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3TN

CONSULTING
8415 High Corners
Dallas, TX 75201

THE WILKINSON FAMILY

PREPARED BY
Thu Pham
Nelson Trang
Tung Do
Surasak Moolpim

TABLE OF CONTENTS
Engagement Letter ........................................................................................................................ 3
Financial Record Keeping ............................................................................................................ 5
Net Worth Statement .................................................................................................................... 6
Cash Flow Statement ..................................................................................................................... 7
Top Spending Areas ...................................................................................................................... 9
Financial Ratios ........................................................................................................................... 10
Insurance ...................................................................................................................................... 12
Debt Repayment .......................................................................................................................... 13
Mortgage Refinance .................................................................................................................... 16

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ENGAGEMENT LETTER
3TN Consulting
8415 High Corners
Dallas, TX 75201
October 25th, 2014
Dear Mr. & Mrs. Wilkinson,
We welcome the opportunity to work with you as this letter confirms the terms of our agreement
regarding the financial planning services will provide for you.
At 3TN Consulting our mission is to simply help our clients achieve their financial goals. We are
committed to maintaining the highest standards of integrity in our relationship with you. Please
rest assured that all information you provide will be kept strictly confidential.
This engagement will include services designed to meet your stated goals and objectives
ultimately reducing your costs and debt. These services will specifically include:

Developing a summary of your current financial situation, including a year-end net worth
statement and an annual cash flow statement.
Identifying your top spending areas.
Analyzing important financial ratios.
Reviewing your current home and auto insurance policies.
Developing a debt repayment strategy.
Analyzing mortgage refinancing options.

At 3TN Consulting we maintain the highest level of fiduciary responsibility, meaning that we put
our clients best interests first. Not only is it our job to act with high fiduciary standard of care, it
is also our job to communicate this with our clients. The cost of our services will be a flat fee of
$1500. We feel that this is a fair evaluation based on the services provided.
Common billing structures when working with certified financial planners are typically feebased and commission-based. Fee-based planners earn fees from advice given and make
commissions off products sold. Commission-based planners only earn money from the products
they sell. Our billing structure is simply fee-only. We earn from advice given and do not make
any type of commissions.
We look forward to helping you meet and exceed your financial goals.
Sincerely,

3TN Consulting
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By signing below, you are acknowledging that you have read, agree to and accept all of the terms
and conditions contained in this agreement.
Head CFP Professional:

Client:

______________________________

________________________________

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FINANCIAL RECORD KEEPING


It is critically important to keep all your financial records safe but accessible. Keeping your
records up to date and in order will allow you to:

Save time and reduce stress


Keep track of expenses
Prove that a bill has been paid
Show legal proof of events
Prove ownership status
Prove claims to insurance
Correct errors on statements

The following steps can help you get started on organizing your financial documents:
1.
2.
3.
4.
5.

Gather all your financial documents.


Set up a filing system.
Separate your paperwork into labeled stacks such as Bills or Statements.
File all documents into their appropriate folder.
Immediately file when you obtain additional documents.

In addition there are many web and mobile-based personal financial management services
available. Listed below are several popular budgeting and personal finance applications.
Mint.com
Mint not only helps you track your income and expenses but also your financial state as a whole.
Besides allowing for in-depth personal budget management and expense logging, the Mint app
lets you sync your bank and card details for an up-to-date and secure look at your financial state.
BUDGT.ch
This application focuses on budgeting and expense tracking, allowing you to create and manage
a monthly budget with income and recurring expenses, and then enter your own categories that
can be displayed in colorful expense charts.
MoneyGuidePro.com
MGP offers financial planning software thats great for college, retirement, estate and Social
Security planning. In addition asset allocation and insurance needs analysis.

