FP I Cheatsheet — Formulas, Decision Tables, Checklists & Glossary

Use this as your last-mile FP I review. Pair it with the Syllabus for coverage and Practice for speed.

For official exam details, see Overview (CSI sources linked there).

FP I in one picture (process beats trivia)

    flowchart TD
	  A["Discover client facts"] --> B["Clarify goals + constraints"]
	  B --> C["Analyze gaps (cash flow / tax / retirement / risk)"]
	  C --> D["Recommend solutions"]
	  D --> E["Document + implement"]
	  E --> F["Monitor + adjust"]

If you can state these three items from any question stem, you’re usually close to the best answer:

• Goal: what outcome is the client trying to achieve?
• Constraint: what’s the tightest limit (time, liquidity, risk capacity, legal/tax)?
• Next step: what’s missing (facts, documentation, suitability, approvals)?

Chapter 1 — Managing the Financial Planning Process

Advisor role (exam reflex)

• You’re responsible for process quality: gather facts, confirm understanding, communicate trade-offs, and document.
• Many wrong answers are wrong because they skip a step (recommend before you understand constraints).

Full-service offer (a safe mental checklist)

• cash flow + debt capacity
• tax context (registered vs non-registered, timing)
• investment plan (risk capacity, horizon, liquidity)
• retirement plan (needs vs resources)
• estate plan (will/POA/beneficiaries)
• risk plan (insurance and contingency planning)

Financial planning process (order of operations)

Many FP I questions test sequence. A safe order:

1. Engage + define scope (what you are solving).
2. Gather facts (financial + non-financial).
3. Clarify goals + constraints (time, liquidity, risk capacity, tax/legal context).
4. Analyze gaps (cash flow, debt, tax, retirement, risk).
5. Recommend (options + trade-offs; match tools to constraints).
6. Document + implement (confirm client understanding/consent).
7. Monitor + update (life events trigger reviews).

Best-answer elimination rule: if an option recommends a product before confirming constraints or missing inputs, it’s often wrong.

Chapter 2 — Budgeting and Consumer Lending

Two core statements (build them fast)

\[ \text{Net worth}=\text{Assets}-\text{Liabilities} \]

\[ \text{Net cash flow}=\text{Cash inflows}-\text{Cash outflows} \]

Exam use: identify whether the problem is a cash flow deficit (behaviour/timing) or a balance sheet issue (leverage/solvency).

Savings rate (quick signal)

\[ \text{Savings rate}=\frac{\text{Savings}}{\text{Gross income}} \]

Cash flow planning (exam-friendly)

• Fixed vs variable expenses: fixed obligations determine baseline risk; variable expenses are where plans often “leak.”
• Buffers: if the scenario shows unstable income or high debt, the best answer often adds a cash buffer before new commitments (concept).
• Sinking funds: earmark periodic costs (property taxes, insurance premiums, repairs) to avoid surprise borrowing (concept).

Consumer credit: interest rate basics

If compounding occurs \(m\) times per year:

\[ \text{EAR}=\left(1+\frac{r}{m}\right)^{m}-1 \]

Exam use: compare borrowing options on a like-for-like basis (concept).

Credit and borrowing (quick classifier)

Exam use: match product type to purpose + repayment capacity.

Debt service ratios (high yield)

Gross Debt Service (concept):

\[ \text{GDS}=\frac{\text{Housing costs}}{\text{Gross income}} \]

Total Debt Service (concept):

\[ \text{TDS}=\frac{\text{Housing costs}+\text{Other debt payments}}{\text{Gross income}} \]

Exam use: when two answers both “work”, the better one is often the one that keeps ratios safer given uncertainty.

Debt reduction (two strategies, concept)

Exam use: if the question emphasizes math efficiency, avalanche is usually the better rationale; if it emphasizes behavioural adherence, snowball can be defensible (concept).

