Professional financial planning

This way you will have your 2006 income and expenses safely under control!

Building a Comprehensive Financial Plan Professional private financial planning allows asset owners to answer many questions about their financial circumstances and private retirement planning. Financial planning identifies gaps in provision that may arise in retirement and helps to uncover and eliminate unwanted risks within an estate. The structure of a comprehensive financial plan is very structured so that even complicated issues can be easily understood.

The starting point for financial planning is a net worth statement that shows how one’s assets are invested and what debts encumber the assets. So at the beginning, it is necessary to get a good overview of the total assets available. In the following, the steps to a goal-oriented financial planning are briefly presented. Assets First, all positive assets are determined, the “credit”.

With regard to the concrete analysis of the individual plants, the answers to the following questions can already be recorded at this stage:

– What about availability?

– What about the risk of the investment?

– What is the earnings forecast?

Liabilities On the opposite side, mirroring the assets, are the debts, also known as liabilities. In the course of listing all liabilities, it is necessary to check which assets are tied up by them on the assets side. insurance policies, for example, which have been assigned to credit institutions as collateral for existing loans, cannot be freely disposed of. In particular, such cross-relationships of “liabilities” to “assets” should not be underestimated, as they can put a rude brake on some considerations regarding the perhaps necessary restructuring of assets. How to always have a secure grip on your income and expenditure. Example of a professional asset balance sheet Please insert the graphic asset balance sheet here!

In addition to the static view of the current asset situation, the forecast future liquidity should be analysed in a liquidity balance sheet. Comprehensive financial planning is only guaranteed once the asset balance sheet and a forecast of liquidity development have been drawn up. If the asset owner is still working, the first question is how high his income is. It must also be recorded whether a career break or partial retirement is already planned at a certain point in time, so that this can be taken into account in future annual projections.

With a view to the future, the following needs to be considered: How long should the active professional activity continue? Threat of a career change that involves a reduction or elimination of regular income – Generally speaking:

Will income remain stable over the next few years? In addition to the professional income, of course, all income from previously existing assets is also taken into account. This includes interest income, rents from real estate assets used by third parties, income from types of investment such as ship investments and real estate funds. However, it is not only income that needs to be considered in liquidity. Unfortunately, it is during the period after one’s active career that expenses constitute the larger block.

In terms of liquidity, it is important to look at expenditures to determine whether they are one-time or regular. Recurring, easily calculable expenses occur, for example, with annuity loans familiar from real estate financing.

Other issues would be:

– alimony payments

– Rent, lease, leasing

– Liabilities to the bank, loans

– Mortgages, land charges for third-party liabilities

– Larger purchases

– Insurance premiums Often underestimated and yet usually the largest cost item is the cost of living.

Those who do not keep a “budget book” are usually unable to correctly classify the amount of living expenses.

This term includes, but is not limited to, the costs of the following:

– foodstuffs

– clothing

– car plant

– holiday

– hobbies

– Other consumer spending

In the run-up to financial planning, which has as its goal the analysis of financial retirement provision, it is recommended to record all variable and fixed consumption expenditures over a period of several weeks, or even better, several months. In this way, a realistic average of these expenses can subsequently be calculated. A rule of thumb says that about 60% of the net income should be used for living expenses. Example of a professional liquidity balance sheet The foundations of financial planning have now been laid. The information is now fully compiled. This is followed by an evaluation of the existing financial situation. Contacting trained financial and wealth succession planners is a great help in this regard.

In addition to their extensive knowledge and experience, they usually have the necessary IT facilities to extrapolate the development of assets over the next few years, taking into account periodic and non-recurring income and expenditure. First and foremost, consultants should be selected on the basis of their qualifications and the quality to be expected from them. The costs associated with objective financial planning, which may well amount to several thousand euros, should not be shied away from. Of course, it still doesn’t hurt to compare costs beforehand. How to always have a secure grip on your income and expenditure. An initial evaluation of asset performance may look as follows:
Please insert the graph of the wealth development here!