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NET WORTH STATEMENT


Assets
Current Assets
Checking (Joint)
Bank CD (Joint)
Savings Account
Total Current Assets

Liabilities and Net Worth


Current Liabilities
BB National CC
Sears CC

$2,000
$3,000
$2,300

$7,300 Total Current Liabilities

Investment Assets
401 (k) Account (His)
401 (k) Account (Her)
Roth IRA (H)
Brokage Account

$5,237
$6,200
$11,437

Long-Term Liabilities
$108,657
$65,581
$4,295
$3,700

Student Loans (H)


Harley Davidson Loan
Jeep Auto Loan
Infiniti Loan

$37,380
$18,000
$8,500
$42,000

Primary Mortgage
Total Investment Assets

$182,233 Total Long-Term Liabilities

$283,880

Total Liabilities

$295,317

Total Net Worth

$258,496

Personal Use Assets


Primary Home
Furniture
Jewelry
Harley Davidson
2007 Jeep Patriot
2010 Infiniti E35
Boat

$178,000

$271,980
$12,300
$3,500
$21,000
$9,000
$38,500
$8,000

Total Personal Use Assets

$364,280

Total Assets

$553,813 Total Liabilities and Net Worth

$553,813

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CASH FLOW STATEMENT


Cash Inflows
Todd's Salary
Sarah's Salary
Dividend Income
Total Cash Inflows

Monthly
$8,000
$6,000
$120

Annual
$96,000
$72,000
$1,440

$169,440

Cash Outflows
Savings
Todd's 401 (k) Contributions
Sarah's 401 (k) Contributions
Todd's Roth Contributions
Cash Savings Contribution
Dividend Reinvestment

$300
$300
$230
$600
$120

$3,600
$3,600
$2,760
$7,200
$1,440

Total Savings
Debt Payments
Mortgage Payment (PITI)
BB National CC Payment
Sears CC Payment
Harley Payment
Jeep Payment
Infinity Payment
Student Loan Payment

$18,600
$1,777
$195
$200
$175
$280
$448
$280

$21,324
$2,340
$2,400
$2,100
$3,360
$5,376
$3,360

Total Debt Payments


Living Expenses
Water
Gas
Child Care
Maid
Entertainment
Landscaping
Charity
Groceries
Home Repairs
Cable
Alarm System
Internet
Cellphone
Dining Out
Hobbies
Club Dues

Annual Totals

$40,260
$80
$300
$1,200
$400
$400
$300
$350
$500
$200
$105
$39
$100
$130
$400
$300
$150

$960
$3,600
$14,400
$4,800
$4,800
$3,600
$4,200
$6,000
$2,400
$1,260
$468
$1,200
$1,560
$4,800
$3,600
$1,800
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Dry Cleaning
Parking and Tolls

$160
$45

$1,920
$540

Total Living Expenses


Insurance Payments
Life Insurance
Auto Insurance

$61,908
$100
$268

$1,200
$3,216

Total Insurance Payments


Taxes
FICA and Income Taxes

$800
Total Taxes

Total Cash Outflows


Net Discretionary Cash Flow

$4,416
$9,600
$9,600
$134,784
$34,656

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TOP SPENDING AREAS

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FINANCIAL RATIOS
1. Emergency Fund Ratio =

$7, 300
$7, 300
=
= 0.95 month
($92, 316 /12)
$7, 693

Measures how many months of non-discretionary expenses the client has in the form of
currents assets.
Benchmark: 3-6 months
Important to help alleviate stress caused by risks like job loss, disability, or unexpected
expenses.

Recommendations: The Wilkinsons emergency fund is inadequate and this is an area of concern
for us to focus on and improve. We can accomplish this by decreasing monthly expenses that are
discretionary and maintaining current cash savings.
Non-discretionary expenses:
Utilities (Water, Gas)
Childcare
Home (Alarm System, Home Repairs)
Internet, Cellphone, Cable
Groceries
Dry Cleaning
Charity
Parking &Tolls
Insurance Premiums (Life, Auto)
Debt Payments
Tax Payments
2. Current Ratio =

$7, 300
= 0.64
$11, 437

Measures how many times the client can satisfy short- term liabilities with current assets.
Benchmark: 1.0-2.0.
Important to keep track to identify and correct areas of weakness.

