Financial Planning

1. Financial Planning

2. Financial Planning
It is an exciting time being young, with fewer financial commitments and time on your side. Your career may be get-
ting off the ground and you may be looking to make that first major purchase, grow your savings, or even create an
investment portfolio. It is also the ideal time to consider how you can financially plan for those future goals. As Finan-
cial planning is considered very important for every Individual Specially for the Young Investor; it is the first step to-
wards meeting your goal and dreams. Planning your finances from the day of earning will give you two benefits the
first one is you’re saving and the second one gives you the years of compounding. Hence, it is advisable to start allocat-
ing money towards savings & investments as early as possible
What is financial planning?
Financial Planning is the process of meeting our life goals
through the proper management of our finances. Life goals can
include buying a house, saving for your child's higher educa-
tion or planning for retirement.
Financial planning means deciding in advance how much to
spend, on what to spend according to the funds at your dispos-
al
The Financial Planning Process consists of steps that help you take a
'big picture' look at where you are currently. Using these steps, you
can work out where you are now, what you may need in the future
and what you must do to reach your goals.

3. 1. Prepare a budget: - The first step is to make budget for yourself to know your current income and expenses and also an
individual must know about his cash flows. Also it is very important to consider the factor of inflation in the budget. If your
income exceeds your expenses on a consistent basis, then your financial plan is working for you otherwise you have to
change the plan.
2. Determine your Financial Goals: - The next big step towards building your financial plan is to determine your fi-
nancial goal i.e. Buying a house ,Marriage , Retirement planning etc after determining your goal the next step is towards
classifying your goal into the 3 main categories Short-term, Medium-term & Long-term Goal and one must also asses his
investment capacity and his risk appetite in order to determine the investments.
3. Start saving:- After determining your goals and assessing your minimum requirements the next step is to Start Saving.
Most of the people still follow the thumb rule of saving i.e. Income – Expenditure =Saving but actually with this way people
save less and start spending more But if we follow the reverse rule i.e. Income – Saving= Expenditure then there is chances of
spending less. At this stage as the responsibility of the Individual is very less so one must be able to save 35% - 40% of his
salary.
4. Get your life insured: - The next step is to make your life insured
generally young professionals don’t give much importance towards get-
ting their life insurance in starting times they must know it is very im-
portant, and ideally one should have insurance of minimum of ten times
their yearly income as the insured amount, i.e. if one’s annual income if
Rs. 5 lakhs, one should have a minimum insurance cover of Rs. 50 lakhs
Investing in Insurance is a smarter way to save taxes as you get a deduc-
tion up to 1.5 lakhs under section 80C .
Steps Involved In Financial Planning

4. 5.Start Building Your Portfolio: - After achieving your benchmark saving to meet up your emergency fund one
should look towards investing extra cash in the financial products as now there are many investment options available
for the individuals in the market. But for new and seasoned investors alike, the easiest way to start building a portfolio
is with mutual funds as risk as compared to the equity is less in it you can find your Right Mutual Fund for you based
on your risk tolerance. And there are many advantages of investing in mutual fund as the fund manager manages your
fund.
6.Keep Track Of Your Plan:- After building your portfolio the next step is to keep a track on your plan to man-
age your financial plan, in part with an annual checkup to ensure that it remains congruent with your personal situa-
tion. Depending on circumstances, it may make sense to review or check your plan semi-annually or even quarterly.
And remember don't confuse with your long-term goals with short-term goals and in case of short term fluctuations
don’t just easily change the complete plan.
7. Tax planning: - One of the important aspect of building
wealth is tax planning. An individual should consult with a
tax expert to see the best investment & savings avenues
through which one can save on taxes. An individual can also
get benefit from various schemes offered by the government
to save on taxes, for example medical expenses of dependent
parents, interest on housing loan & loan for home renovation,
etc. are tax deductible over and above the 80C limit of Rs. 1.5
lakhs

5. After the company starts, the finance manager does the
financial planning.
There are three types of financial plans, viz.,
1.Short-term financial plan is prepared for maximum
one year. This plan looks after the working capital needs
of the company.
2.Medium-term financial plan is prepared for a peri-
od of one to five years. This plan looks after replacement
and maintenance of assets, research and development,
etc.
3.Long-term financial plan is prepared for a period of
more than five years. It looks after the long-term finan-
cial objectives of the company, its capital structure, ex-
pansion activities, etc
Types Of Financial Plan

