1.6a Your Personal Financial Portfolio Instructions Booklet

PERSONAL FINANCIAL PORTFOLIO - YOUR PROFILE

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PFP Introduction

Welcome to your very own Personal Financial Portfolio! This will serve as a workbook that will help you succeed in this course, and it will be a valuable tool for you to continue down the path to fi nancial freedom from this day forward. Are you ready? Let’s get started.

Print the instruction booklet.

To access the workbook, you must have Microsoft Excel.

You may fi nd it helpful to print this instruction booklet and have it handy as you move through the exercises.

Financial Goals

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Personal Cash-Flow Statement: Financial Goals

Now is the time to get real and personal with your fi nances: to take your fi nancial fears out of the dark and examine them in the light of day; to set real, tangible goals that you can achieve; and to take an honest look at what you’re spending and earning. In this exercise, you’re going to get real about what you have, what you want, and where you want to go.

To start, fi nd the tab labeled Personal Cash-Flow Statement

at the bottom of your Personal Financial Portfolio workbook.

For just a few minutes, I want you to ponder this one question:what would you love to change about your fi nancial life during the next year? Imagine yourself a year from now: what fi nancial achievement would make you feel great about yourself, and about where you’re headed? Here are a few examples:

I want to pay o� 35% of my credit card debt.

Financial Goals (cont.)

I want to start saving for my child’s education.

I want to start contributing monthly to my retirement plan.

I want to have an eight-month emergency fund in place.

I want to make sure I have all the necessary documents in place to

protect myself and my family.

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Personal Cash-Flow Statement: Financial Goals

Save your work!

Greatest Fear and Money Memories

In the space provided, write down the one or two most

exciting and realistic goals you can imagine achieving

over the next year. Yep, keep it to just one or two. Long

laundry lists of goals tend not to work. Let’s keep your

goals laser-focused.

Whether you’re moving to the next step now or coming back later, it always makes sense to save your work and make sure you don’t lose any of your progress.

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Personal Cash-Flow Statement: Greatest Fear and FirstMemory of Money

What are you most afraid of when it comes to money? I don’t have to tell you that our brains are hard-wired to suppress or avoid anything that triggers a sense of fear. That’s human nature. But I need you to hear this loud and clear: fear is the main internal obstacle to wealth. Too many of us keep our fears locked up inside and let them grow bigger and bigger, further straining our relationship with money. In this exercise I am asking you to face your money fears. I respect that it may not be an easy or natural step to take, but I guarantee that you will ultimately feel better for doing it. The road to fi nancial freedom starts by acknowledging your fears so you can start to overcome them.

I’m afraid I’m going to lose my home and live on the street.

If something goes wrong at work, what other job could I possibly get?

How will I ever pay for my children’s college expenses?

Greatest Fear and First Memory of Money (cont.)

If you’re not already there, fi nd the tab labeled

Personal Cash-Flow Statement at the bottom of your

Personal Financial Portfolio workbook. You heard Suze say

that the best way to take control of your fears is to voice

them. Record your greatest fi nancial fear in the space

provided. If nothing comes to mind, just give it time.

Here are a few common examples:

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Personal Cash-Flow Statement: Greatest Fear and First Memory of Money

Create Your New Truth

In the box just below, record your First Memory of Money:

the first time you knew money was more than just a

plaything, the first time you knew money could get you

what you wanted.

Save your work!

Once you have added your biggest fear and your first

memory, take a moment to look at them.

Be honest about how they make you feel. See if, in your mind’s eye, you can trace your fear back to the first time you had a bad experience where money played a role. For most of us, our fears about money started when we were children, and we have carried those fears with us in many different ways without even realizing it. Do you see any connection between your current fears about money and how you were raised to deal with money, or how you reacted to money in the past?

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Personal Cash-Flow Statement: Create Your New Truth

Create a new truth. Now that you have faced your fears and your money memories, it’s time to break those chains that have linked you to your past and to create a new future for yourself—one based on who you are today and who you want to be tomorrow. It all starts with how you think about, feel about, and act with money.

Until now you probably have said, “I can’t,” more than you have said, “I can.” That is simply because you are afraid. You must learn to silence your fears. Your thoughts create your destiny: if you think you can’t, you never will. You must create a positive, empowering message for yourself. Your words and thoughts have the power to create or destroy. The choice is up to you.

Click the tab labeled Personal Cash-Flow Statement at the

bottom of the Personal Financial Portfolio workbook. Take

a look at what you wrote as your greatest fear and create a

new truth directly the opposite of that fear.

For example, if your biggest fear is, “I will never, ever have

enough money,” your new truth should be, “I have more

money than I will ever need.”

Create Your New Truth (cont.)

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Personal Cash-Flow Statement: Create Your New Truth

Write down your new truth in the space provided.

Three guidelines for your new truth:

Save your work!

Practice Your New Truth

Make it short enough that you can remember it exactly, word for word.

Put your message in the present tense; the future begins today. “I am making more money than I will ever need,” not “One day I will make more money than I will ever need.” Who knows when that one day will come?

Make it an unlimited truth, to open the way to receive: “I’m making at least $5,000 a month.” Accent on “at least.” Set floors for your goals, but never set ceilings.

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Personal Cash-Flow Statement:Practice Your New Truth

Write it down 25 times a day every day.

Say it out loud 25 times every day as soon as you wake up. Yell it in the car on the way to work. (I used to do that when I was just getting started in my career and was anything but successful.)

Repeat it silently 25 times while looking at yourself in the mirror before you go to sleep.

Say it to yourself when you’re out for a jog, when you’re paying bills, when you begin to worry, or when you feel afraid.

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Once you’ve created your new truth,

do the following for the next six months:

There will be times when you’re not “feeling it.” I get it. We all have those moments of confusion or frustration. Please listen to me: it’s when you keep at something just at the juncture when you’re ready to give up that you lay the foundation for success. Giving up is easy. Perseverance is the main ingredient in success.