Recommendations: The current ratio is currently lower than the benchmark. We would like to
decrease the current liabilities through the recommendations in the debt repayment plan.

3. Housing Ratio 1 =

$1, 777
= 12.69%
$14, 000

Housing costs include principal, interest, taxes, and insurance.


Benchmark: 28%
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Recommendations: You are in good financial health based on this benchmark which means that
your housing costs are in accordance with industry standards.

4. Housing Ratio 2 =

$3, 355
= 23.96%
$14, 000

All debt payments include car loans, student loans, credit cards, and all monthly recurring
debt.
Benchmark: 36%

Recommendations: This number is too high because of the amount of monthly debt payments.
We will work to lower the cash outflows through the recommendations in the debt repayment
plan.

5. Saving Rate =

$18, 600
= 11.07%
$168, 000

The amount of money that is set aside towards a retirement goal.


Benchmark: 10 13% (Age 25 35)

Recommendations: Your saving rate is very good. This means that you are saving enough to
cover retirement.

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INSURANCE
A split limit policy is when you have different coverage limits for bodily injuries and property
damage. Your current policy is $50k/$100k/$50k. This simply means that you are covered up to
a maximum of $50k for bodily injuries per person, $100k for total bodily injuries per accident,
and $50k for total property damage per accident. Anything over these amounts will be your outof-pocket expense.
The $500 deductible is money you pay out-of-pocket before the insurance company pays toward
a claim resulting from a loss or damage. You will be responsible for paying the first $500 for
repairs from an auto accident and then the insurance company will pay for the remaining
balance.
Your home is currently insured 100% of its actual cash value. Actual cash value is the amount it
would take to repair or replace damage to your home after depreciation. On the other hand your
property has replacement cost coverage. Under replacement cost coverage, if your personal
property is damaged or stolen, the insurance company will pay you what it would cost to buy the
property today. You should consider switching your home insurance policy from actual cash
value to replacement cost. Although insurance premiums are lower for an actual cash value
policy, you may find yourself paying a significant amount of money out-of-pocket when you
incur a loss.

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DEBT REPAYMENT
It is extremely important to prioritize your debt. By paying off the right debts first, you can save
a great amount of money while clearing your debts faster. Power payments are highly
recommended. Power payments mean that as soon as one debt is paid off, the monthly payment
from that debt is applied to the next debt. This is beneficial because the total amount of money
paid towards these debts each month will be held constant until all are paid. Below is a table
displaying total payments of your debt with and without power payments.

By using power payments, you will save $6,254.31 with a time reduction of 3 years and 9
months! In addition, if you could pay down the debt with an extra $300 per month, the amount
saved will increase to $10,188.67. The table below shows power payments with an extra $300
per month under the highest interest first method.

The following pages contain a detailed payment calendar should you decide to establish the
power payment plan above beginning January 2015.

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Month

Visa

American Express

Home Equity Loan

Student Loan

Auto Loan

Nov 2014

$225.00

$150.00

$506.31

$354.37

$647.00

Dec 2014

$225.00

$150.00

$506.31

$354.37

$647.00

Jan 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Feb 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Mar 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Apr 2015

$525.00

$150.00

$506.31

$354.37

$647.00

May 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Jun 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Jul 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Aug 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Sep 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Oct 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Nov 2015

