Intro to Cash Flow Planning

Cash Flow Solutions For Critical Times

MyCashFlowCoach.com

Why Cash Flow Planning?

Your Type A Clients Are In Pain!
Economy is down Real estate is down Retirement plans are down

Taxes are going up

- Interest rates are going up - College costs are going up

Baby-boomers are getting older

Savings is going up Debt is going down

THE AGE OF THRIFT IS HERE!

Cash Flow Planning

What are the three biggest expenses in a familys budget?

Taxes Interest expense (debt) College tuition

Top Two Ways To Manage Cash Flow

Income Planning Debt Management

Income Planning
Income planning is KEY in cash flow planning
New Pension Protection Act & Financial Aid Changes (2010)

Income Planning = Strategies + Implementation

Reduces business owners taxes Frees up cash flow to fund college & retirement investments Increases financial aid opportunity

8 Income Planning Strategies

Health Reimbursement Hire Child Gift Leaseback Education Assistance

Health Savings Deduct Childs Car Gift Of Appr Assets 1.163-10T(o)(5)

Income Planning Strategy #1

Health Reimbursement Account (Sec 105 Plan):
Tax Benefits:
1. Lower income $10,000/year: $10,000 x 5 years x 25% = $12,500

2. Save SE tax on $10,000/year: $10,000 x 5 years x 15.3% = $7,650

Financial Aid Benefits:

1. Employment Allowance: $3,500 x 5 years x 47% = $8,225 2. Lower income $10,000/year: $10,000 x 5 years x 47% = $23,500

Total Tax & Financial Aid Benefits: $51,875

Income Planning Strategy #2

Hiring the Child:
Tax Benefits:
1. Lower income $5,700/year: $5,700 x 5 years x 25% = $7,125 2. Save SE tax on $5,700/year: $5,700 x 5 years x 15.3% = $4,361

Financial Aid Benefits:

1. Lower income $5,700/year: $5,700 x 5 years x 47% = $13,395

Total Tax & Financial Aid Benefits: $24,781

Income Planning Strategy #3

Gift / Leaseback of Equipment:
Tax Benefits:
1. Lower income $5,000/year: $5,000 x 5 years x 25% = $6,250
2. Save SE tax on $5,000/year: $5,000 x 5 years x 15.3% = $3,825

Financial Aid Benefits:

1. Lease Deduction: $5,000 x 5 years x 47% = $11,750

Total Tax & Financial Aid Benefits: $21,825

Income Planning Strategy #4

Education Assistance Program:
Tax Benefits:
1. Lower income $5,250/year: $5,250 x 5 years x 25% = $6,563 2. Save SE tax on $5,250/year: $5,250 x 5 years x 15.3% = $4,016

Financial Aid Benefits:

1. Lower income $5,250/year: $5,250 x 5 years x 47% = $12,338

Total Tax & Financial Aid Benefits: $22,917

Income Planning Strategy #5

Health Savings Account for Parents:

Tax Benefits:
1. Lower income $5,800/year: $5,800 x 5 years x 25% = $7,250

Financial Aid Benefits:

1. Lower income $5,800/year: $5,800 x 5 years x 47% = $13,630

Total Tax & Financial Aid Benefits: $20,880

Income Planning Strategy #6

Deducting the Childs Car Expenses:
Tax Benefits:
1. Lower income $3,000/year: $3,000 x 5 years x 25% = $3,750 2. Save SE tax on $3,000/year: $3,000 x 5 years x 15.3% = $2,295

Financial Aid Benefits:

1. Lower income $3,000/year: $3,000 x 5 years x 47% = $7,050

Total Tax & Financial Aid Benefits: $13,095

Income Planning Strategy #7

Gift of Appreciated (or Depreciated Out) Assets:

Tax Benefits:
1. Lower income $3,000/year: $3,000 x 5 years x 15% = $2,350

Financial Aid Benefits:

1. Lower income $3,000/year: $3,000 x 5 years x 47% = $7,050

Total Tax & Financial Aid Benefits: $9,400

Income Planning Strategy #8

Deducting Home Interest as a Business Expense: 1.163-10T(o)(5)
Tax Benefits:
1. Lower income $10,000/year: $10,000 x 5 years x 15% = $7,650

Financial Aid Benefits:

1. Lower income $10,000/year: $10,000 x 5 years x 47% = $23,500

Total Tax & Financial Aid Benefits: $31,150

Income Strategies
Strategy HRA (Section 105) HIRE CHILD Tax Savings $20,150 $11,486 Fin Aid Savings

$31,725 $13,395

GIFT / LEASEBACK
EDUCATION ASSISTANCE

$10,075
$10,579

HSA
DEDUCT CHILDS CAR GIFT / APPRECIATED ASSET 1.163-10T(o)(5)

$7,250
$6,045 $2,350 $7,650

TOTAL

$75,585

$11,750 $12,338 $13,630 $7,050 $7,050 $23,500 $120,438

Debt Management

Best two ways to pay off debt?

