Living Balance Sheet by samanthac

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									 Lesson #2
LBS Domains
  The Living Balance Sheet
Financial Balance – the key objective
   The Living Balance Sheet acts as a
    ready-made template
   Offers comprehensive feedback toward
    all protection, asset, liability and
    cash flow issues
   Acts a a highly reliable resource
    Purpose of a Balance Sheet
     A “Balance Sheet” has been used
    to create a “moment in time” snapshot
         of a particular financial entity.

 Balance sheets were thought to be useful
  only in business situations
 Have become helpful in establishing the
  current financial condition of an individual
  or family.
Purpose of a Balance Sheet

  A Balance Sheet’s structure lists
         all assets owned and
     subtracts all liabilities owed
        to calculate net worth.
  Purpose of a Balance Sheet
  Traditional balance sheets:
• Do not forecast what might be; they
  create a statement of what is.

• Do not take into consideration any of the
  factors that affect the direction in which
  net worth is moving or that it is likely
  to move in the future.
               Traditional Balance Sheet
Assets                                         Liabilities
  Riskless Assets                            Unsecured short-term debt
    cash & equivalents                          signature loans
        checking balances                       credit card debt
        passbook savings (Bank, S&L, CU)        drawn lines of credit
        cash on hand                            borrowed cash values
        money market mutual funds
        money market instruments
    other liquid assets
    life insurance cash values
 Investment Assets
    marketable investments
    maturing investments
    other investment assets                     investment debt
 Job-Related Assets
    pension assets (vested)
 Personal Assets
    home                                        first & second mortgages
    personal property                           loans secured by personal property
        collections (hobby)
        household goods                    TOTAL ASSETS       _____________
                                           TOTAL LIABILITIES _____________
                                           NET WORTH         $
  Purpose of a Balance Sheet

When you look at a traditional balance sheet
    it is impossible to tell how or where
            it may be susceptible to
     destructive forces that might affect
      the current and future net worth.
LBS – A New Wide-Angle View
“The Living Balance Sheet builds on customary
  balance sheet entries and offers an expanded
             financial perspective.”

                 In addition to
     “assets less liabilities equal net worth,”
    the LBS adds protection and cash flow
        considerations to the same view.
    The Living Balance Sheet
John Driscoll &
Company, Inc.
LBS – A New Wide-Angle View

   “People often make important money decisions in a
    vacuum, without considering the impact or
    relationship of that decision to the rest of their
    financial picture.
   This limited, disconnected view is primarily
    responsible for the development of unfavorable
    financial conditions and allows inaccurate financial
    myths to take root and evolve
    (as discussed in Lesson #1).
LBS – A New Wide-Angle View

   The LBS avoids these problems by
    simultaneously considering Protection, Assets,
    Liabilities and Cash Flow, and by combining all
    four of these critical financial “domains” into a
    single view.
   These 4 areas maintain an important
    interdependent relationship that suggests
    all decisions be made from a “big picture”
LBS – A New Wide-Angle View

 The design of the Living Balance Sheet
  provides you with a panoramic view, or
    “wide-angle lens” to look through in
      assessing the financial health
          of a prospect or client.
      Four Financial Domains
   The Living Balance Sheet is comprised of
       4 broad universes, or Domains.
  Protection  Assets  Liabilities Cash Flow

  Each Domain has individual categories:
 Protection (4), Assets (6), Liabilities (4), (Cash Flow (5)

At the very TOP of the LBS lies the
Protection Domain, which acts as
  the “umbrella” that shelters the
  Asset, Liability, and Cash Flow
   Maintaining the proper form and level of
    protection is critical to achieving optimum
    financial balance and success.

   The Implementation of a sound protection
    program should come first, and serve as the
    foundation before all subsequent
    financial opportunities are
The primary role of insurance is to fully indemnify
    against losses that would otherwise create
                financial hardship.

     It is generally most desirable to insure
          all assets and all future income
                      in an amount
          equal to their full and complete
                  replacement value
        against all forms of hazards and peril.
   It is appropriate to maintain insurance equal
    to existing liabilities such as short term debts,
    mortgages, and various taxes.

   Protection decisions should be properly
    coordinated with important legal
    documentation to ensure that personal
    financial objectives may be realized.
Protection Domain Rules:

   • Protection First
   • Full Replacement
   • Lifetime Protection
  The Assets Domain
consists of six categories:

      Personal Property
      Savings
      Investments
      Retirement Accounts,
      Real Estate
      Business
       Assets Domain Rules:

• Achieve High Overall Rate of Return
• Avoid Unnecessary Risk
• Maintain Sufficient Liquidity
• Utilize Tax Advantaged Products
   and Strategies
 This Domain deals with
all of the various forms of

    Short Term Debt
    Taxes
    Mortgages
    Business Debt
  Liabilities Domain Rules:

• Avoid High Interest Debt
• Implement Tax Avoidance
• Consider Time Value of Money
          Cash Flow
This Domain displays the sequential
 money flow in the critical areas of

         Gross Income
         Protection or Insurance Costs
         New Savings into Assets
         Liability Payments
         Net Income
         Cash Flow
        Most Americans
develop an improper and inefficient
        cash flow strategy
   early on in their adult lives.
         Cash Flow

    The Living Balance Sheet
    helps prospects and clients
re-evaluate the flow of their money
      and how it impacts both
 the accumulation and distribution
             of wealth.
             Cash Flow
Through efficient cash flow management
     across the four critical domains,
  prospects will have the opportunity to
    increase the ultimate value of their
     balance sheet, and
    improve their distribution options
     and opportunities.
        Cash Flow
 Cash Flow Domain Rules:

• Protect First
• Regular Savings (10 – 20%)
• Effective Debt & Tax
• Budgeted Lifestyle
           LBS Domains:
      Financial Interdependence

   Achieving financial balance and success
  requires special attention in all four Domains.
Because of the interdependent relationship that
  exists between each Domain, neglecting one
   or more of the other Domains may lead to
        disappointing financial outcomes.
             LBS Domains:
        Financial Interdependence
Examples of this interdependent relationship:
   Premature Death
   Lawsuit
   Reinvesting Interest or Realizing Capital Gains
   Tax Deferred Programs
   Maintaining High Interest Debt
   Canceling Life Insurance During Retirement
   Binding Stockholder Agreements
   Estate Taxes
       The Living Balance Sheet

-   Delivers an innovative, comprehensive
    platform to properly assess all financial
    products and strategies.
- Creates a whole new perspective
  on achieving financial balance
  and success.

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