Amortizing loans (what your payment actually does)

Most installment loans (and mortgages) are amortizing: each payment includes interest + principal.

• Early in the schedule, interest is a larger share; later, principal is a larger share (concept).
• Extending amortization reduces payment but increases total interest (concept).

Remaining balance after \(k\) payments (concept):

\[ B_k=P(1+i)^k-\text{PMT}\cdot\frac{(1+i)^k-1}{i} \]

Rule of 72 (quick compounding intuition, concept)

Approximate doubling time:

\[ \text{Years to double}\approx\frac{72}{\text{rate \%}} \]

Debt consolidation checklist (concept)

• compare all-in cost: rate + fees + penalties (if any)
• confirm the new term doesn’t hide higher total interest via a longer paydown
• remove the root cause (budget leak); otherwise balances often “rebuild” (concept)
• confirm the client can handle the new payment under stress (cash buffer)

Emergency buffer vs debt paydown (exam framing, concept)

Chapter 3 — Mortgages

Mortgage vocabulary that causes mistakes

• Term: how long the current rate/contract lasts.
• Amortization: total time to pay off the loan.
• Payment frequency: changes cash flow and total interest (concept).
• Open vs closed: flexibility vs penalty risk (concept).

Mortgage types and features (concept)

• Fixed vs variable: fixed stabilizes payments; variable introduces rate-reset risk (concept).
• Prepayment terms: privileges and penalties can dominate “best choice” answers when the client may move or refinance (concept).
• Collateral charges / legal form: legal structure can affect portability/refinancing choices (concept).

Loan-to-value (LTV) framing (concept):

\[ \text{LTV}=\frac{\text{Loan balance}}{\text{Property value}} \]

Loan payment (annuity) formula (concept)

For principal \(P\), periodic rate \(i\), and \(n\) payments:

\[ \text{PMT}=P\cdot\frac{i(1+i)^{n}}{(1+i)^{n}-1} \]

How to use it on the exam: you often don’t need exact PMT; you need directionally whether higher rates/shorter amortization raise payment burden.

Refinancing break-even (concept)

If refinancing saves \(\Delta\text{PMT}\) per month but costs \(\text{Fees}\) upfront:

\[ \text{Break-even months}\approx \frac{\text{Fees}}{\Delta\text{PMT}} \]

Exam use: when the time horizon is short, “cheaper rate” can be the wrong answer if fees/penalties dominate.

Penalties and flexibility (high-yield, concept)

• Open mortgages usually offer more flexibility; closed mortgages usually have higher penalty risk (concept).
• Prepayment options (privileges, lump sums, increased payments) matter when the client expects cash inflows (concept).
• If the client may break the mortgage early (move, refinance), the “best” choice is often the one with lower penalty risk, not the lowest headline rate (concept).

Portability / assumptions (concept)

• Portability: moving an existing mortgage to a new property can reduce breakage risk (concept).
• Assumable mortgage: taking over an existing mortgage can matter in changing-rate environments (concept).

Home affordability (fast checklist)

• stable gross income and variability risk
• down payment and closing costs
• total fixed obligations (other debt)
• rate-reset risk and cash buffer
• suitability: does the client still meet the goal under stress?

Chapter 4 — Taxation (concept-first)

Deductions vs credits (must not mix up)

Core workflow (how many tax questions work)

1. Identify income type at a high level (employment / business / investment).
2. Identify deductions that reduce taxable income (concept).
3. Identify credits that reduce tax payable (concept).
4. Decide if timing matters (deferral vs acceleration) (concept).

Marginal vs average rate (don’t mix up)

Directional “savings from a deduction” (concept):

\[ \text{Tax saved}\approx \text{Deduction}\times \text{Marginal tax rate} \]

Types of income (high-level)

• Employment income (regular wages/salary)
• Business income (self-employment)
• Investment income (interest/dividends/capital gains, concept)

Exam use: when two solutions have similar pre-tax outcomes, the better answer is often the one with better after-tax fit (concept).