Debt Consolidation
Cash Flow Maximizer

The Power Of Debt Reduction Planning

Debt reduction planning is POWERFUL dooropener People want ways to pay off debt Get clients to contact you in this tough market Reduce any debt in half the time Build back equity in their home (invest later) Use PLUS loans for college instead of assets

Case Study
Debt Consolidation
Joe The Plumber 40 years old ASSETS
RESIDENCE

AMOUNT
$400,000

DEBT
MORTGAGE

AMOUNT
$216,500

BANK ACCOUNT
STOCKS/FUNDS 401(k)

$10,000
$10,000 $200,000 $620,000

CAR LOANS
CREDIT CARDS

$35,000
$15,000

BUSINESS LOAN $50,000 $316,500

Debt Consolidation
Before Consolidation Monthly Payment Mortgage Car Loans Credit Cards Totals $1,400 $ 600 $ 420 $3,000 Balance $216,500 $ 35,000 $ 15,000 $ 50,000 $316,500 $2,000 $316,500 After Consolidation Monthly Payment $2,000 Balance $316,500

Business Loan $ 580

$1,000/mo. Cash Flow Savings

Mortgage Considerations
Qualifying Income / Credit Loan costs - Origination Fees / Points / Closing Costs Appraised value LTV / Mortgage Insurance Locking the rate Float / Lock Credit Lines Adjustable / No Costs

Cash Flow Maximizer Strategy

Pay off debt fast Dramatically reduce total interest cost on debt Guaranteed rate of return in a tough market Debt reduction is a great lead generator

Conventional Method Of Paying Debt

CHECKING ACCOUNT
Income
Expenses
Cash Flow Excess

MORTGAGE
6.5% - 30 Yrs $316,500
($2,000)

$7,000 $4,000 $2,000 $1,000

0%
Rate of Return

How Cash Flow Maximizer Works

Cash Flow Maximizer METHOD
MONTH 1

LOC
6.5%

MORTGAGE
6.5% - 30 Yrs

$12,000
Income
Expenses
Cash Flow Excess

$7,000 $4,000 $2,000 $1,000 $11,000

$316,500 ($12,000)

($2,000)

LOC Balance

$304,214

How Cash Flow Maximizer Works

Cash Flow Maximizer METHOD
MONTH 2

LOC
6.5%

MORTGAGE
6.5% - 30 Yrs

$11,000
Income
Expenses
Cash Flow Excess

$304,214

$7,000 $4,000 $2,000 $1,000 $10,000

($2,000)

LOC Balance

$303,861

How Cash Flow Maximizer Works

Cash Flow Maximizer METHOD
MONTH 12

LOC
6.5%

MORTGAGE
6.5% - 30 Yrs

$1,000
Income
Expenses
Cash Flow Excess

$300,600

$7,000 $4,000 $2,000 $1,000 $0

($2,000)

LOC Balance

$300,227

How Cash Flow Maximizer Works

Cash Flow Maximizer METHOD
MONTH 13

LOC
6.5%

MORTGAGE
6.5% - 30 Yrs

$12,000
Income
Expenses
Cash Flow Excess

$300,227 ($12,000)

$7,000 $4,000 $2,000 $1,000 $11,000

($2,000)

LOC Balance

$287,853

YEARS 1-13
Cash Flow Maximizer Mortgage Balance 300,227 $282,866 $264,341 Conventional Mortgage Balance $312,962 $309,188 $305,506

Year 1 2 3

4 5
6 7 8 9 10 11 12

$244,575 $223,486
$200,985 $176,976 $151,360 $124,027 $94,865 $63,750 $30,550

$301,232 $296,672
$291,807 $286,615 $281,078 $275,166 $268,861 $262,133 $254,954

13

$0

$246,633

Cash Flow Maximizer

Investment Accumulation
From Loan Payoff To Retirement

Age At Loan Payoff

Age At Retirement Additional Retirement Funding
Cash Flow per year Monthly Mortgage Payment # Years to Retirement Rate Of Return