Practice Your New Truth (cont.)

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Personal Cash-Flow Statement: Practice Your New Truth

Personal Cash-Flow Statement: Overview

Save your work!

Commit to doing this for six months.

Keep track of how you feel and what changes start to happen in your life. If you’re like me and the thousands of people I have taught this exercise to over the years, I think you will be amazed at its positive power.

In your new truth, you’ve gained strength. With this new strength and your goals in mind, it’s time to take an honest look at how much money you have coming in and how much you have going out each month.

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Personal Cash-Flow Statement:Overview

Know Your Flow. To accomplish any of your goals, it is essential that you know where you stand today so you can get to where you want to be in the future. How much money do you have coming in each month? And yes, you need to do a thorough accounting of how much is going out to pay bills and cover your living costs. That means it’s time to create a Personal Cash-Flow Statement. This will take some time, but this is THE MOST IMPORTANT STEP toward attaining your goals.

Expenses

You can add or change any information within the white cells. Don’t try to change any of the values in the gray cells—they are either locked or contain formulas that automatically populate them.

Here are some tips to help you work with

the PFP cash-fl ow statement:

Click any underlined word to be taken automatically to its defi nition in the Glossary of Terms tab. After reading up on the term, navigate back to the original tab you were working in to continue working on your assignment.

Whenever you see a small red triangle in the corner of a cell, click it to reveal extra information or helpful hints.


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It’s time to take an honest look at where you’re spending your money. Evaluating your expenses is the fi rst step to gaining valuable insight into your fi nancial situation, whatever it may be.

Get out your canceled checks, ATM receipts, bank statements, credit card bills—whatever will tell you where you spent your money over the last year. Keep it all within easy reach as you start this exercise.

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Record your expenses under the appropriate categories. We’ve taken the liberty of indicating mandatory expenses with an asterisk. As you’re doing so, click the cell in the Frequency column next to each expense and use the up and down arrows to indicate how often you incur each expense: daily, monthly, yearly, etc. Enter the amount of the expense in the next column, and the amount that expense costs you each month will automatically appear in the Monthly Payment column.

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Personal Cash-Flow Statement:Expenses

Expenses (cont.)

Click the tab labeled Personal Cash-Flow Statement located

at the bottom of your Personal Financial Portfolio workbook.

Find the box labeled Expenses.

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Personal Cash-Flow Statement: Expenses

Expenses (cont.)

Financial or legal services

Children’s activities and summer camps

Anniversary dinners, birthdays, and other celebrations

Higher heating or cooling costs in winter and summer

If you have weekly expenses such as childcare, remember that

some months have four Fridays and some have fi ve, so your

monthly cost may look di� erent than you think it will. The

monthly average is calculated over the 52 weeks of the year.

Once you have itemized your monthly expenses, notice that we have taken the liberty of adding $100 per month for miscellaneous items that come up that no one plans for. We’re just trying to keep it real!

Make sure to include seasonal expenses and big expenses that you only pay once or twice a year and that might not show up on a monthly bill. For example:

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Yearly or twice-yearly insurance premiums

Holiday travel and gifts

If you do not have any expenses for a particular category, you can skip it. If you have an expense but don’t see a line item for it, not to worry. Within each category, we’ve added additional rows for you to fi ll in as needed.

Now you know how much you’re spending every month just to pay your bills and cover your living expenses. What would you do if disaster struck and you lost your income? How long would you be able to survive?

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Personal Cash-Flow Statement: Expenses

Income and Results

Below the Expenses section find the box labeled Emergency

Savings Fund and fill in the amount of money you have

stashed away for a rainy day.

For how many months will that emergency fund cover your mandatory monthly expenses? Do you have enough money to cover your expenses for 8 months? If so, congratulations! That is no easy feat. If not, don’t be discouraged. In the coming lessons we are going to explore ways to reduce your spending and debt so that eventually you can start building up that emergency fund and give yourself the financial cushion you need.

Save your work!


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Now that you have recorded the average amount of money that is going out every month, let’s take a look at what’s coming in.

Get out your paycheck stubs or any paperwork that will tell you how much money you brought in over the last year. Keep it all within easy reach as you start this exercise.

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Record your regular and reliable income. Make sure you list your after-tax income. Be as realistic as possible about how much you can really count on month in and month out. Possible sources of income include:

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Paycheck after taxes

If you’re about to retire or be laid o� , do not count your last

paycheck as income. It will distort the truth of your monthly

average income.

Personal Cash-Flow Statement:Income and Results

Income and Results (cont.)

Click the tab labeled Personal Cash-Flow Statement at the

bottom of the Personal Financial Portfolio workbook and fi nd

the box labeled Income.

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Personal Cash-Flow Statement: Income and Results

Predictable bonuses

After-tax pension income

Social Security income

After-tax income you are taking or about to take from retirement accounts

Disability income

After-tax investment income, if you have any

Rental income, if you have any

Gifts from family, if you can really count on them year in and year out for

the next fi ve years at least

Loan repayments, if they will continue for more than one year

Save your work!

If you loaned someone money, and that person has been

paying you back regularly and less than six months remain

before the loan is repaid in full, don’t count that as income.

If you’ve loaned someone money and that person has

yet to start paying you back, don’t count those potential

repayments as income either.

Hope is not a line item. Do not include any funds you “think”

you might get, unless you are 100% certain you will get them.

Income and Results (cont.)


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You have just done the most amazing thing: you are now standing in the truth of your financial life.

You’ll also see a pie chart in the box labeled

Expense Overview with the breakdown of how you

spend your money each month.

Congratulations, You’re Finished!

Personal Cash-Flow Statement: Income and Results

This cash-flow statement is a valuable tool—one that you

can return to over and over again to help you stay focused

on your financial goals. So don’t forget to save your work!

