General Principles of Financial Planning

Quantitative data (objective facts and figures: income, assets, liabilities, statements) and qualitative data (subjective attitudes, goals, values, risk tolerance, health, family dynamics).

Goals should be Specific, Measurable, Attainable (achievable), Realistic (relevant), and Time-bound. SMART goals make objectives concrete and trackable.

Risk tolerance is the client's psychological/emotional willingness to accept volatility. Risk capacity is the objective, financial ability to absorb losses given time horizon, income, and resources. A client may be willing but unable, or able but unwilling.

Assets − Liabilities = Net Worth. Assets are listed at fair market value as of a point in time (a snapshot).

At fair market value (FMV) as of the statement date, not original cost or basis.

Cash/cash equivalents (liquid: checking, savings, money market), invested assets (stocks, bonds, retirement accounts, business interests), and use assets (personal-use: home, vehicles, furnishings).