53
65

$12,000 $2,000 12 5%

Balance At Retirement

$595,663

Home Equity Wealth Builder

Loan Information
Loan Amount Annual Interest Rate Number of Monthly Payments $316,500 6.50% 360

Loan Information Calculator

Current Principal Balance Annual Interest Rate Monthly Payment Amount Number of Payments Remaining $1 1.00% $1.00

Monthly Payment Amount

$2,000.50

1.00

Extra Cash Flow

Extra Monthly Cash Flow Extra Annual Cash Flow Contribution Month of Annual Cash Flow Contribution Total Extra Cash Flow $0 $12,000 1 $156,000.00

Investment Summary
Current Age Retirement Age Investment per Year Rate of Return Years Until Paid in Full Value of Investment @ Paid in Full Number of Years Until Retirement Extra Payment per Year Monthly Loan Payment 40 65 $0 5.00% 12.83

Loan Summary
Total of All Payments Total Interest Paid Years Until Paid Off $463,224.30 $146,724.30 12.83

$0.00
12.17 $12,000 $2,000.50

Interest Savings

$256,954.00

Balance at Retirement

$595,663.12

Case Study

Combining Income Planning With Debt Management Strategies To Increase Cash Flow

Case Study
Joe The Plumber 40 years old Income: $100,000 ASSETS
RESIDENCE

AMOUNT
$400,000

DEBT
MORTGAGE

AMOUNT
$216,500

BANK ACCOUNT
STOCKS/FUNDS 401K

$10,000
$10,000 $200,000 $620,000

CAR LOANS
CREDIT CARDS

$35,000
$15,000

BUSINESS LOAN $50,000 $316,500

Cash Flow Strategy

Before Consolidation Monthly Payment Mortgage Car Loans Credit Cards Totals $1,400 $ 600 $ 420 $3,000 Balance $216,500 $ 35,000 $ 15,000 $ 50,000 $316,500 $2,000 $316,500 After Consolidation Monthly Payment $2,000 Balance $316,500

Business Loan $ 580

$1,000/mo. Cash Flow Savings

Tax Strategies
Plumbing Business
STRATEGY HRA (Section 105) HIRE CHILD GIFT / LEASEBACK EDUCATION ASSISTANCE HSA DEDUCT CHILDS CAR GIFT / APPRECIATED ASSET 1.163-10T(o)(5) TOTAL TAX SAVINGS $3,500 $2,330 $2,000 $2080 $1,450 $1,200 $450 $1,530 $15,030

Results!
College Tuition Bill Paid For After Using Cash Flow Strategies

BEFORE Taxable Income $100,000

AFTER $45,050

CASH FLOW $15,030 / yr $12,000 / yr

Tax Savings Cash Flow Savings

Private University Cost Estimated Financial Aid Final Tuition Bill Cash Flow Available $38,000 -0$38,000 $38,000 $20,000 $18,000

$27,030 / yr

Increased Cash Flow = Found Money

NUMBER OF YEARS TO ACCUMULATE FUNDS :

25

FUTURE VALUE ESTIMATOR

Initial
LUMP SUM DEPOSIT:

Revised
$0.00 $1,000.00 $15,030.00 4.00%

$0.00 $0.00 $0.00 4.00%

MONTHLY CONTRIBUTION:

ANNUAL CONTRIBUTION:

ESTIMATED RATE OF RETURN:

ESTIMATED FUTURE VALUE:

$0.00

$1,140,067.55 $1,140,067.55

ESTIMATED INCREASE IN RESOURCES:

Marketing To Small Business Owners

Small Business Owners Are Your Best Prospects

WHY?
More financial strategies available More proactive to improve their bottom line More sales opportunities:
IRAs and Pension Alternatives Deferred Compensation Buy Sell Agreements Key Person Insurance Long-term Care Premium Financing Company-Owned Life Insurance

Identify Strategic Small Business Groups

Who are your type A clients?

Contact your key business clients Find out what trade groups or associations they belong to

Identify Strategic Small Business Groups

Research
Gale Researchs Directory of Associations

Gale Researchs Regional State & Local Organizations Encyclopedia of Associations Standard Rate & Data Service
Trade Mags & Consumer Lists

GOOGLE Search Online

State Small Business Associations

Infiltrate Strategic Small Business Groups

CPAs Attorneys Fund-raisers (targeting small business groups) Real Estate Brokers (small businesses moving to the community) Courthouse / Sec of State Corporation filings

Approaching CPAs For Joint Ventures!