Tax bucket framing (concept)

After-tax return (simple screening, concept):

\[ r_{\text{after}}\approx r_{\text{pre}}(1-t) \]

Where \(t\) is the marginal tax rate (concept).

Chapter 5 — Investments + registered plans (TFSA/RESP)

Return math (light but common)

Holding period return:

\[ \text{HPR}=\frac{\text{Ending value}-\text{Beginning value}+\text{Cash flows}}{\text{Beginning value}} \]

Real vs nominal (concept):

\[ (1+r_{\text{nom}})\approx(1+r_{\text{real}})(1+\pi) \]

Compound growth (concept):

\[ FV=PV(1+i)^n \]

Risk and diversification (concept)

• Risk tolerance: willingness to accept volatility.
• Risk capacity: ability to absorb losses (time horizon, income stability, liquidity).
• Risk required: return needed to meet the goal (often the source of “plan reset” answers).

Expected return (portfolio, concept):

\[ E[R_p]=\sum_i w_i\,E[R_i] \]

Two-asset risk (concept):

\[ \sigma_p^2=w_1^2\sigma_1^2+w_2^2\sigma_2^2+2w_1w_2\rho_{12}\sigma_1\sigma_2 \]

Exam use: diversification works best when correlation \(\rho\) is low/negative (concept).

Types of investments (fast classifier)

TFSA vs RESP (concept)

Rule: match the account to the goal first (education vs general flexibility), then confirm constraints and rules.

TFSA vs RRSP vs non-registered (quick decision, concept)

Exam trap: choosing an account before clarifying time horizon and tax context.

Fund selection and fees (concept)

Exam reflex: if two answers deliver similar exposure, the one with lower friction (fees/taxes/complexity) is often better (concept).

Rebalancing (simple rule, concept)

• Set target weights and allowable ranges.
• Rebalance when drift is material or a life event changes risk capacity (concept).

Chapter 6 — Retirement

Registered plans (what to distinguish)

• RRSP: accumulation focus (contribution/deduction logic; withdrawals are taxable as income, concept).
• RRIF: decumulation vehicle (conversion from RRSP; withdrawals support retirement income, concept).
• RPP: employer-sponsored pension plan (plan type and benefits structure matter, concept).
• Government pensions: baseline income layer (don’t assume it covers the full retirement need, concept).

Time value of money (the 3 formulas you reuse)

Present value:

\[ PV=\frac{FV}{(1+i)^n} \]

Future value:

\[ FV=PV(1+i)^n \]

Present value of an annuity (income stream, concept):

\[ PV_{\text{ann}}=PMT\cdot\frac{1-(1+i)^{-n}}{i} \]

Future value of an annuity (savings stream, concept):

\[ FV_{\text{ann}}=PMT\cdot\frac{(1+i)^n-1}{i} \]

Solve for the contribution needed (concept):

\[ PMT\approx FV_{\text{target}}\cdot\frac{i}{(1+i)^n-1} \]

Solve for the withdrawal supported by a capital amount (concept):

\[ PMT\approx PV\cdot\frac{i}{1-(1+i)^{-n}} \]

Calculating retirement needs (a clean workflow)

1. Estimate annual spending need in retirement (concept).
2. Estimate reliable income sources (pensions, government benefits, etc., concept).
3. Compute the funding gap: needs minus income (concept).
4. Convert the gap into a capital requirement (PV of annuity) (concept).
5. Compare to expected assets and savings trajectory (FV of annuity) (concept).

