"Smiths" Personal Balance Sheet & Cash Flow Statement

I met with Mr Strand to discuss my progress on the financial planning portfolio for “The Smith family”. I based the income and expenses on the facts I was given from the original summary of the family. This enabled me to create a personal cash flow statement and break down Mr and Mrs Smiths income into the two salaries based on an annual, monthly and gross income percentage weighing. The Federal tax is based at 15%, while the State is at 5% so I was able to calculate the precise amount their take home pay would be. Once I sort out their investments I will be able to include interest income and dividends into their total income. I learn at Ameriprise Financial that tax on income from investments is only 15% so this will help to boast their net income.

            I categorized the living expenses into the following: Housing, food, clothing/personal care/ transportation, recreation, medical expenses, insurance and other expenses. I based these figures on my dorm parent’s expenditure, as her family is similar to that of “The Smiths”.  Once all the figures where in place I was able to see the percentage ratio of all living expenses compared to one another and the cash available for savings/investment. Once the expenses were calculated against the income the savings ratio could then be seen. This is the net savings of the total gross income.

           

            Their personal balance sheet can be broken up into assets and liabilities. Assets come in the form of monetary, taxable investments, retirement plan, personal property, real property and other tangible assets, while liabilities came from current and long term. This allowed for investment net worth and personal net worth to be worked out. I will look to work on the ratio analysis and asset allocation next. Mr Strand advised me to used Yahoo finance to start to build up a investment portfolio of equities and bonds, this will help to boast “The Smiths” gross income, as currently with their expenses they are only just breaking even.

            I like taking part in this project because so far I have been able to link what I learnt in the office at Fall River to my mock planning forecast. Its an awesome feeling to be able to see the bigger picture when creating my portfolio that those of the real life clients at Ameriprise in order to get a grasp of what the potential overview could look like.