benefit a CFP Board designee or related party receivesfrom performing his or her professional duties.(5) Conflicts of interest exist when a CFP Board designee’s financial, business, property,and/or personal interests, relationships, or circumstances reasonably may impair his orher ability to offer objective advice, recommendations, or services.(6) Fee-only denotes a method of compensation in which compensation is received solelyfrom a client with neither the personal financial planning practitioner nor any relatedparty receiving compensation that is contingent upon the purchase or sale of anyfinancial product.
Ratt01 001-050-hr42/20/0711:02 AMPage 4Chapter 1 General Principles of Financial Planning(7) Financial planning engagement exists when a client, based on the relevant facts andcircumstances, reasonably relies upon information or services provided by a CFP Boarddesignee using the financial planning process.(8) Personal financial planning or financial planning denotes the process of determiningwhether and how an individual can meet his or her life goals through the propermanagement of financial resources.(9) Personal financial planning process or financial planning process denotes aprocess that typically includes, but is not limited to, these six elements: establishingand defining the client-planner relationship; gathering client data, including goals;analyzing and evaluating the client’s financial status; developing and presentingfinancial planning recommendations and/or alternatives; implementing the financial planning recommendations; and monitoring the financial planningrecommendations.(10) Personal financial planning subject areas or financial planning subject areas denotesthe basic subject fields covered in the financial planning process, which typicallyinclude, but are not limited to, financial statement preparation and analysis (includingcash flow analysis/planning and budgeting), investment planning (including portfoliodesign, i.e., asset allocation and portfolio management), income tax planning, educationplanning, risk management, retirement planning, and estate planning.(11) Personal financial planning professional or financial planning professional denotes aperson who is capable and qualified to offer objective, integrated, and comprehensivefinancial advice to or for the benefit of individuals to help them achieve their financialobjectives.E. Principles—Part I. The Code of Ethics Principles apply to all CFP Board designees andprovide guidance to them in the performance of their professional services.Principle 1: IntegrityPrinciple 2: ObjectivityPrinciple 3: CompetencePrinciple 4: FairnessPrinciple 5: ConfidentialityPrinciple 6: ProfessionalismPrinciple 7: DiligenceF. Rules—Part II. As stated in Part I, the Principles apply to all CFP Board designees.However, certain rules may not be applicable to a CFP Board designee’s activities. Theuniverse of activities engaged in by a CFP Board designee is indeed diverse. Whenconsidering the Rules, a CFP Board designee must first recognize the specific services he orshe is rendering and then determine whether a specific Rule is applicable to those services.The Code of Ethics includes definitions to help a CFP Board designee determine whichservices he or she provides and which Rules are applicable to those services.(1) Rules that relate to the Principle of Integrity:(a) Rule 101. Do not solicit clients through false or misleading communications oradvertisements.(b) Rule 102. Do not engage in conduct involving dishonesty, fraud, deceit, ormisrepresentation.(c) Rule 103. This rule lists the specific responsibilities a Board designee has to his orher clients.