Common pitfalls:

• ignoring inflation (real vs nominal mismatch)
• mixing today’s dollars with future dollars
• assuming constant returns without recognizing sequence risk (concept)

Replacement ratio (concept):

\[ \text{Replacement ratio}=\frac{\text{Retirement income}}{\text{Pre-retirement income}} \]

Chapter 7 — Wills and Powers of Attorney

Writing a will (high-yield checklist)

• identify beneficiaries clearly
• appoint an executor (and alternates)
• appoint guardians/trustees when relevant (concept)
• coordinate with beneficiary designations (concept)
• keep documents updated after major life events

Probate and intestacy (concept)

• Probate: legal validation/administration step; timing and complexity vary (concept).
• Intestacy: dying without a valid will; outcomes follow default rules and may not match intent (concept).

Beneficiaries and coordination (concept)

FP I questions often reward coordination logic:

• Confirm beneficiary designations align with the overall plan (concept).
• Ensure will/POA instructions don’t conflict with account designations or joint ownership arrangements (concept).
• After major life events, review documents and designations together.

Roles that get mixed up (concept)

Powers of attorney (scope matters)

Vulnerable clients (what the “best answer” often does)

• slows down the process, confirms understanding, and documents
• checks for undue influence red flags (concept)
• escalates appropriately when necessary (concept)

Chapter 8 — Risk Management and Life Insurance

Risk management responses (memorize)

• Avoid the risk
• Reduce the risk (controls, diversification, safety)
• Transfer the risk (insurance)
• Retain the risk (accept with buffers)

Types of life insurance (concept)

Policy roles (easy points)

Insurance needs analysis inputs (what you must gather)

• dependents and time horizon of support
• debts and obligations (mortgage, education funding, final expenses) (concept)
• existing assets and existing coverage/benefits (concept)
• income stability and contingency planning

Life insurance needs analysis (two common frames)

Capital needs (concept): ensure the household can meet obligations if income is lost.

\[ \text{Coverage}\approx (\text{Debts}+\text{Income replacement PV}+\text{Final expenses}+\text{Other goals})-(\text{Existing assets}+\text{Other benefits}) \]

Income replacement PV (concept):

\[ PV_{\text{income}}=PMT\cdot\frac{1-(1+i)^{-n}}{i} \]

Human life value (concept): PV of future economic value (earnings net of personal consumption, simplified).

\[ HLV\approx\sum_{t=1}^{n}\frac{E_t}{(1+i)^t} \]

Exam pitfall: recommending a product before you’ve clarified the goal (income replacement vs debt payoff vs estate liquidity, concept).

Quick formula pack (concept)

• Net worth: \(\text{Assets}-\text{Liabilities}\)
• Net cash flow: \(\text{Inflows}-\text{Outflows}\)
• EAR: \(\left(1+\frac{r}{m}\right)^{m}-1\)
• GDS: \(\frac{\text{Housing costs}}{\text{Gross income}}\) • TDS: \(\frac{\text{Housing costs}+\text{Other debt payments}}{\text{Gross income}}\)
• LTV: \(\frac{\text{Loan balance}}{\text{Property value}}\)
• After-tax return (simple): \(r_{\text{after}}\approx r_{\text{pre}}(1-t)\)
• PV: \(\frac{FV}{(1+i)^n}\) • FV: \(PV(1+i)^n\)
• PV annuity: \(PMT\cdot\frac{1-(1+i)^{-n}}{i}\)
• FV annuity: \(PMT\cdot\frac{(1+i)^n-1}{i}\)
• Mortgage payment: \(P\cdot\frac{i(1+i)^{n}}{(1+i)^{n}-1}\)
• Replacement ratio: \(\frac{\text{Retirement income}}{\text{Pre-retirement income}}\)
• Portfolio expected return: \(\sum_i w_iE[R_i]\)

Glossary (FP I)

