A starting point for financial planners when working with clients is to construct both a statement of financial position and a cash flow statement. How is this done, and what information will appear on one statement versus the other? There are then five widely used financial ratios that can be calculated in order to assess the financial strength of the client. How do you determine if someone’s debt is under control? Or how much is reasonable to borrow to purchase a home? Various types of credit are discussed, both installment and revolving. What are some of the main types of mortgages available? What is the importance of keeping consumer debt under control, including student loans? What are the main factors that a lender will use to evaluate potential borrowers? The final chapter deals with budgeting, and ways to effectively approach budgeting with a client.

Author: Jim Pasztor, MS, CFP®

Jim Pasztor, vice president of Academic Affairs at the College for Financial Planning is also involved with several of the College‚Äôs investment courses and the white paper series. He is a CFPM® practitioner, and has an MS degree in personal financial planning and an MSF degree in financial analysis, both from the College for Financial Planning. Jim was the recipient of the Edward D. Baker III Journal Award from IMCA in 2014 for his article Endogenous Risk and Dangers to Market Stability. You can reach Jim at jim.pasztor@cffp.edu.

Complexity Level: Overview