Ratt01 001-050-hr2/20/0711:02 AMPage 5Topic 2 CFP Board’s Code of Ethics5(i) Act in accordance with the authority set forth in the governing legal instrument(e.g., special power of attorney, trust, letters testamentary, etc.).(ii) Identify and keep complete records of all funds or other property of a client.(iii) Deliver any funds or other property that the client or third party is entitled toreceive, and render a full accounting regarding such funds or other property.(iv) Do not commingle client funds or other property with the CFP Board designee’s personal funds or property. Two or more clients’ funds or other property may be commingled, subject to compliance with applicable legalrequirements and maintenance of accurate records.(v) Show the care required of a fiduciary.(2) Rules that relate to the Principle of Objectivity:(a) Rule 201. Exercise reasonable and prudent professional judgment.(b) Rule 202. Act in the interest of the client.(3) Rules that relate to the Principle of Competence:(a) Rule 301. Keep informed of developments in the field of financial planning andparticipate in continuing education.(b) Rule 302. Offer advice only in those areas in which the CFP Board designee hascompetence. In areas where the CFP Board designee is not professionally competent, the CFP Board designee shall seek the counsel of qualified individuals and/orrefer clients to such parties.(4) Rules that relate to the Principle of Fairness:(a) Rule 401. Disclose to the client all material information, such as conflict(s) ofinterest(s), changes in business affiliation, address, telephone number, credentials,qualifications, licenses, compensation structure, and any agency relationships. Theinformation required by all laws applicable to the relationship in a manner complyingwith such laws(b) Rule 402. A CFP Board designee shall make timely written disclosure of allmaterial information relative to the professional relationship. In all circumstances such disclosure shall include conflict(s) of interest(s) and sources ofcompensation. Written disclosures that include the following information areconsidered to be in compliance with this rule: Rule 301. Keep informed ofdevelopments in the field of financial planning and participate in continuingeducation.(c) Rule 403. Communicate CFP Board designee’s compensation if client requests.(d) Rule 404. Make disclosures annually for current clients, and provided if requested.(e) Rule 405. Compensation must be fair and reasonable(f) Rule 406. CFP Board designee shall perform professional services in accordancewith the employer’s objectives and in accordance with the Code of Ethics.(g) Rule 407. ACFP Board designee shall: Advise an employer of outside affiliationsthat may reasonably compromise service to an employer. Provide timely notice tothe employer and clients, unless precluded by contractual obligation, in the event ofchange of employment or CFP Board certification status.(h) Rule 408. A CFP Board designee must disclose to an employer any compensationor other benefit arrangements in connection with his or her services to clients thatare in addition to compensation from the employer.
Ratt01 001-050-hr62/20/0711:02 AMPage 6Chapter 1 General Principles of Financial Planning(i) Rule 409. If a CFP Board designee enters into a business transaction with a client,the transaction shall be on terms that are fair and reasonable to the client.(5) Rules that relate to the Principle of Confidentiality:(a) Rule 501. Do not reveal, without the client’s consent, any personally identifiableinformation relating to the client relationship, except when use is reasonablynecessary: to establish an advisory or brokerage account, to effect a transaction forthe client, or as otherwise impliedly authorized in order to carry out the clientengagement. To comply with legal requirements or legal process to defend the CFPBoard designee against charges of wrongdoing in connection with a civil disputebetween the CFP Board designee and the client.(b) Rule 502. Maintain the same standards of confidentiality to employers as toclients.(c) Rule 503. Adhere to reasonable expectations of confidentiality while in businessand thereafter.(6) Rules that relate to the Principle of Professionalism:(a) Rule 601. Use the marks in compliance with the rules and regulations of CFP Board(see Topic 2, Section 1.A.(1)).(b) Rule 602. Show respect for other financial planning professionals and related occupational groups by engaging in fair and honorable competitive practices.(c) Rule 603. Inform the CFP Board when another CFP Board designee has committeda violation of the Code of Ethics and there is no substantial doubt.(d) Rule 604. Inform the appropriate regulatory and/or professional disciplinary bodywhen there is unprofessional, fraudulent, or illegal conduct by another CFP Boarddesignee or other financial professional and there is no substantial doubt.(e) Rule 605. Disclose illegal conduct to the immediate supervisor and/or partners if illegal conduct is suspected. If appropriate measures are not taken to remedy the situation, alert the appropriate regulatory authorities, including the CFP Board, in atimely manner.