The chart shows very clearly the most important information on asset development. In particular, the shift among asset classes is readily apparent. The maturing endowment life insurance policies flow into liquidity, from which ongoing withdrawals are made over the next few years. This contrasts with capital assets, which are showing steady positive growth. No performance is assumed for the real estate assets. Existing liabilities are being gradually reduced, as can be seen from the ever-shrinking bars below the zero line.

The simulation If the planning process has already progressed so far that the asset development is ready, simulations can be started. How would it affect, for example, if our very wealthy sample client Max Stifter becomes in need of care at the age of 75. The wife Edeltraud Stifter has also reached the age of 70 at this time and can only partially care for her husband independently. For this reason, from 2025 onwards, in addition to the cost of living, expenses amounting to 6,000 – per month will be added. Please insert the graphic simulation here!
The graph shows that the very high level of wealth itself can bear such a heavy burden over a considerable period of time. The situation becomes more critical in cases where assets that are difficult to liquidate, such as real estate, have to be sold under pressure in order to provide liquidity again. This must then be examined and prepared for in the long term.

Example of a caregiver’s retirement plan:

A salaried caregiver, born in 1970, earns a total of 40,000 euros gross from several employers, and has 13.0 earning points in the statutory pension insurance scheme to date.

A professional advisor will calculate the net benefits on the basis of the entitlement to a company pension in accordance with § 1 a BetrAVG (taking into account more than 50 individual personal parameters):

The basis for this is the AltEinkG and the SGB (in particular SGB IV-VI).

Evaluation (uniform product return of 4% assumed):

How high is the pension gap (pension target: 100% of net salary before retirement)? Net wage 1,929.68 ? Net pension at 65 1,128.75 ? Gross pension 1,400.12 ? Supply gap 800.93 ? What could then be the proposal for closing the supply gap (VL) – funding path 1 funding path 2 funding path 3

Total Type Riester pension Pension commitment Basic pension

Gross contribution 131,25 + 31,25 + 172,68 = 335,18 €

Anf. Net contribution 81,17 + 12,38 + 131,72 = 252,57 €

Gross pension 444,99 + 105,95 + 585,45 = 1136,39 €

Net pension 319,02 + 79,75 + 402,16 = 800,93 €

Yield 4.76% 5.51% 3.96% 4.40% Closing VL at 39.83% 9.96% 50.21% 100%

Example of what a guardian should do with the assets of the guardian:

An affluent caregiver with Alzheimer’s is scheduled to move into an assisted living community. She currently occupies a debt-free single-family home – a son wants to buy it and submits an architect’s appraisal of its fair market value. Only an analysis by an independent real estate expert brings to light an underutilized (significantly value-enhancing) building right. The analysis of further assets (e.g. life insurance with hidden charges in the balance sheet) and debt items (expensive overdraft), as well as an examination of investment risks (e.g. almost worthless closed participations) and, above all, management costs (e.g. several inherited apartments at a greater distance and with renovation arrears) leads to a gradual regrouping. In the present case, the objective is to properly diversify the assets in open-ended mutual funds – linked to a payout plan to supplement retirement and widow’s pensions. An annual custody account check (cf. www.finanzkonzepte.de) with a financial planning report also makes the procedure transparent for the supervising court and protects the custodian against possible later reproaches by the heirs.

Bottom line:

Through professional financial planning, your personal asset development can be individually calculated. This provides security and shows which adjustments, such as private pension provision, still need to be made in order to be financially secure. In view of the fact that in most cases there is only enough income available during one’s working life to actively build up assets, professional financial planning should be drawn up at an early stage and kept up to date. In this way, it is possible to build up assets in a targeted manner and to continue to draw on one’s assets even in old age. If there is no longer enough income available to build up assets, financial planning enables a comprehensive analysis of existing investments. It is not uncommon for this to reveal considerable investment risks, which can be largely or completely eliminated through individual restructuring of the assets.

by Johannes Fiala

Our office in Munich

You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.

About the author

Dr. Johannes Fiala
PhD, MBA, MM

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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