Later in the course, you will learn how to get yourself out of any deficit hole or what to do with any excess funds you may have at the end of each month. This is just the beginning. Feels good, doesn’t it?

It’s time to take a break and go do something fun. You’ve earned it!

When you are finished putting in your expenses and

income, check out the Totals section. Here you will see

the total funds you have remaining each month in black,

or the amount you are short in red.

If you’re like many of us, you may see more than a few surprises. That’s okay. No beating yourself up.


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Itemized Debt:Becoming Debt Free

Okay, it’s time for us to tackle the Big D: Debt. Please don’t stress. At the risk of annoying you just a little bit, I need to repeat a key message of this course: facing your fi nancial reality is an amazing accomplishment. It is the foundation that will enable you to build a future where you are more confi dent and secure.

To tackle your debt, you need to know exactly how much you have. Then you can dive into repayment strategies.

You will see the gray areas of this worksheet have already been pre-populated with information from your personal cash-fl ow statement. If it looks like you’re missing some debt payments, please click the Personal Cash-Flow Statement tab, fi nd the debt section, and enter the missing information. Also add any debts that you have now but are not currently paying off . For those debts leave the monthly payment as zero. Once you’re fi nished, return to this worksheet and you’ll see that new information carried over into the gray sections. The goal is for this worksheet to include all your debts, large and small.

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Becoming Debt Free (cont.)

Open your Personal Financial Portfolio and click the tab

labeled Itemized Debt.

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Becoming Debt Free

All right, my friend, it’s time to prioritize. In the Priority column, you are going to assign a priority of 1 to 10+ (1 being the most important) to each of your debts. Below is the order in which you should prioritize.

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Student loan debt. Once you fi nish school (or even if you’re still in

school and you have unsubsidized student loans), student loan debt has

to come fi rst. Because (in most cases) student loan debt is not forgivable

in bankruptcy, you must treat it as your number-one priority. If you have

several outstanding student loans, assign a priority of 1 to the loan with

the highest interest rate, a priority of 2 to the second highest, etc.

Personal debt next. Make sure you are including loans from friends,

family, and anyone you know who is not a lending institution. (The

lenders in this case have honored you with their trust, so be sure to

respect and protect that trust.)

IRS debt (if any)

Mortgage payment (if applicable)

Car loan (if applicable)

Credit card balances, prioritized from the highest to the lowest interest

rate. (If you are not sure of the interest rate, check with your bank or

credit card provider.)

As you can see, your current monthly payment will be pulled in from your personal cash-fl ow statement in the Current Monthly Payment column. If you’ve listed a debt that you are not currently paying off , this space will be blank.

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In the next column, click each cell and indicate whether each debt is secured or unsecured.

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Record the total balance due in the Balance Owed column and the interest rate associated with each debt in the APR (%) column.

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Becoming Debt Free

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Now look at the section titled Totals. Here you will see the total monthly payments for all of your debt and the total excess or defi cit from your monthly cash-fl ow worksheet.

If the Total Monthly Excess or Defi cit From Your Cash Flow is a negative number,

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You’ll see these small, up- and down-arrow boxes next to all of the titles in this row, but the only one you need for this exercise is Priority.

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Once you have assigned each debt a number, click the small box (with the up and down arrows) next to Priority. In the black box that appears, click Ascending under the Sort menu to see your lines of debt rearrange in the order of the priority you’ve assigned. After sorting, click the X in the top left corner of the Priority box to make it disappear.

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it means you’ve gotten yourself into some trouble and can’t a� ord to

pay all of your bills right now. Don’t worry. Make absolutely sure to

stick to the order-of-repayment priority you created.

When you are short on funds and have to pay little by little, keep paying

your student loan bill fi rst. In the next lesson, we’ll show you how to

free up some extra cash so you can pay all of your bills. Stick with us!

Becoming Debt Free

pg. 4Becoming Debt Free (cont.)

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Once you’ve decided how much of your excess cash you want to

allocate to each credit card payment, enter those amounts in the

Additional Payments column. If you decide to contribute additional

funds to your 8-month emergency fund, enter that amount in the box

labeled Additional Emergency Savings Fund Contributions.

Be sure to allocate all of your excess cash—either to additional

credit card payments or to a combination of credit card payments and

emergency savings, so that the Total Monthly Excess or Defi cit in your

new plan equals $0.01. Do this each month, contributing to your credit

card debts in order of interest rate, highest to lowest.

As soon as you have paid o� the debt with the highest interest

rate, start the process over again, adding your remaining funds to the

debt with the next-highest percentage rate. Stick with the same total

amount you can a� ord to pay each month for your debt allocation

(unless you can raise it!)

Keep going down your list of credit card debts each month until

your cards are paid o� in full.

If the Total Monthly Excess or Defi cit From Your Cash Flow is positive,

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your goal should be to retire any of your credit card debt you might

be carrying as soon as possible. But you also need to be building an

8-month emergency fund. Allocate your excess cash between these

two priorities in whatever way makes you feel comfortable. You may

want to divide your excess funds equally between the two; or you

may want to allocate the lion’s share to your credit card debt for the

time being, until you get that under control. Whatever you do, try to

pay more than the minimum amount due on the credit card with the

highest outstanding balance; and try not to ignore your emergency

fund. You never know when you might need it.

Once you have prioritized your debts and have allocated whatever extra funds you can toward your credit card payments, don’t forget to carry that information back over to your personal cash fl ow statement to keep it current. Also, if you allocated additional funds towards your emergency savings fund, be sure to carry that information over into the savings section in your personal cash fl ow statement. Do this every month to keep yourself on track toward becoming debt free.

Becoming Debt Free

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Save your work!

What are some additional things you can do to eliminate

your debt? List them in the text box near the bottom of

the sheet.

If your credit score is low, list strategies to improve

your credit situation.