(f) Rule 606. In all professional activities, a CFP Board designee shall perform services in accordance with:(7) Applicable laws, rules, and regulations of governmental agencies and other applicableauthorities; applicable rules, regulations, and other established policies of the CFPBoard(a) Rule 607. Do not engage in any conduct that reflects adversely on the profession.(b) Rule 608. Disclose to clients the firm’s status as registered investment advisers. It isproper to use the term registered investment adviser if the CFP Board designee isregistered individually. If the CFP Board designee is registered through his or herfirm, then the firm is the registered investment adviser.(c) Rule 609. A CFP Board designee must not practice any other profession or offer toprovide such services unless the CFP Board designee is qualified to practice inthose fields and is licensed as required by state law.(d) Rule 610. Return the client’s original records in a timely manner upon request ofthe client.(e) Rule 611. Do not bring or threaten to bring a disciplinary proceeding under thisCode of Ethics or report or threaten to report information to CFP Board pursuant to
Ratt01 001-050-hr2/20/0711:02 AMPage 7Topic 3 CFP Board’s Financial Planning Practice Standards7Rules 603 and/or 604 for no substantial purpose other than to harass, embarrass,and/or unfairly burden another CFP Board designee.(f) Rule 612. Comply with all applicable renewal requirements established by CFPBoard.(8) Rules that relate to the Principle of Diligence:(a) Rule 701. Provide services diligently.(b) Rule 702. Enter into an engagement only after securing sufficient information tosatisfy the CFP Board designee that: The relationship is warranted by theindividual’s needs and objectives. The CFP Board designee has the ability to eitherprovide requisite competent services or to involve other professionals who canprovide such services.(c) Rule 703. Implement only recommendations that are suitable for the client.(d) Rule 704. Make a reasonable investigation regarding the financial products recommended to clients.(e) Rule 705. Supervise subordinates with regard to their delivery of financial planningservices.2. Disciplinary Rules and ProceduresA. The Board of Professional Review is charged with the duty of investigating, reviewing, andtaking appropriate action with respect to alleged violations of the Code of Ethics andalleged noncompliance with the Financial Planning Practice Standards.TOPIC 3: CFP BOARD’S FINANCIAL PLANNINGPRACTICE STANDARDSCan divide the Board into two panels consisting of an Inquiry Panel and a Hearing Panel anddesignate a chair for each panel. No member of an Inquiry Panel shall act as a member of a HearingPanel on the same matter.1. Inquiry PanelA. Investigates alleged grounds for discipline, with appropriate assistance from members ofCFP Board staff; can dismiss allegations as being without merit, dismiss allegations with aletter of caution recommending remedial action and entering other appropriate orders, orrefer the matter to CFP Board for preparation and processing of a complaint against the CFPBoard designee. All answers to complaints shall be in writing. The answers shall be submittedwithin 20 calendar days from the date of service of the complaint upon the CFP Boarddesignee. If the CFP Board designee fails to file an answer within the period provided, suchCFP Board designee shall be deemed to be in default and the allegations set forth in thecomplaint shall be deemed admitted.2. Hearing PanelA. Conducts all hearings on complaints seeking disciplinary action against a CFP Boarddesignee; reports its findings and recommendations to the Board for final decision;appeals must be made within 30 calendar days after notice of the order is sent to theCFP Board designee, or such order shall be final. Appeals must be made within30 calendar days after notice of the order is sent to the CFP Board designee or such ordershall be final.
Ratt01 001-050-hr82/20/0711:02 AMPage 8Chapter 1 General Principles of Financial Planning3. Purpose and applicabilityA. Staff counsel—maintains a central office for the filing of requests for the investigation ofCFP Board designee conduct, for the coordination of such investigations, for theadministration of all disciplinary enforcement proceedings carried out pursuant to theseprocedures, for the prosecution of charges of wrongdoing against CFP Board designeespursuant to these procedures, and for the performance of such other duties as are designatedby the Board or the chief executive officer of CFP Board.B. Content of each series (use most current Practice Standards, as posted on CFP Board’s Website at www.CFP.net)4. Enforcement through Disciplinary Rules and ProceduresA. The following are grounds for discipline:(1) Any act or omission that violates the provisions of the Code of Ethics(2) Any act or omission that fails to comply with the Practice Standards(3) Any act or omission that violates the criminal laws of any state or of the UnitedStates or of any province, territory, or jurisdiction of any other country(4) Any act that is the proper basis for professional suspension(5) Failure to respond to a request by the Board, without good cause shown(6) Any false or misleading statement made to CFP BoardB. Forms of discipline(1) No action. In cases where no grounds for discipline have been established, the Boardmay dismiss the matter either as being without merit or with a cautionary letter.