Financial Planning For You

An interest rate swap is an agreement in which two parties make interest payments to each other for a set period based upon a notional principal. 

Accountants provide you with advice on tax matters and help you prepare and submit your tax returns to the Internal Revenue Service (IRS). All accountants who practice as Certified Public Accountants (CPAs) must be licensed by the state(s) in which they practice.

The process of gradually repaying a loan over an extended period of time with periodic payments.  Payments include principal and interest.

An insurance-based contract that provides future payments at regular intervals in exchange for a lump-sum premium paid when the annuity is purchased. Annuities are often used as a strategy to provide a regular income stream during retirement.

Money set aside to cover costs that might results from an unexpected event or emergency.

The process of organizing your assets for use during your lifetime and distribution after death in accordance with prevailing state and federal laws.

A profession and a process focused on helping individuals and families meet their life goals through proper financial management.  Financial planning integrates the financial planning process with aspects of personal finance including managing cash flow, insurance, investing, taxes, and retirement and estate planning.

The amount of earnings before deductions such as income taxes and Social Security. Gross income is calculated by prorating a worker's annual salary according to the number of pay periods or by multiplying an hourly wage rate by the number of hours worked.

Short-term investments such as U.S. Treasury securities, certificates of deposit, and money market fund shares, that can be readily converted into cash.

A person who signs a promissory note in addition to the borrower and is responsible for the obligation if the borrower does not pay.

Estate planners provide you with advice on estate taxes or other estate planning issues and put together a strategy to manage your assets at the time of your death. While attorneys, accountants, financial planners, insurance agents or trust bankers may all provide estate planning services, you should seek an attorney to prepare legal documents such as wills, trusts and powers of attorney.

The difference between the sales price and the purchase price of a capital asset. When that difference is positive, the difference is referred to as a capital gain. When the difference is negative, it is a capital loss.

An individual with no negative credit history per the criteria established by the lender.

Anything owned that has monetary value.

A compensation arrangement whereby the financial planner or advisor is paid by clients exclusively in the form of fixed, flat, hourly, percentage or performance-based fees.

A qualified retirement plan under which a retiring employee will receive a guaranteed retirement fund, usually payable in installments. Annual contributions may be made to the plan by the employer at the level needed to fund the benefit. The annual contributions are limited to a specified amount, indexed for inflation.

A unit of ownership in a corporation. Common stockholders participate in the corporation's profits or losses by receiving dividends and capital gains or losses in the stock's share price.

Upon the death of a decedent, federal and state governments may impose tax on the value of an estate left to heirs.

The value for which you could reasonably expect to buy or sell an item.

A retirement plan under which the annual contributions made by the employer or employee are generally stated as a fixed percentage of the employee's compensation or company profits. The amount of retirement benefits is not guaranteed; rather, it depends upon the investment performance of the employee's account.

The amount that a sum of money today will be worth in the future with growth due to compound interest.

Earning interest not only on the original principal amount, but also on accumulated prior interest.

Household expenses, such as food, transportation, and gifts, that vary from month to month.

A strategy that uses different types of assets within a portfolio to limit risk.

Periodic purchases of stocks or other investments that in the best-case scenario allows investors to register investment gains as prices head up and shield themselves from greater risk as investments head down.

An amount that can be subtracted from gross income, from a gross estate, or from a gift, thereby lowering the amount on which tax is assessed.

The amount an insured person must pay for a covered medical and/or dental expense if his or her insurance doesn't provide 100 percent coverage.

An individual who has completed CFP Board’s rigorous certification requirements and is authorized to use the CFP® certification marks.

The savings element of a permanent life insurance policy, which represents the policy owner's interest in the policy.

 A process which typically includes, but is not limited to, some or all of these six steps:

1)     Establishing and defining the client-planner relationship,
2)     Gathering client data including goals,
3)     Analyzing and evaluating the client’s current financial status,
4)     Developing and presenting recommendations and/or alternatives,
5)     Implementing the recommendations, and
6)     Monitoring the recommendations.

The compensation generated from a transaction involving a product or service and received by an agent or broker, usually calculated as a percentage on the amount of his or her sales or purchase transactions. This includes 12(b)1 fees, trailing commissions, surrender charges and contingent deferred sales charges.

Grains, food products, livestock, oils, and metals that are traded on national exchanges. These exchanges deal in both "spot" trading for current delivery and "futures" trading for delivery in future months.

Household expenses, such as housing or car loan payments, that don't vary over time.

Someone designated in a will or by the probate courts to carry out the wishes of someone who has died.

The person or party named by the owner of a life insurance policy or investment accounts to receive the proceeds in the event of the owner's death.

Investing in different companies, industries, or types of assets to reduce risks in an investment portfolio.

A conflict of interest exists when a financial planner or advisor’s financial, business, property and/or personal interests, relationships or circumstances reasonably may impair his/her ability to offer objective advice, recommendations or services.  CFP® professionals are required to disclose to clients and potential clients any likely conflicts of interest between the client and them, their employer or any affiliates or third parties.

The tax cost of securities, which determines the profit when sold.

A relatively small percentage of attorneys provide financial planning services, usually specializing in estate and tax planning. A financial planner may ask an attorney to provide specific legal advice for a client, particularly in the areas of taxation or estate planning. An attorney may also be called upon to prepare the legal documents necessary to implement recommendations in areas such as wills, trust documents or business ownership planning.