Make sure you are paying the lowest interest rate possible on your credit card debt, or look into transferring your debt to a card with a lower interest rate. Credit unions and aiccca.org are good sources to check out.

It may take several months or even years to retire all your debt, but with each payment you will be closer to becoming debt free. All I ask is to keep in mind that you didn’t get into debt overnight and you’re not going to get out of it overnight either. Take pride in your efforts to shrink your debt. Every payment brings you closer to financial freedom.

While paying off your debts, make sure to keep in contact with everyone who has given you a personal loan. Treat them with all of the respect they deserve, and make sure to ask them if they need you to pay them back now. If so, what is the least amount of money they need from you each month that will make them feel honored?

Here are a few other things to remember:


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Whenever I am asked to review a family’s fi nancial situation, I insist that they complete the same type of personal cash-fl ow statement that is the centerpiece of your PFP. Then we go through their cash-fl ow statement line by line and talk through how they might tweak their spending. It’s always an eye opener to learn how spending $5 less here or $20 less there adds up to major savings!

As di� erent as each situation is, it is extremely rare that I can’t fi nd ways for each family to spend less so they can free up money to put toward their fi nancial goals, such as paying o� credit card debt or building up their emergency savings.

And the people I work with feel so great once they see how choices they make can have a huge impact on improving their fi nancial future. I want to be very clear: I don’t ask them to create a budget. Please. I really, really don’t like budgets. Budgets are like diets: you go on a diet and lose 10 pounds, then you go o� the diet and gain back 20. This is not about restriction; this is about making wise choices with the money you spend.

This installment of the Personal Financial Portfolio project focuses on reviewing your personal cash-fl ow statement and looking for the wise spending tweaks you can make that will free up more money to put toward your fi nancial goals.

Get ready to be amazed at what you have the power to change!

Cash-Saving Strategies (cont.)

Cash-Savings Strategies

Cash-Saving Strategies

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Now go back up to the cash-flow tables, find the line items where you identified expenses as Wants, and see if you can cut back a little on each of those. Write in the amount you can trim each month for each of them in the column labeled $ Changed per Month. Take a look at your Needs as well. Are there any of those where you might be able to cut down on what you’re spending each month?

Next to each of your expenses, click the box in the Want or Need? column, then click the up and down arrows and choose whether the expense is a Want or a Need.

At the top of this page you will see the same monthly cash-flow statement you created in Topic 1. All the information has been automatically carried over to this tab and entered into the gray areas.

Time for the big reveal. In case you haven’t noticed, the total amount you can save by trimming has been adding up as you go. Check out the box at the top of the page and check out how much your trimming will save you. Amazing, right? Also check out how this savings can add up over a year. If you’re like many people I have worked with, you might have just gotten a second wind of motivation to trim even more from your current spending. Go for it! Just remember to stay realistic: your goal is to come up with smart spending tweaks that you are confident you can commit to.

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Cash-Saving Strategies (cont.)

Open up the Personal Financial Portfolio and click the tab

labeled Cash-Saving Strategies.

In order to get the most out of this exercise, make sure that the additional amounts you applied to your debt payments and emergency fund in the Itemized Debt exercise are entered in your personal cash-flow statement. If not, now would be a good time to add those new monthly payments to your expenses to bring your cash-flow statement up to date.


pg. 3Cash-Saving Strategies (cont.)

Earlier in this course I asked you to write down the one or two fi nancial goals you wanted to achieve in a year—the steps you could take that would make you feel fabulous a year from now. Well, my friend, you now have created the savings that can help you start moving toward those goals. At the bottom of the worksheet, record what you want to do with your newfound savings. It can be what you wrote down as your goals earlier in this course or:

Okay, now that you know how much you can save by

changing your spending, let’s focus on what you can do

with all those newfound savings.

If you have credit card debt, you can use the extra money to

begin paying it o� or to accelerate the rate at which you’re

currently paying it o� .

If your cash-fl ow worksheet indicates you’re spending more

than you’re taking in, try to fi nd enough in savings to make up

for the shortfall.

While this exercise is all about trimming your spending, your debts are the one area where you should aim to pay more each month if you can. Remember, debt is bondage! Therefore, the cells in the Debt section can not be modifi ed.

If you updated your personal cash-fl ow statement with the priority list and payment increases you identifi ed while itemizing your debt, you will see those new monthly payment expenses in this section, too. If not, do that now to get the full picture of your expenses.


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Save your work! What you have created is an

amazing road map that can transform your life.

I want you to be able to come back to it later

for guidance and inspiration.

Need motivation? Okay, come back to this exercise and look again at the total amount you can save per month and per year. The savings you can create today are the foundation for building the financial freedom you so deserve. And talk it out! Lean on a great friend or family member: tell them what you are up to and enlist them as your go-to support system for when you could use some encouragement to stay committed.

Your Action Plan: Starting today I want you to make

the spending trims and tweaks you have identified in

this exercise. Push yourself to stay on track.



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We have spent a considerable amount of time in this topic discussing how to be responsible when it comes to funding your children’s college education. We discussed 529 plans, PLUS loans, and other funding options.

Now we want to make sure that you have a complete understanding of your own education funding; that you know exactly how much it is going to cost you, where you’ll get the money from, and what you can do if you’re short. This is a topic that you’re going to be dealing with for as long as you’re in school and beyond, so it’s important to have this information collected in one place where you can revisit it often and revise your plans as circumstances dictate.

In this installment of the Personal Financial Portfolio Project, I am going to walk you through how to make sure your student loan strategy is affordable. I want this good debt to remain a good debt that you can repay on time and that won’t become a burden that affects you or other members of your family. We want you to say, “I’m glad I did,” not “I wish I hadn’t.” So this is a topic that can never be examined enough. Please know that if your student loan debt exceeds your first year’s expected income by more than 5%, a warning sign will appear in the worksheet associated with this exercise, and you need to pay attention to it.