(2) Continuing education. The Board has the right to require CFP Board designees tocomplete additional continuing education or other remedial work.(3) Private censure. The Board may order private censure of a CFP Board designee (i.e., anunpublished written reproach mailed by the Board to a censured CFP Board designee).(4) Public Letter of Admonition. The Board may order that a Letter of Admonition beissued against a CFP Board designee (i.e., a publishable written reproach of the CFPBoard designee’s behavior).(5) Suspension. The Board may order suspension for a specified period of time, not toexceed five years, for those individuals it deems can be rehabilitated. CFP Boarddesignees receiving a suspension may qualify for reinstatement to use the marks.TOPIC 4: FINANCIAL STATEMENTS1. PersonalA. Statement of financial position(1) A balance sheet is a statement of financial position. It is a financial snapshot of theindividual’s wealth at a moment in time. It contains three categories: (1) assets,(2) liabilities, and (3) net worth. Net worth measures the client’s wealth or equity at aspecified period of time (i.e., net worth equals total assets minus total liabilities).(a) Net worth increases from the following:(i) Appreciation in the value of assets(ii) Increase in assets from retaining income(iii) Increase in assets from gifts or inheritances
Ratt01 001-050-hr2/20/0711:02 AMPage 9Topic 5 Cash Flow Management9(iv) Decrease in liabilities through forgiveness(b) Net worth is unchanged by the following:(i) Paying off debt(ii) Buying an asset with cash(c) Assets and liabilities are indicated at fair market value (FMV), footnotes are usedto describe details of assets and liabilities, and property is identified by type ofownership.(d) Assets are categorized as (1) cash and cash equivalents (checking and savings account, money markets), (2) invested assets (stocks, bonds, mutual funds), and (3)use assets (home, furnishings, cars).(e) Liabilities are categorized as (1) current liabilities (credit card balances) and(2) long-term liabilities (auto loans, real estate mortgages, life insurance loans).(2) Statement of cash flow(a) Must indicate the period of coverage, usually a calendar year(i) Step 1. Estimate the family’s annual income.(ii) Step 2. Develop estimates for both fixed and discretionary expenses.(iii) Step 3. Determine the excess of shortfall of income within the budget period.Net cash flow equals total income minus total expenses. If net income is positive, the client can increase discretionary expenses.(iv) Step 4. Consider available methods of increasing income or decreasing expenses.(v) Step 5. Calculate income and expenses as a percentage of the total to determinea better allocation of resources.2. BusinessA. Balance sheetB. Income statementC. Statement of cash flowsD. Pro forma statements(1) Pro forma statements forecast future balance sheets and cash flow statements. It maymake sense to include three different cash flow statements: (1) worst-case budget, basedon lowest income and highest expenditures expected, (2) average-case budget, based onreasonable expectations of income and expenses, and (3) best-case budget, based onhighest income and lowest expenditures.TOPIC 5: CASH FLOW MANAGEMENT1. BudgetingA. There are two types of budgeting: discretionary and nondiscretionary. Discretionaryexpenses are flexible and can be prevented or timed. Nondiscretionary or fixed expenses canbe changed, but must be paid. Various strategies are used to maximize income and minimizeexpenses:2. Budgeting strategiesA. Debt restructuring: The process of paying off all outstanding credit cards by consolidatingdebt into one low personal line of credit
Ratt01 001-050-hr102/20/0711:02 AMPage 10Chapter 1 General Principles of Financial PlanningB. Asset reallocation: This process involves the change in assets from underperforming assetsto more productive investment assets to improve return and income.C. Expenditure control: The process of reducing consumption expenditures by emphasizing thesavings elementD. Income tax planning: Process of benefiting from proper tax planning incorporatingchildren’s assets. The process of saving for a child in a custodial account or trust to benefitfrom the lower tax rate of the childE. Qualified plan vehicles: The process of utilizing a qualified plan to benefit from savingprograms and deductibilityF. Financing strategies: Consolidating credit card debt and student loan debtG. Cash-out r
Rattiner’s review for the CFP certification examination: fast track study guide / Jeffrey Rattiner. — 2nd ed. p. cm. Includes bibliographical references and index. ISBN: 978-0-470-05455-0 (pbk.) 1. Certified Financial Planner Examination—United States—Study guides. 2. Financial planners— United