A personal tax-deferred investment account to save for retirement. Contributions to a standard IRA may be deductible, and investments-including earnings and gains-generally are not taxed until distributed to you. Contributions to a Roth IRA are not deductible, but qualified distributions are not taxable.

An increase in the price of products and services over time. The government's main measure of inflation is the Consumer Price Index.

A mutual fund that carries a sales charge.

A collection of stocks, bonds, or other securities purchased and managed by an investment company with pooled funds from many investors.

A mutual fund that does not pass a sales charge along to investors.

The cost of borrowing money, expressed as a percentage of the amount borrowed for a period of time, usually one year.

The amount of money that a worker receives in a paycheck (“take-home” income) after items such as income taxes, Social Security (FICA) tax, retirement plan savings, and other items have been deducted.

A sales or redemption charge, usually imposed by a mutual fund.

All the investments held by an individual or a mutual fund.

Insurance agents are individuals licensed by a state or states to sell life and health and/or property and casualty insurance products. Many financial planners are licensed to sell or give advice on insurance products. Other financial planners might identify insurance needs for a client, but turn to a licensed insurance agent for recommendations about which existing insurance products best meet your needs. Independent insurance agents sell products for two or more insurance companies, while exclusive insurance agents represent only one.

A trust created by a person during his or her lifetime.

The disbursement of the entire value of a profit-sharing plan, pension plan, annuity, or similar account to the account owner or beneficiary. Lump-sum distributions may be rolled over into another tax-deferred account.

A type of insurance that covers the cost of support services (e.g., home health care and nursing home care) when someone is unable to perform basic activities of daily living such as bathing, eating, and dressing.

Assets are considered “liquid” if they can be converted to cash quickly without losing their value.

Money owed by an individual or business that decreases net worth.

The price at which a mutual fund sells or redeems its shares. The net asset value is calculated by dividing the net market value of the fund's assets by the number of outstanding shares.

Investment advisers are individuals or firms that provide securities advice for compensation as part of a regular business. They must register with the Securities and Exchange Commission (SEC) or appropriate state securities agencies, unless specifically exempted. Because financial planners often advise people on securities-based investments, many are registered as investment advisers. Investment advisers cannot sell securities products without a securities license. For that, you must use a licensed securities representative, such as a stockbroker.

Insurance coverage that offers protection against claims resulting from the finding that a property owner has caused bodily injury or property damage to another party.

A "snapshot" of one’s financial situation, calculated by subtracting debts (liabilities) from assets.  All figures in a net worth statement reflect their current fair market value.

The condition of an estate left by a decedent without a valid will. State law then determines who inherits the property or serves as guardian for any minor children.

Co-ownership of property by two or more people in which those who survive one of the owners automatically assume ownership of a decedent's interest.

Umbrella coverage is insurance coverage that extends the terms of a regular insurance policy once coverage limits for the regular policy have been reached. Specifically, umbrella coverage is for people who want protection against a large jury award that is not covered in their standard policy.

A type of life insurance that combines a death benefit with a savings feature which accumulates tax-deferred at current interest rates. Under a universal life insurance policy, the policyholder may increase or decrease his or her own coverage under certain rules without purchasing a new policy.

The market price of a stock divided by the company's annual earnings per share, a widely regarded yardstick for investors.

Life insurance that combines a death benefit with a savings feature that accumulates tax-deferred at current interest rates. However, under this insurance, the cash value can be placed in a variety of subaccounts with different investment objectives. Fees are charged on these subaccounts, so be careful.

In general, the yield is the amount of current income provided by an investment. For stocks, the yield is calculated by dividing the total of the annual dividends by the current price. For bonds, the yield is calculated by dividing the annual interest by the current price. The yield is distinguished from the return, which includes price appreciation or depreciation.

The amount of money invested excluding earnings.

A method by which an individual can transfer the assets from one retirement program to another without the recognition of income for tax purposes. The requirements for a rollover depend on the type of program from which the distribution is made and the type of program receiving the distribution.

A nondeductible IRA that allows tax-free withdrawals when certain conditions are met. Income and contribution limits apply.

This is a type of life insurance that features a death benefit and accumulates cash value tax-deferred at a particular interest rate. Whole life insurance is also referred to as "ordinary" or "straight" life insurance.

The qualification date for minimum company benefits at an assigned time in an individual's seniority with the company or organization.

The degree of price fluctuation associated with a specific investment or market index. The more price fluctuation that is experienced, the greater the volatility.

A pension, profit-sharing, or qualified savings plan established by an employer for the benefit of the employees in compliance with IRS rules.

A legal document that declares a person's wishes concerning the disposition of property, the guardianship of his or her children and the administration of the estate after his or her death.

The cost of replacing property without a reduction for depreciation. People shopping for homeowner's insurance should insist on replacement costs as a measurement for damage to their property.

Also called registered representatives, stockbrokers are licensed by the state(s) in which they practice to buy and sell securities products such as stocks, bonds and mutual funds. They generally earn commissions on all of their transactions. Stockbrokers must be registered with a company that is a member of the Financial Industry Regulatory Authority (FINRA) and pass FINRA-administered securities exams.