• Amortization: total time to pay off a loan via scheduled payments.
• Annuity: stream of equal payments over time (concept).
• Assets: resources owned with economic value.
• Average tax rate: tax payable divided by taxable income (concept).
• Beneficiary: person/entity designated to receive an asset/benefit (concept).
• Budget: planned cash inflows/outflows over a period.
• Capital needs analysis: insurance approach focused on obligations and goals if income stops (concept).
• Cash flow: timing and magnitude of cash inflows/outflows.
• Cash equivalents: very short-term, high-liquidity holdings (concept).
• Closed mortgage: limited prepayment flexibility; penalties may apply (concept).
• Correlation (\(\rho\)): degree to which returns move together (concept).
• Credit risk: borrower/counterparty may fail to pay (concept).
• Creditor insurance: insurance tied to a loan; coverage/terms vary and require careful disclosure (concept).
• Debt consolidation: replacing multiple debts with one structure to simplify and/or reduce cost (concept).
• Deduction: reduces taxable income (concept).
• Debt service ratios: affordability ratios for housing and total debt burden (concept).
• Diversification: reducing risk by spreading exposures across assets/risk factors (concept).
• Executor: person responsible for administering an estate under a will (concept).
• Expected return: average return implied by assumptions (concept).
• Financial planning process: structured workflow from discovery to monitoring.
• Fixed income: securities with contractual cash flows (bonds/GICs, concept).
• FV (future value): value of money at a later time given compounding (concept).
• GDS/TDS: common housing and total debt service measures (concept).
• Government pension plans: public retirement income programs (concept).
• Gross income: income before deductions and taxes (concept).
• Guardian: person appointed to care for a minor (concept).
• Holding period return (HPR): total return over a holding period (concept).
• Human life value (HLV): PV of future economic value of earnings (concept).
• Inflation (\(\pi\)): general rise in prices over time.
• Insurance: contract that transfers specified risk in exchange for premiums (concept).
• Interest rate risk: market value sensitivity to rate changes (concept).
• Intestacy: dying without a valid will (concept).
• Investment horizon: length of time funds can remain invested.
• Liquidity: ability to meet cash needs without large losses (concept).
• Loan-to-value (LTV): loan balance divided by property value (concept).
• Marginal tax rate: tax rate on the next dollar of taxable income (concept).
• Mortgage term: length of the current mortgage contract (rate/conditions).
• Net cash flow: cash inflows minus outflows for a period.
• Net worth: assets minus liabilities at a point in time.
• Nominal return: return not adjusted for inflation (concept).
• Open mortgage: prepayment flexibility is higher (concept).
• Permanent insurance: life insurance designed for long-duration coverage (concept).
• PMT: periodic payment for a loan/annuity (concept).
• Policy owner: the person/entity that owns and controls an insurance contract (concept).
• POA (power of attorney): legal authority granted to act on someone’s behalf (concept).
• Probate: legal process to validate a will/estate administration (concept).
• PV (present value): value today of future cash flows given discounting (concept).
• Real return: return adjusted for inflation (concept).
• Registered plans: accounts with special tax treatment under current rules (concept).
• RESP: education-focused registered plan (concept).
• Retirement funding gap: retirement needs minus expected resources (concept).
• Replacement ratio: retirement income divided by pre-retirement income (concept).
• Risk capacity: ability to absorb losses without derailing goals.
• Risk tolerance: willingness to accept volatility and drawdowns.
• RRIF: retirement income fund used for withdrawals (concept).
• RRSP: retirement savings plan (concept).
• RPP: registered pension plan (concept).
• Savings rate: savings as a fraction of income (concept).
• Sequence risk: impact of return order on withdrawals (concept).
• Suitability: recommendation fits the client’s goals, constraints, and profile (concept).
• Tax credit: reduces tax payable (concept).
• Tax payable: calculated tax after credits (concept).
• Taxable income: income after deductions (concept).
• Tax deferral: shifting tax to a later time (concept).
• Term insurance: life insurance for a specified term (concept).
• TFSA: tax-advantaged flexible savings account (concept).
• Time horizon: when funds are needed.
• Trustee: person/entity managing assets for beneficiaries (concept).
• Variance / standard deviation: volatility measures (concept).
• Vulnerable client: client who may be at higher risk of financial harm or undue influence (concept).