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  • BUILDING BLOCKS for Wealthy Living



    Mark Reynolds, CFP® Mark Reynolds and Associates

    123 Main Street, Suite 100 San Diego, CA 92128 Phone: 800-123-4567 Fax: 800-123-4567

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  • Building Blocks for Wealthy Living EVT-092-07-000000

    Building Blocks for Wealthy Living LIVE WITHIN YOUR MEANS 3 Are you throwing money away?

    FOLLOW SOUND INVESTMENT PRINCIPLES 7 Don’t make the most expensive mistakes of your life.

    BE READY FOR ANYTHING 11 Understand the five areas of coverage.

    PAY ATTENTION TO TAXES 14 Taxes may be your single greatest expense.

    CONSIDER YOUR ESTATE 16 Manage assets during your lifetime. Distribute assets after death.

    DON’T DO IT ALL YOURSELF 18 Why work with a professional?

    This material was written and prepared by Emerald Connect.

    Copyright by Emerald Connect, LLC. All rights reserved. No part of this publication may be copied or distributed, transmitted, transcribed, stored in a retrieval system, transferred in any form or by any means—electronic, mechanical, magnetic, manual, or otherwise—or disclosed to third parties without the express written permission of Emerald Connect, LLC, 15050 Avenue of Science, Suite 200, San Diego, CA 92128, U.S.A.

    The information contained in this workbook is not written or intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from your own tax or legal counsel. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

    Emerald Connect assumes no responsibility for statements made in this publication including, but not limited to, typographical errors or omissions, or statements regarding legal, tax, securities, and financial matters. Qualified legal, tax, securities, and financial advisors should always be consulted before acting on any information concerning these fields.


  • © 2015 Emerald Connect, LLC 3

    Live Within Your Means When was the last time you tore up a dollar bill? Tossed money

    out the window? Lit money on fire? Threw money in the trash?

    Never, right? You wouldn’t dream of it. But have you ever:

    • Bought something just because it was on sale?

    • Subscribed to a magazine that you never read?

    • Bought some clothing and then used it as a justification to buy new shoes?

    • Paid for something on a monthly basis that you never used? In fact, can you name all the charges you have posted automatically to your credit card or bank account?

    • Bought dinner with a credit card and then allowed yourself to be charged interest on the purchase?

    The more cash flow you have, the more likely you are to spend carelessly.

    The Latte Factor Every day on his way to work, Paul stops to get a caffè latte.

    When he goes to lunch, he gets another one. Lattes cost about $4.00 each. That means Paul is spending $8 each day on his habit. A quick bit of math reveals that Paul spends about $176 per month

    on lattes. If Paul were to invest the amount he’s spending on lattes, he might be able to accumulate a sizable sum over time (see graph below).

    Are you in the habit of purchasing small “luxury” items on a regular basis? Consider the monthly cost and the potential opportunity if instead you used some or all of the money to invest in pursuit of your financial goals.

    This hypothetical example is used for illustrative purposes only and does not represent the performance of any specific investment. Rates of return will vary over time, especially for long-term investments. The effect of fees, expenses, and taxes is not considered. Actual results will vary.


    $176 per month 8% rate of return 25 years

    The $140,000 Latte$160,000










    5 years 15 years 25 years

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  • 4 © 2015 Emerald Connect, LLC

    Put It in Writing A cash-flow analysis can

    help you clarify your priorities. Once you have everything in front of you

    in writing, it’s easier to make decisions about

    how you want to spend your money.

    Three Steps to Living Within Your Means 1. Analyze Your Cash Flow

    Analyzing your cash flow is important whether you are rich or poor because it requires you to be honest with yourself about how you spend your money.

    Obviously, analyzing your cash flow can help prevent you from overspending. But it can also help prevent you from underspending, so that you aren’t living too frugally. If you know how much money you have available for spending on luxuries or fun activities, then you can spend it without guilt. If you spend money on something that you aren’t sure you can afford, then you won’t be able to fully enjoy your purchase. This exercise can help you feel better about your spending.

    Sources and Uses of Funds

    Employment Salary, wages, tips $ –––––––––––––– Business income $ ––––––––––––––

    Investment Taxable interest (from CDs, savings accounts, etc.) $ –––––––––––––– Nontaxable interest (from bonds, etc.) $ –––––––––––––– Dividends (from stocks, mutual funds, etc.) $ –––––––––––––– Rental income $ –––––––––––––– Partnership income $ ––––––––––––––

    Other Alimony, child support $ –––––––––––––– Pensions $ –––––––––––––– Social Security benefits $ –––––––––––––– Other income $ ––––––––––––––

    TOTAL MONTHLY INCOME $ ––––––––––––––



  • © 2015 Emerald Connect, LLC 5

    Taxes Federal income taxes $ –––––––––––––– State income taxes $ –––––––––––––– FICA (Social Security) /self-employment $ –––––––––––––– Real estate taxes $ –––––––––––––– Loan Payments Mortgage (or rent) $ –––––––––––––– Automobile loans $ –––––––––––––– Credit cards $ –––––––––––––– Education loans $ –––––––––––––– Other installment loans $ –––––––––––––– Insurance Life $ –––––––––––––– Auto $ –––––––––––––– Homeowners $ –––––––––––––– Long-term care/disability income $ –––––––––––––– Medical/dental $ –––––––––––––– Liability $ –––––––––––––– Household Food $ –––––––––––––– Clothing/laundry $ –––––––––––––– Utilities (electricity, heat, water, phone) $ –––––––––––––– Household repairs/maintenance $ –––––––––––––– Auto expenses (maintenance/fuel) $ –––––––––––––– Other transportation $ –––––––––––––– Recreation/travel $ –––––––––––––– Entertainment/dining out $ –––––––––––––– Charitable contributions $ –––––––––––––– Unreimbursed medical/dental $ –––––––––––––– Child care $ –––––––––––––– Education expenses $ –––––––––––––– Other expenses $ –––––––––––––– TOTAL MONTHLY EXPENSES $ ––––––––––––––


    Total monthly income (from facing page) $ –––––––––––––– Total monthly expenses (from above) – $ –––––––––––––– NET CASH FLOW $ ––––––––––––––


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  • 6 © 2015 Emerald Connect, LLC

    2. Pay Yourself First You may have heard this expression, but what does it mean?

    Paying yourself first is deciding to set aside your first dollar of income toward your financial goals. The key word is “deciding” because this is really an act of will. It is a deliberate effort to devote your first dollar of income to your number-one financial priority, whether that is saving for retirement, saving for a family member’s college education, saving for a down payment on a major purchase, or simply getting out of debt.

    If you wait until the end of the month, you might find that you don’t have enough money left over to fund your first priority, and you will be unlikely to reach your long-term financial goals.

    Starting Now Pays Later

    Assumes a 6% rate of return in both accounts. This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investments. Taxes and investment costs are not considered. Rates of return will