To begin, open the Personal Financial Portfolio and click

the tab labeled Investigate Education Funding.

Investigate Education Funding (cont.)

Investigate Education Funding


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Next, record the amount of this year’s tuition and fees that is funded through loans.

Then, record the amount you will be personally contributing through savings or current income (not by putting tuition charges on your credit card!).

What is the total amount of student loan debt you expect to have upon graduation? Record that where indicated.

Your goal should be for the total amount borrowed to be no more than what you expect your starting annual salary to be once you leave school and embark on your career. Not sure about starting salaries in your field? Asking friends or contacts is a good start. Or you can look up typical starting salaries in your chosen career in your geographical area at the U.S. Bureau of Labor Statistics Web site (bls.gov). Record a realistic starting salary on the line beneath your total expected student loan debt.

What’s your plan for next year and subsequent years?Indicate whether you plan to take the same approach to funding your future education that you’re taking this year. If the answer is no, enter any changes you’re contemplating in the appropriate text box.

If there is an amount remaining in the box titled Unfunded Tuition Costs, you will need to look into other funding options, including scholarships and grants, to make up the shortfall. Research what might be available to you. A good place to start is finaid.org. Record any new sources of funding and the amount they cover in the box provided. (Again, charging tuition costs to your credit card is not an option!)

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Investigate Education Funding (cont.)

Record this year’s total current tuition costs in the first box at the top of the sheet.

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Okay, now let’s compare those two figures. If your total student loan debt will be more than your anticipated starting annual salary, that’s a serious warning signal that you may have trouble repaying your loans on time. Here are some logical steps you can take to make sure you graduate with manageable student loan debt:

Enter your options and their savings benefits in the box provided.

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Take a lighter course load and spread out your tuition payments over

a longer period, thereby managing your cash flow more effectively.

Consider taking on a once-a-week evening job to

cover additional costs.

Start saving a small amount now in a separate savings account.

Adding even $20 a week now will help you out down the road.

Head back to the cash-flow statement in your PFP and see if you can

make a few more spending tweaks to free up a little more money for

tuition. Remember our mantra: small amounts here and there can

add up to big savings. Could you find $50 more a month to put into

your tuition savings account?

Save your work!

I want to say it one more time: a student loan is an

amazing investment in yourself.

The challenge is to make sure that you borrow an amount that is manageable. Even good debt can turn bad if you have trouble keeping up with the repayments once you leave school. If you have additional questions, or would like to discuss options for or changes in your current financial aid plan, contact a University of Phoenix financial advisor.


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In this installment of the Personal Financial Portfolio Project, we are going to make sure you have all the insurance you need, and your policies deliver the level of coverage that provides true protection. You will have free access to My Insurance Evaluator tool, which evaluates fi ve types of insurance: home, auto, life, long-term care, and disability. (Please note: My Insurance Evaluator does not cover health insurance. It’s far too personalized and complicated for any single online tool to be able to address.) If you already have one or more of those policies, my Evaluator will help you determine whether your current coverage is adequate, suggest any improvements, and identify ways to save money. If you are looking to buy any of those policies, my Evaluator will make sure you don’t buy too much or too little.

Let’s start by reviewing the insurance you already have.


the tab labeled Insurance Evaluator.

Insurance Evaluator (cont.)

Insurance Evaluator

All the insurance you entered when you were building

your cash-fl ow statement should be automatically entered

under Current Insurance. Please give this list a serious

once-over to make sure your list is complete and fi ll in

the provider name and contact information.

Insurance Evaluator

pg. 2

In each row’s Notes section, indicate whether you think this insurance is adequate to your needs, if you think the payout will actually cover your losses, and if you would like to investigate getting a better price for your current coverage (either from your current provider or from a diff erent one).

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Looking at the list below, are there any other types of

insurance that you think you need that you don’t have

now? Defi nitions for diff erent types of insurance can be

found in the Glossary of Terms tab. Enter your answers

under New Insurance to Research.

Home insurance

Flood insurance

Auto insurance

Life insurance

Disability insurance

Health insurance

Long-term care insurance

If you fi nd you left out insurance coverage you have, you can return to your cash-fl ow statement and add it into that document. Once you’ve done that, it will automatically populate to this worksheet. Be sure to save your updated cash-fl ow statement so you don’t lose any of the changes you’ve made.

Insurance Evaluator

pg. 3

Once you’ve signed in to My Online Insurance Evaluator, you’ll be taken to my Insurance Evaluator home page, where you’ll find links to lots of resources that can help you research your various insurance options.

A few things to be aware of:

Next: Evaluate your existing insurance, and research insurance you may need.

My Insurance Evaluator will show you how you

can save as much as $300 a year on your existing car

and home insurance.

If you have home insurance, it will tell you whether it

will cover you in the event of a natural disaster such as

a flood or earthquake.

My Evaluator includes a home inventory tracker where you

can make a list of everything in your home, which you can

then send to your insurance company in the event of theft

or fire.

You now have a full list of types of insurance

to research. Here comes the fun part. Follow

the directions in your syllabus to launch

My Online Insurance Evaluator.


Keep the PFP workbook open on your desktop while you do this as they go hand in hand.

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Insurance Evaluator

pg. 4Insurance Evaluator (cont.)

Print the results from My Online Insurance Evaluator and file them with the rest of your important documents, including the four must-have documents. Take them when you visit your insurance agent and use themas a second opinion to validate your insurance agent’s recommendations.

If you don’t have a specific type of insurance and you think you might need it, My Online Insurance Evaluator will help you determine what the right level of coverage is for your personal circumstances.

Be sure to save your information in the online Evaluator.

That makes it easy to come back and check your coverages.

Also, if you are ever away from home and need access to

a policy’s coverage, you can log in and get it online!

Start by getting out the documents that detail your existing coverage on each type of insurance you already have and enter that information into my Insurance Evaluator. Once you have done so, the tool will evaluate whether you are underinsured or overinsured.