The CPA Campaign
What to look for?
Age 30 to middle 50s Has less than 6 8 employees Client base of small business owners Has an entrepreneurial and creative mindset Positive, upbeat, decision maker Dont go after the big accounting firms

Where To Locate CPAs

City Business Journals (www.BizJournals.com) State CPA Societies (www.AICPA.org) Local CPA Chapters Online resources (www.CPADirectory.com) Yellow Pages Google Search for local CPAs

Developing Your Cash Flow Planning Team

Find Your Income Planning (CPA) Specialist
By using mutual business owner clients Send CPA to free Intro To College Planning course CPE credit
Learn the power of Income planning in college funding

Do team (CPA/Advisor) seminars

Increase attendance Increase % first appointments Increase credibility Increase closing ratio (both advisor and CPA)

How To Get In Front Of 10 Business Owner Clients Every 30 Days!

Step 1: Identify 100 potential business owner clients by doing appropriate research

Develop a database list of Type A small business owners to contact.

How To Get In Front Of 10 Business Owner Clients Every 30 Days!

Step 2: Send out a prospecting letter to the 100 potential business owner clients

The letter should detail ways for the business owner to save money and pre-sells the need for the initial meeting. The letter should also make the business owner comfortable meeting with you by stating upfront that you need to involve their CPA in the planning process.

How To Get In Front Of 10 Business Owner Clients Every 30 Days!

Step 3: During the next 30 days follow-up the prospecting letter with a phone call to set up an appointment with the business owner

Using income planning and debt reduction to create new-found money is a huge door-opener You will make appointments with a minimum of 10% of the 100 prospects within 30 days.

How To Get In Front Of 10 Business Owner Clients Every 30 Days!

Step 4: Meet with the business owner to discuss the value of proactive planning along with potential investment strategies to use the increased cash flow

New-found money to fund college or retirement demonstrates the unique value you bring to the table. When using this cash floe value-added approach first, discussing later the movement of all their assets, or reviewing their life policies, becomes a much easier process

How To Get In Front Of 10 Business Owner Clients Every 30 Days!

Step 5: Have the business owner coordinate a meeting with you, the business owner, and the CPA Step 6: Meet with the business owner and CPA

Let the CPA know that you need his/her expertise in income planning to increase cash flow for college/retirement.

What Is The MyCashFlowCoach program?

Easy door-opener to business owner market by reducing their three biggest costs:
Taxes Interest expense College tuition

Easy way to network with CPAs to build a powerful cash flow planning team Adds another way to get Type A clients without incurring heavy marketing costs!

What Can MyCashFlowCoach Do For You?

Income Planning

Income planning is KEY in cash flow planning

Strategies (tax capacity) wont work unless implemented

MyCashFlowCoach provides implementation tools

Step-by-step guides for the CPA to implement the strategy

Includes documents, forms and contracts

What Can MyCashFlowCoach Do For You?

Debt Reduction Planning
Debt reduction planning is POWERFUL door-opener
People want ways to pay off debt Show them how with Cash Flow Maximizer

MyCashFlowCoach provides implementation tools

Step-by-step guide to implement the debt reduction strategy Includes software tool for comparison and tracking results

Get clients to contact you in this tough market

Reduce any debt in half the time
Build back equity in their home (invest later)

MyCashFlowCoach.com Advisor Marketing Program

What you get:
1) One year unlimited membership license
A. Unlimited access to how to income planning and debt reduction implementation guides for the business owners CPA Debt reduction implementation guide and Equity Wealth Builder software

B.

MyCashFlowCoach.com Advisor Marketing Program

What you get:
2) Marketing material and presentations
A. How To Use The MCFC Program With Small Business Owners and Their CPA Or Tax Advisor step-by-step guide How To Market To Small Business Owners manual Sample Brochure

B. C.

D. CPA Introduction Letter

E. Three PowerPoint Presentations with Scripts

MyCashFlowCoach.com Advisor Marketing Program

What you get:

3) 4) Marketing and Technical Webinars Ongoing Support

MyCashFlowCoach.com Advisor Marketing Program

1) Cost = $1,497 (per year)

a) Apply these strategies to your own business b) Implementing just one strategy in your own business will more than recoup the $1,497 cost

HOW TO ORDER!

Step 1: Go To MyCashFlowCoach.com Step 2: Click Join Today Step 3: Order Financial Advisor Package

Questions?

Contact Ron Them directly at:

614-889-5665

Ron@ MyCashFlowCoach.com