1. The FAB Calculators © Financial Asset Building Personal Planning Calculators Access the FAB Calculators © at www.bjellandconsult.com Developed by Richard Bjelland

2. Purpose of the FAB Calculators © Financial planning tools that can be used to examine different future asset building, debt reduction or house purchase scenarios or plans Explore many asset building scenarios with the Asset and Debt Calculators and see the impacts on one's financial future Displays the individual's personal asset dollars at the end of life stages based on possible investment return assumptions Displays the individual’s debts and their financial impacts Explore housing options and affordability

3. The FAB Asset Building Calculator © Personal Asset Building Calculator Developed by Richard Bjelland

4. Asset Calculator © Uses Five Life Stages Child - a period where the individual is not able to personally contribute to their account but is an important time for other contributors to help establish a successful financial future for that individual. Youth - a time when the individual may have the opportunity to earn some money and begin to save a portion for later withdrawal needs such as college, car, housing, or even retirement.

5. Life Stages (continued) Young adult - age when an individual will either continue their education or begin working. Adult age 26 to 50 - stage of an individual's life most associated with increasing financial responsibilities - raising a family, establishing a home, paying for education, etc. Adult age 51 and over - a period where family responsibilities begin to lessen and plans for retirement should take a more prominent role.

6. Calculator Uses Constant Dollars Assumes a dollar today is worth the same at any future time Using constant dollars eliminates the effects of price changes allowing comparisons between years without having to factor in the effect of inflation Future estimated balances and resulting withdrawals or annuity payments displayed are represented by their present value in current dollars Accomplished by removing inflationary factors from future inputs to the calculator such as planned contributions, withdrawals, and investment return rates

7. Asset Calculator © Structure Several input columns are used to reflect the various types of contributions and withdrawals that could take place in an individual's asset building plan Separate input cells are available for the individual, custodial parents, non-custodial parent, other family, and non-family contribution sources Automatically calculates annuities payments if annuities are part of retirement plan

8. Asset Balances Displays the asset account balances in constant dollars at various ages Uses ‘true’ investment return assumptions to estimate asset balances at present value ‘True return’ is the annual investment return based on expected after-tax return and after deduction of anticipated inflation rate For example, if annual investment return is 12%, tax rate is 25% and inflation 2.5%, then True return is 12% - (12% x.25 = 3%) - 2.5% = 6.5% If tax deferred account, then True return = 9.5% Three fixed and one user-defined return rates are used to calculate asset balances

9. Financial Planning Scenarios Easily run multiple scenarios reflecting different asset accounts’ investment returns Accommodates taxable and tax deferred accounts such as IRAs Produces graph of asset balances at various return rates for each scenario Flexible uses, i.e. - College fund calculator

10. Retirement Planning Features Allows for combination of monthly withdrawals, total withdrawal or purchase of an annuity Calculates asset account balances and/or age when account is out of funds based on planned monthly withdrawal amounts Calculates monthly annuity payments based on account balances and term of annuity for two typical annuity earning rates

11. Easy to Use – Few Inputs Name that identifies each scenario For each life stage – three entries per input column –Beginning age –Monthly amount –Ending age ‘True’ investment return assumed to be earned on scenario’s assets For annuity – purchase age and term

12. Example of Using Calculator for Retirement Planning

13. Example of Graph Generated by FAB Calculator ©

14. Sam Middleton’s Retirement Plan with Annuity Purchase

15. Illustration of Impact of Investment Return on Retirement Sam or Sally Middleton’s IRA Plan Start investing at age 40 – put money into IRA Invest $150 per month through age 50 Invest $350 per month from age 51 through age 65 Begin withdrawals at age 66 Total amount contributed = $82,800 Retirement Scenarios Based on Annual Investment Returns Investment return 3%4%6%10%15%20% Monthly withdrawal 6007501,1002,5506,60019,000 Estate at 90 OOF 87 OOF 88OOF 891.46 MM6.3 MM Retirement Scenario Summary Using Asset Calculator ©

18. Asset Calculator © Used to Examine College Savings Plan Joe College’s Coverdell Education Savings Account Start investing at age 1 - put money into CESA Invest $150 per month through age 12 Begin tax-free withdrawals at age 19 for education expenses Amount contributed = $21,600 College Scenarios Based on Annual Investment Returns Investment return 3%4%6%8%10%12%15% Annual withdrawal 9,00010,80015,00018,00024,00027,00030,000 Out of funds age OOF 22 OOF 25

19. IDA Design Features Originally designed for Individual Development Account participants Calculator structure includes a column that incorporates matching funds from an asset building program Variables inputted for IDA are the percent match at different life stages and the annual asset match maximum

