2. Do Not Work For Money
Let Your Money Work For You
3. What is Financial Planning
Financial Planning
is when you develop a plan for your money
is the process of meeting your life goals through the proper
management of your finances
is a critical exercise in ensuring long-term financial security.
provides direction and meaning to your financial decisions.
Helps you to adapt more easily to life changes and feel more
secure that your goals are on track.
4. Why should you have a
Financial Plan?
Do you know how much you need to invest in order to have a
comfortable retirement?
Do you know how much you need to save up in order to get an
MBA education for your 1 year old after 20 years?
Do you know how much you need to invest today to get your
10 year old married after 15 years?
Do you know in which investment avenues should you invest
your money to achieve these goals?
Do you know what kind of life insurance you should buy?
Do you know how much health insurance do you need?
Do you know what is your net worth?
Do you know what is your asset allocation?
A financial plan would help you answer these questions, and more
5. Financial Plan
A financial plan is a road map to
help you achieve your life’s
financial goals.
The process involves:
gathering relevant financial
information,
setting life goals,
examining your current
financial status
coming up with a strategy
or plan for how you can
meet your goals given your
current situation and future
plans.
6. How to make Financial
Planning work for you?
To achieve the best results from your Financial
Planning engagement, you will need to be prepared
to avoid some of the common mistakes by
considering the following advice:
Start planning as soon as you can
Set measurable goals
Be realistic in your expectations
Realize that you are in charge
Understand the effect of each financial decision
Re-evaluate your financial situation periodically
7. Budget Planning
Budgeting allows you to
track your monthly
expenditures so that you can
plan key savings strategies
for important short- and
long-term goals.
Having a financial budget
may find that about 5-10%
of your total spending may
be for purchases that are not
needed.
Budget identifies expenses
that can be cut so that you
can set goals on making
important long-term savings.
8. Saving and Investing
If you are not currently saving, you may never achieve financial
independence
Save at least 10% of your gross income each month
Creating a savings plan help you reach your short and long term
goals
Once you commit to creating savings, you must define an
investment strategy that works for you.
Assess your risk tolerance and then invest so you will have
enough money to reach your goal.
9. Contingency Plan
A contingency plan is a plan devised for a specific situation when things
could go wrong.
It is your guard for those Murphy moments in life.
A good emergency fund consists of 3 to 6 months of living expenses.
This could be saved in form of cash in Saving Accounts, Bank FD's and
liquid funds.
10. Assets & Liabilities
Assets
In financial accounting, assets are economic resources.
Anything that has value and that is held to have positive
economic value is considered an asset.
Assets include stocks, mutual funds, gold, real estate
Liabilities
indebtedness: an obligation to pay money to another party
Liabilities include loans such as Home Loan, Education loan,
Personal loan and Credit Card loan
11. Investments
Short Term Investments
Bank and Post Office Fixed Deposits
Recurring Deposits
Fixed Maturity Plans
Liquid Funds
Company Deposits
12. Investments
Long Term Investments
Stocks
Mutual Funds
Real Estate
Provident Fund
National Savings Certificates
Kisan Vikas Patras
ULIPS
14. Insurance
Life Insurance
Term Insurance
Whole Life Insurance
Endowment Plans
ULIPS
Health Insurance
Accident Insurance
Motor Insurance
15. Debt
Education Loans
Home Loans
Car Loans
Loan Against Gold
Loan Against Securities
Personal Loans
Credit Card Loans
16. TAX
The only sure things in life are death and taxes
Utilize the entire Section 80C deduction
Provident Fund
National Saving Certificate
Life Insurance Premium
Tuition fees paid for children's education
(maximum 2 children)
Principal component of home loan repayment
Equity Linked Savings Schemes (ELSS)
5-Year fixed deposits with banks and Post Office
17. TAX
Think beyond Section 80C
Interest payments on Home
Loan
Medical Insurance for Self &
Family
Medical Insurance for
Parents
Donations
HRA
LTA
18. Estate Planning
An estate is the total of all personal and real property owned by
an individual
Estate planning is the process of anticipating and arranging
for the disposal of an estate.
Estate planning typically attempts to eliminate uncertainties
over the administration of a probate and maximize the value
of the estate by reducing taxes and other expenses.
Guardians are often designated for minor children and
beneficiaries in incapacity.
19. Retirement Planning
Analysis of the available retirement benefits from various
sources, such as the State, the employer, etc. to arrive at the
additional needs to be met
Dependency needs of self and other family members requiring
continued income flow
Anticipation of possible changes to the employment conditions
and the family circumstances
Decision on the savings pattern out of the present income to
build the required corpus for the visualized and prioritized needs
Proper selection of investment strategies on the basis of defined
yield and rate of accumulation
Analysis of risk elements arising during the process