While working with My Online Insurance Evaluator, keep your PFP Excel worksheet exercise open and enter any new information you find in the Notes column in both the Current Insurance and New Insurance to Research sections. Include all of the specifics!

Now you are ready to explore if your current coverage is sufficient, and what additional types of insurance would be smart for you to add to protect you and your loved ones from life’s “what ifs.”

Insurance Evaluator

pg. 5Insurance Evaluator (cont.)

Never cancel any existing policy before you have

a new policy “in force”—that is, one that is active

and will protect you.

If you are considering canceling any existing policy, please check with your insurance agent or the insurance company to make sure there is no cancellation fee.

For insurance you already have, add any new premium costs into the New Premium column in the Current Insurance section. You will see we have prepopulated this New Premium column with your current monthly premiums. Change the ones you can at this time and leave the ones that have no change.

For new insurance you need, add those costs into the New Premium column in the Additional Insurance Needs section.

When you have updated the costs for your current insurance and any new insurance you may need, go back to your monthly cash-flow statement and see how these new costs affect your monthly spending habits.

Once you have an updated list, check with your insurance agent as well as with an online service that will give you a free estimate (called a quote) of the annual premium cost for any policies you want to modify, or new coverage you want to add.

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Now go back to the Insurance Evaluator tab in your PFP

workbook. In the section labeled Additional Insurance Needs,

add any new types of insurance you’re interested in purchasing

as a result of having used My Online Insurance Evaluator.

Insurance Evaluator

pg. 6Congratulations, You’re Finished!

There’s a lot more to My Online Insurance Evaluator.

I encourage you to spend some time exploring all the features. One of my favorites is the Home Inventory. In the event any of your possessions are stolen, lost, or damaged, having a full accounting of what you own will be a great help when you file a claim with your insurer.

Follow through on the recommendations in My Online

Insurance Evaluator and you will feel enormous satisfaction

(and relief, too). You and your loved ones are protected

from life’s “what ifs.” That is a seriously great step you

have taken. Well done!

Save your work!


pg. 1

I know that, having gotten this far in the course, you are up to speed on how important it is to save for retirement. And I bet some of you are already socking away money in 401ks and IRAs. But you may have no idea whether you are on track to meet your retirement goals.

If that’s the case, that’s totally understandable! It’s not exactly easy to calculate in your head what today’s savings might be worth decades from now when you are ready to retire. And that’s just the fi rst step in fi guring out if you are on track. The trickiest step comes once you do retire: calculating how much you can safely withdraw each month from your retirement accounts, while ensuring that the balance never gets down to $0 during your lifetime. That is, you need to withdraw money at a pace that gives you the best odds of not outliving your money.

As I said, not exactly easy to fi gure out on your own.

The good news is that there is a worksheet in the Personal Financial Portfolio workbook that is going to do all the calculations for you. Once you enter your current retirement savings balances and your current monthly contributions to your retirement plans, it will estimate whether you are on track to have enough to meet your living expenses in retirement.

If you fi nd you’re not on track, don’t panic. It is so great that you realize this now, when you can make tweaks to your savings (or spending) that can help you meet goals that may still be decades away. Let’s get started.


the tab labeled Retirement Choices.

Retirement Choices (cont.)

Retirement Choices

Retirement Choices

pg. 2

List all of your retirement accounts and their current value. Include the amount that you contribute each month and the amount your employer (if applicable) contributes. Under the column Taxed or Tax-deferred? click each cell and use the up and down arrows to select whether that account is taxed or tax-deferred.

In the same section, plug in an estimate of how long you expect to live. (Unless you have a clear family medical history that makes it unlikely you will live a very long time, I would plug in a minimum age of 90. Age 95 is an even more conservative estimate to use, to boost the odds you won’t run out of money.)

We’ve preset the annual return you can expect from your retirement savings at 6.0%. You may wish to adjust this downward to provide a more conservative estimate of what your monthly retirement income will be, but you should not adjust it upward. You cannot and should not count on an annual return of more than 6.0%.

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Retirement Choices (cont.)

Locate the box labeled Plug in your Retirement Savings.

In the box below where you listed your retirement accounts, enter your current age and the age at which you expect to retire. As I explain in the textbook, I encourage you to think about working until you are age 67, or even 70 if you think that’s realistic. For this exercise, I encourage you to plug in a retirement date no later than age 70. Maybe you will work longer. But by basing your plan on age 70 you won’t be in trouble if in fact you find you can’t or don’t want to keep working past that age.

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This tool doesn’t include the potential income you may have from Social Security. You can get an estimate of your benefits at the Social Security website. But as I have explained elsewhere in this course, I encourage you to think of Social Security as “extra” retirement income. For now, I want you to focus on retirement savings apart from Social Security.

Retirement Choices

pg. 3Retirement Choices (cont.)

We’ve pulled your current monthly expenses from your cash-flow statement and the monthly after-tax retirement income provided by your retirement accounts and entered them automatically into the boxes under Retirement and Lifestyle Choices.

The after-tax amount of money you will receive per month from your retirement accounts will appear at the bottom of the box. Remember, if you have retirement savings in traditional 401ks and IRAs, the money you withdraw is taxed by the federal government at whatever your ordinary income tax rate is when you retire. Your state may also tax certain retirement income.

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Retirement and Lifestyle Choices

The figures you’re looking at cover you through the age you said you would die plus five years. This additional five-year cushion is applied because no one can predict when they are going to die.

How’s it looking? Are you saving at a rate that will cover your monthly expenses? Are you short? If so don’t be discouraged. Remember, if it looks like you’ll be short, you have a few levers you can pull: you can try reducing your monthly expenses; and/or you can see what happens if you increase your monthly contribution(s) to your retirement accounts. Can you afford to put away more each month? If so add that amount into the Additional Monthly Contributions I Can Afford section and see what it does. Play around with both of those strategies and see what it will take to get you to your retirement goal.