$525.00

$150.00

$506.31

$354.37

$647.00

Dec 2015

$378.36

$296.64

$506.31

$354.37

$647.00

Jan 2016

$675.00

$506.31

$354.37

$647.00

Feb 2016

$675.00

$506.31

$354.37

$647.00

Mar 2016

$336.33

$844.98

$354.37

$647.00

Apr 2016

$1181.31

$354.37

$647.00

May 2016

$1181.31

$354.37

$647.00

Jun 2016

$1181.31

$354.37

$647.00

Jul 2016

$1181.31

$354.37

$647.00

Aug 2016

$1181.31

$354.37

$647.00

Sep 2016

$1181.31

$354.37

$647.00

Oct 2016

$1181.31

$354.37

$647.00

Nov 2016

$1181.31

$354.37

$647.00

Dec 2016

$1181.31

$354.37

$647.00

Jan 2017

$1181.31

$354.37

$647.00

Feb 2017

$1181.31

$354.37

$647.00

Mar 2017

$1181.31

$354.37

$647.00

Apr 2017

$1181.31

$354.37

$647.00

May 2017

$1181.31

$354.37

$647.00

Jun 2017

$1181.31

$354.37

$647.00

Jul 2017

$1181.31

$354.37

$647.00

Aug 2017

$1181.31

$354.37

$647.00

Sep 2017

$1181.31

$354.37

$647.00

Oct 2017

$1181.31

$354.37

$647.00

Nov 2017

$1181.31

$354.37

$647.00

Dec 2017

$1181.31

$354.37

$647.00

Jan 2018

$1181.31

$354.37

$647.00

Feb 2018

$1181.31

$354.37

$647.00

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Mar 2018

$1181.31

$354.37

$647.00

Apr 2018

$1181.31

$354.37

$647.00

May 2018

$1181.31

$354.37

$647.00

Jun 2018

$1181.31

$354.37

$647.00

Jul 2018

$1181.31

$354.37

$647.00

Aug 2018

$1181.31

$354.37

$647.00

Sep 2018

$1181.31

$354.37

$647.00

Oct 2018

$1244.73

$354.37

$583.58

Nov 2018

$1828.31

$354.37

Dec 2018

$1828.31

$354.37

Jan 2019

$1828.31

$354.37

Feb 2019

$1042.82

$1139.86

Mar 2019

$2182.68

Apr 2019

$2182.68

May 2019

$2182.68

Jun 2019

$2182.68

Jul 2019

$2182.68

Aug 2019

$2182.68

Sep 2019

$2182.68

Oct 2019

$1846.33

TOTALS

$6603.36

$3932.97

$52157.72

$36337.82

$30992.58

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MORTGAGE REFINANCE

Total of Payments
$500,000.00
$450,000.00
$400,000.00
$350,000.00
$300,000.00
$250,000.00
$200,000.00
$150,000.00
$100,000.00
$50,000.00
$0.00

Interest
Current
30 years @
6.6%

OpAon 1
15 years @
4.2%

OpAon 2
30 years @
4.6%

Interest

$259,834.35

$64,142.54

$155,152.87

Principal

$200,000.00

$183,500.00

$183,500.00

Total

$459,834.35

$247,642.54

$338,652.87

Principal

The chart above shows the total payments of interest and principle of the current mortgage and
the two refinance options. Total interest is significantly lower in both options 1 and 2 therefore
refinancing is highly recommended.

Monthly Payments
(W/ Taxes & Insurance)
$2,000.00
$1,500.00
$1,000.00

$1,777.00

$1,875.47
$1,440.38

$500.00
$0.00
Current OpAon 1 OpAon
2
30 years @ 6.6%
15 years @ 4.2%
30 years @ 4.6%

As for monthly payments, option 1 will increase payments by $98.47 while option 2 will save
you $336.62.

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Housing Ratios
30.00%
25.00%
20.00%

23.96%

24.67%
21.56%

15.00%
10.00%

Housing RaAo 1

12.69%

13.40%

Housing RaAo 2

10.29%

5.00%
0.00%
Current OpAon
1 OpAon
2
30 years @ 6.6%
15 years @ 4.2%
30 years @ 4.6%

Important factors to consider when deciding between the two refinancing options are the housing
ratios. Although option 1 has a lower total interest, the monthly payments will be higher than
what you are currently paying. Refinancing with option 2 is recommended due to the
significantly low housing ratios. In addition, refinancing to 30 years at 4.6% will lower your
monthly mortgage payments giving you the flexibility to pay off other debts and expenses.

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