20. The FAB Debt Calculator © Personal Debt Analysis Calculator Developed by Richard Bjelland

21. FAB’s Debt Calculator © Can display all debt obligations by category – credit cards, personal or real estate loans Calculates the length of time needed to pay off debt amount based on account balance, APR interest rate and monthly payment Calculates total payments needed to pay off account balance given monthly payment Calculates expected interest to be paid Calculates monthly and total amount owed Includes mortgage calculator

23. The FAB Housing Affordability Calculators © Personal and Regional Housing Affordability Calculators Developed by Richard Bjelland

24. FAB Housing Calculator 1 Simple calculator for both personal and regional housing affordability assessments Can be used to determine income needed to afford a particular house for sale Can be used by households to determine the price of housing that is affordable Calculates the annual and monthly income needed and equivalent hourly earnings Can be used to assess the relative affordability of housing within a region by using median household income and the median sale price of housing in the region

25. Mortgage Rates and Affordability Affordability is a function of mortgage rates An affordability calculator should reflect different mortgage rate assumptions Calculator 1 uses three different mortgage rates Historical rate of 8.1% based on past rates Low rate is set at 6% High rate is set at 12% Demonstrates the significant effect of interest rates on current housing affordability

26. Housing Calculator 1 Assumptions Housing is affordable when no more than 30% of income is spent on housing costs Housing costs include mortgage payments, property taxes, and insurance Mortgage payments based on 80% 30 year mortgage - no mortgage insurance needed Property taxes set at $15 per thousand Insurance based on State Farm Ins. rates

27. Lender Income Ratios & Affordability Historically lenders have used an income ratio of ~30% to determine affordability Today’s lenders may increase the ratio depending on an applicant’s credit score A housing affordability calculator should have flexibility to reflect this situation The FAB Calculators will handle historical and an individual’s approved higher ratio

28. FAB Housing Affordability Calculator 1 © House Price (or Median Sale Price) Minimum Gross Income Needed Depending on Mortgage Rates * Lender Approved Income Ratio** Historical *LowHigh $ 187,000 $ 55,572 $ 47,123 $ 72,798 Monthly Income $ 4,631 $ 3,927 $ 6,067 Equivalent Hourly Wage $ 26.72 $ 22.66 $ 35.00 Annual Gross Income (or Median Household Income) Maximum House Price Affordable Depending on Mortgage Rates HistoricalLowHigh $ 56,800 $ 191,161 $ 225,920 $ 145,471

29. FAB Housing Affordability Calculator 1 © House Price (or Median Sale Price) Minimum Gross Income Needed Depending on Mortgage Rates * Lender Approved Income Ratio** Historical *LowHigh35.0% $ 187,000 $ 47,633 $ 40,391 $ 62,398 Monthly Income $ 3,969 $ 3,366 $ 5,200 Equivalent Hourly Wage $ 22.90 $ 19.42 $ 30.00 Annual Gross Income (or Median Household Income) Maximum House Price Affordable Depending on Mortgage Rates HistoricalLowHigh $ 56,800 $ 223,021 $ 263,573 $ 169,716 Explore impact of costs to income ratio on housing affordability

30. Local Housing Affordability Calculator To calculate housing affordability, enter median household income into Annual Gross Income above and local median house sale price into House Price above Homeownership Affordability Index Depending on Mortgage Rates Interest RatesHistoricalLowHigh Affordability Index 1 1.0221.2080.778 1 An Affordability Index of 1.00 or higher indicates that the median priced house sold is affordable to the median income household. An index of 1.15 means that the median income household could afford 115% of the median priced house.

31. FAB Housing Calculator 2 Calculator 2 produces accurate estimates by using both property and personal data Can be used by households to determine impacts of different financing scenarios Calculates the annual and monthly income needed and equivalent hourly earnings Can use a known credit score to more accurately estimate the cost of mortgage insurance if your mortgage terms require it

32. FAB Calculator 2 Notes Calculator assumes a credit score of 710 unless a different credit score is entered Calculator uses a debt-to-income ratio of 40% unless a different approved ratio is entered Other monthly debt payments such as auto loans, personal property loans, credit line loans, school loans, minimum credit card payments, alimony, child support payments, etc., are required to be entered

33. FAB Housing Affordability Calculator 2 House Price Down payment Down payment % Down payment $212,500$30,000 14.12%$30,000 Mortgage amount Term in years Interest Rate FICO Score (Note 1) Lender Approved Debt-to-Income Ratio (Note 2) $182,500306.75%690 Homeowners Insurance - annual premium Property Taxes - annual Other debt monthly payments 3 Monthly housing expenses plus other monthly debt $720.00$2,850.00$425.00$2,015.69 Minimum Income Needed Monthly Income Equivalent Hourly Wage $60,471$5,039$29.07

34. The FAB Calculators © Financial Asset Building Personal Planning Calculators Access the FAB Calculators © at www.bjellandconsult.com Developed by Richard Bjelland