Retirement Choices


Save your work!

If you’re staring at numbers that don’t add up to what you need, please take a deep breath. Do not panic; do not feel defeated. There is so much you can do to improve your situation. After you’ve played around with the numbers a bit, in the space provided, enter some ideas about how you can boost your savings and/or reduce your spending and income needs to bring your retirement savings into line.

Additional Steps to Meet My Retirement Goals

Be proud and positive. Taking a clear-eyed look at

your retirement savings is something most people

never do, but should.

I am so glad you have completed this exercise. Now you know where you stand. That’s so important to learn now, rather than a year before you plan on retiring. You have time to make all sorts of adjustments. The simple fact that you completed this worksheet is a tremendous step forward in your retirement planning.


pg. 1

Are you engaged? Don’t worry, I’m not getting personal. I’m asking about your approach to your investments. One of the keys to successful investing is that once you make an initial investment in a mutual fund, ETF, or stock or bond, you must periodically check to make sure that what you own is actually earning you money.

In this installment of the Personal Financial Portfolio Project, you will size up your current investments and see if you need to make any tweaks.

Open the Personal Financial Portfolio workbook and click

the tab titled Evaluating Investments.

Evaluating Investments (cont.)

Evaluating Investments

In the rows provided, enter all of your current investments. This includes your retirement accounts (401ks and IRAs) and any other investments. If you do not currently have any investments, go online and fi nd at least one mutual fund and one ETF. Use the data related to each to complete the assignment.

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Locate the fi rst box labeled Evaluating Investments.


pg. 2Evaluating Investments (cont.)

In the appropriate columns, enter your investments’ rate of return for this year and the average over the past five years. If you are invested in mutual funds or ETFs, you should be able to easily find this information at the web site for that investment, or call customer service and ask for the information. If you are doing this exercise within the first three months (January, February, or March) of the year, enter your rate of return for last year and the average over the previous five years.

How is each investment performing relative to its comparative benchmark? If an investment lags its comparative benchmark, that’s a problem and you may want to reevaluate it. Could you potentially do better by selling that investment and reinvesting the money elsewhere? If you are investing through automatic deposits into your 401k or IRA, would it make sense to switch your future contributions to a different investment? Use the Notes column to record your thoughts.

Next, check the web site of each investment fund and look for something called the comparative benchmark index/cat.avg. For each investment, enter that figure under the Comp. Benchmark Index/Cat. Avg. column.

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Who might assist you with making changes and

improvements to your portfolio?

Where might you go for help and advice? Under Assistance Contacts, enter any appropriate resources, such as a financial advisor.

If you’re invested in a 401k, don’t bother calling customer service. They’re legally prevented from offering you investment advice. Some 401ks offer investment advice, but usually for a fee.


Save your work!


Make sure to return to this list periodically to evaluate

your investments against their comparative benchmarks

and to make any necessary adjustments. Remember:

you have power over your money; don’t let your money

have power over you!

pg. 3


pg. 1How Much House Can I Afford?

You’ve come a long way in this course: you’ve taken the huge step of figuring out how much money you have coming in each month, how much is going out, and where you can trim your expenses and free up a little more cash. You’ve taken a long, hard look at your debts and figured out how to get those under control; you’ve gotten your personal affairs in order and made sure you can provide for your loved ones should anything happen to you; and you’ve put yourself on the road to a comfortable, affordable retirement. Congratulations! That’s a lot to be proud of!

Now it’s time to turn your attention to the two big-ticket items that are so much a part of the American dream: a house and a car. So many important questions are associated with both of these: if you’re looking to own a home, can you afford the house of your dreams, or should you scale back a little? And if you do own a home and you have a mortgage, is this the time to refinance and maybe take advantage of a lower interest rate?

And what about a car? If you’re not a city dweller, a car isn’t a luxury; it’s a necessity. (And even if you are a city dweller, you might want a car at some point, just for the added freedom and flexibility it gives you.) But what kind of car: new or used? (Short answer: you should always buy used!) Assuming you’re going to have to finance the purchase, which loan strategy is best for you?

In this final installment of the Personal Financial Portfolio project, you’ll look at these and other questions associated with what, for most of us, are the biggest and most stressful purchases of our lives. The tools you’ll work with in this assignment are some of the most important in the entire course. You can come back and use them at any time, and I encourage you to do so when you are contemplating any big-ticket purchase.

Big Ticket Items:Overview


pg. 2How Much House Can I Aff ord? (cont.)

Big Ticket Items:How Much House Can I Aff ord?

Are you currently renting a house or apartment and wondering if you can aff ord to own? Maybe you’ve been looking around and have found a house that’s the right size in the right neighborhood, and you’re wondering if you can buy it. Or maybe you want to know how much house you can purchase before you start looking. Either way, this exercise can help.

Open the Personal Financial Portfolio and click the tab

labeled Big-Ticket Items.

As a renter, the fi rst step toward fi nding out how much house you can aff ord to buy is to enter your current monthly rent. Let’s assume that’s equivalent to your monthly mortgage payment.

As you know, owning a house means more than just making the monthly mortgage payment. There are property taxes and maintenance to consider, and sometimes HOA fees—all of which come to an additional 40% or so of your mortgage payment. Notice that amount is automatically added to your monthly rent amount to produce a total monthly cost of ownership. Take a look at that fi gure. Is that something you can aff ord? If so, keep going. If not, reduce the amount you entered as your monthly rent until you get a total cost of ownership that you can live with.

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Locate the box labeled How much House can I a� ord?

pg. 3To Refinance or Not to Refinance?

Big Ticket Items: How Much House Can I Afford?

