Getting the Right Data for Total Term (Tt)

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Data Needed to Calculate Total Term (Tt)

To calculate Total Term all you need is an up-to-date net worth statement and an accurate spending number

Data Considerations For Total Term (Tt)

Accounting For Student Loans and Consumer Debt

Generally, Total Term is the sum of the other four term elements (Liquid Term, Qualified Term, Real Estate Term, and Business Term) which are net equity values (i.e. net of related debts). However, in cases that involve student loans or high consumer debt, the Total Term score will be less than the sum since these debts typically aren’t netted against other assets (just against net worth as a whole).

Example: A client has a net worth of $1,000,000 and spends $100,000 annually.  Included in net worth is a student loan balance of $200,000.  While the term scores add up to 16.3 (Lt = 1.7; Qt = 0.4; Rt = 2.6; Bt = 11.6), Total Term is only 10.0 since the student loan is only netted out of total net worth, not individual assets within each of the other Term scores.