Now let’s add a 20% down payment (which you can change, but, as you know, I think it’s a seriously bad idea to put down anything less than 20%), let’s assume a mortgage interest rate of 5.5% (again, you can change this to align with what mortgage lenders are offering at the time you do this exercise), and let’s assume the term is 30 years. (If you can afford less than 30 years, more power to you!) At the bottom of the box, you’ll see the maximum purchase price of a house you can afford.

Play around with the numbers a bit to see what their effect is on the bottom line. If you can afford to put down more than 20%, you’ll be able to afford a more expensive home. Likewise, the lower the interest rate you can get, the more you’ll be able to afford. Note, however, that if you shorten the term of the mortgage—say, from 30 years to 15—without increasing the monthly rent/mortgage amount, the calculator will indicate the value of the house you can afford is less. The shorter the term of the mortgage, the shorter the period of time over which the payments are spread, which means each payment has to be more. So, to get the same amount of house on a 15-year mortgage as on a 30-year, you’ll have to make a considerably larger mortgage payment each month.

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Save your work!

pg. 4


To Refi nance or Not to Refi nance? (cont.)

Big Ticket Items:To Refi nance or Not to Refi nance?

Are mortgage interest rates lower now than they were at the time you bought your house? Even if you do not currently own a home, I hope at some point in time you do. And if you do, there will likely come a day when you will think about refi nancing your mortgage. How do you know if it’s the right thing to do? This exercise will tell you.

Open the Personal Financial Portfolio and click the

tab labeled Big-Ticket Items. Locate the box labeled

Mortgage Refi nance Calculator.

First, enter the number of years remaining on your current mortgage.

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To complete this exercise, there are some things you’re going to have to know before you start: the remaining balance on your current mortgage, your current interest rate, the length of the term of the new mortgage you’re considering, the interest rate of your new mortgage, and the closing costs associated with refi nancing. Talk to your lender or a mortgage broker to get these fi gures. If you don’t currently own a home, talk to someone you know who does and get this information from them. Or simply play around with some numbers just for the heck of it.

pg. 5To Refinance or Not to Refinance? (cont.)

Big Ticket Items: To Refinance or Not to Refinance?

How long do you anticipate the term of your new mortgage will be? Enter that number in the appropriate cell.

Now enter the interest rate of the new mortgage. Notice your new monthly mortgage payment has been calculated. (Given the current interest-rate environment, you should always refinance with a fixed-rate mortgage, so the calculator assumes your payment will remain the same over the term of the mortgage.) Beneath that, enter the amount of the closing costs.

Finally, enter the number of years you expect to remain in your house. This is critical, because you want to stay in your house long enough for the savings in your monthly mortgage payments to make up for the money you’re paying in closing costs.

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What does the calculator tell you?

Should you refinance or not? If the result is “No,” it may be because the term of the new mortgage is longer than the number of years remaining on your current mortgage. If that’s the case, that’s never a good idea.

The other reason the answer may be “No” is because you’re not going to be in your house long enough for the amount of money you’re saving each month on the refinanced mortgage to cover the closing costs. In that case, even though the payments on the new mortgage are less than what you’re currently paying, the total cost of refinancing is more than your total savings. It only makes sense to refinance if you’re going to stay in your home long enough to recoup the closing costs.

Next, enter the remaining balance on your current mortgage and the interest rate you are paying. Your current monthly mortgage payment will automatically be calculated.

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pg. 6Car Loan Strategies

Big Ticket Items: To Refinance or Not to Refinance?

There are several reasons why refinancing might make sense. For example, maybe you’re not saving anything on the monthly payment, but you’re reducing the term of the mortgage, which will save you enough money over the long haul to cover the closing costs and then some. Maybe you’re not reducing the term of the mortgage, but the combination of a lower monthly payment (as a result of a lower interest rate) and the length of time you plan to stay in your home is enough to cover the closing costs.

Bottom line: as long as you’re saving enough money,

one way or another, to cover the closing costs, it makes

sense to refinance.

Save your work!

pg. 7


Car Loan Strategies (cont.)

Big Ticket Items:Car Loan Strategies

If you’re shopping for a car (and if you are, I hope you’re looking at a used one, not a new one!) and you’re like most of us, you’re not going to pay cash; you’re going to have to take out a loan. If you’re shopping at a dealership, the dealer might be off ering a choice between a loan with a low APR, or a loan with a higher APR combined with a dealer rebate. How do you know which is the better deal? And how does trading in your old car aff ect the monthly payment on your new car?

Use the calculator in this exercise to fi nd out.

Open the Personal Financial Portfolio and click the tab

labeled Big-Ticket Items. Locate the box labeled

Car Purchase Calculator.

Enter the total purchase price, before tax, of the car you’re considering buying. Below that, enter your state sales tax rate. (If you don’t know it off the top of your head, you can fi nd it out online.)

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Big Ticket Items: Car Loan Strategies

Next, fi ll in your down payment and the length, in months, of your car loan. If you are doing this exercise as a hypothetical, leave the length at 36 months. And just FYI, if you need to take out a loan longer than 36 months in order to aff ord the monthly payments, that’s a sign you cannot aff ord the car you are about to buy.

Now, enter the amount you still owe on your current car loan and the amount, if any, you will get for the car if you trade it in.

Is the dealer off ering you a low-interest fi nancing option? If so, enter that below your expected trade-in value. Beneath that, enter the traditional fi nancing option and any rebate (often called “cash back”) the dealer may be off ering. (If you do not know these amounts you can leave them at the hypothetical values already entered.)

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Save your work!

Which option is better for you: the low APR or the

combination of traditional APR plus rebate?

The results at the bottom of the box will tell you. Are you surprised to see which option represents the better value?

Congratulations! You now have an arsenal of tools to help you make well-informed decisions when it comes to your big-ticket purchases. Come back and use these tools as often as you need them. And, don’t forget to save your work!

1.6a Your Personal Financial Portfolio Instructions Booklet

Documents

Transcript of 1.6a Your Personal Financial Portfolio Instructions Booklet