6. Financial Advisor
Financial advisors are people who work and help their clients
in achieving their financial goals by effectively channelizing
their savings into investment and also give financial advice. An
individual, firm or organization that provides this service can
be called as a Financial Advisor. . A financial advisor is a qual-
ified expert who can give advice a person regarding his invest-
ment portfolio and also help in improvising his financial
health. The main functions of a financial advisor are:
• To allocate your funds between various investment avenues
in order to achieve your financial goals.
• To figure out ways in which you can save on taxes.
• Help you achieve your financial goals based on your cash
flow and savings.
• Give advice on investment avenues you need to choose at
different stages of your life in accordance to your income level
and financial goals. -
Sep 29, 2014 | Source: Money Control
Generally people call their financial advisor when they need to make money deci-
sions, especially those pertaining to financial goals, investments, etc. Some of the
top reasons that one will call their advisor are:
• To get information on the various investment avenues available.
• To understand the current market condition and likely future market situation.
• To help plan one's finances, create a risk profile, and help in designing a portfo-
lio.
Financial advisors examine the financial history and current status of their client's
assets and liabilities to suggest the steps their clients need to take in order to meet
his/her goals. It is a broad-based approach towards ones overall financial planning
which distinguishes them and their service offerings from other finance profession-
als.
Financial advisors determine how their clients can meet lifelong financial goals
(like retirement planning, purchasing a house, saving for marriage, etc.) through
management and investment of their resources. - While choosing a financial advi-
sor know what type of service you are looking for, as this means the difference
between an independent financial advisor or restricted financial advisor.

7. Key takeaways:
 Financial Advisor will be helpful in giving a true and unbiased advice
 Choose your Financial Advisor diligently
 An advisor can guide you in maximizing your Post Tax take home by maximizing your tax saving
An independent financial advisor provides advise on full ranges of invest-
ment product available across the market - stocks, mutual funds, insur-
ance, pensions, fixed deposits, etc.; whereas a restricted financial advisor
will provide advise only on certain types of products available in the mar-
ket (eg., only annuities) or recommends products from a very limited set
of providers – these financial advisors are typically attached to a bank or
financial institution. Independent financial advisors are typically more
reliable since they do not represent certain financial providers; rather they
work for a fee – making their interests more aligned to the financial well
being of their clients.
Financial advisors are critical to one's financial plans, since there are
several factors to be considered while making a plan, and as individuals
we are likely to be unsure of some aspects of good financial planning.
Also, a financial advisor will be able to assess your risk profile, and sug-
gest a model portfolio based on your goals and risk profile – making it a
customized/tailor made investment plan for you. Unless one is a financial
professional, it is difficult to do this by oneself. A good financial advisor
is the key to a good financial plan.
It is important that you choose a financial advisor who is well qualified
and authorized to provide financial advice, i.e. ideally they should be a
certified financial planner. One should also keep in mind their fees struc-

8. How to make a personal budget that works
The first step towards achieving your financial goals is to start working on a budget. A budget is nothing but a tool to keep your spending under
control and ensure that the monthly expenses are lower than your monthly income. Here are some tips on how you can make your budget work:
Identify what your budget should comprise of
The first and foremost important factor to make your budget
work is to add in components that will actually make your
budget a realistic one. A budget should include your family's
expenditure and means of income. Under the expenses head
include all means of expenses related to you, viz. your debt/
loans, EMI, your monthly expenses, etc. and under the in-
come head included all your income sources such as salaries,
rent and so on.
By doing so, one could get a clear idea on what your overall
expenses and overall income looks like. This can help you to
curtail unnecessary expenses and save more.
Know your needs and wants
Spending is unavoidable, but over spending leads to one's
future financial situation getting affected.
This limits your ability to build wealth and save money for
your family’s future and emergency requirements. To avoid overspending one has to know to differentiate between their wants, needs and luxu-
ries. Remember your needs should be treated first, luxuries or wants are to be treated later (if you have excess of cash left over in your budget).
Sep 22, 2014 | Source: Rediff.com

9. Fix a financial goal
Every budget is formed to achieve a certain goal during specific periods of time. Once you have prepared the budget, take into account various
priorities, for example, you have to pay off a loan, while at the same time pay for your child’s education. In such cases you have to prioritise your
financial goals and save accordingly.
For example, one can pay for the child’s education and at the same time start meeting the minimum EMI and discuss with the bank if it is possible
to increase the tenure of the loan so that the EMI amount comes down. This will give one some leeway to make both payments.
Maintain a contingency fund
An emergency/contingency fund has to be maintained as a separate account, apart from
your usual savings and investments accounts. It is imperative to keep between two to
four months’ of your income as an emergency fund. This should be used only in emer-
gencies and kept aside from other investments and savings. One can use this to fall
back in case of any unforeseen situation which leads to loss of monthly income. This
fund largely helps you not to erode your savings at times of unexpected situations.
Have an adequate risk cover
It is advisable for you to have a risk cover, as this forms a very important component
of investments and it could help your family in times of emergencies. It is advisable to
regularly check the cover taken and whether the same is sufficient enough to cover

10. Choose optimal investment avenues
It is advisable to invest on a monthly basis (through a systematic investment plan/systematic transfer plan), as this will give one the double benefit of
regular investment and compounding as well as negating the possibility of overshooting the budget and hence delaying one’s savings.
Ideally, one should automate this process to avoid any last minute delays in investing. Automating the investment process by a direct bank transfer to
a mutual fund/recurring deposit etc. will help in ensuring the savings objective is met and it also curtails the number of impulse spends -- keeping
you within budget.
Anil Rego is the founder and CEO of Right Horizons, an investment advisory and wealth management firm that focuses on providing financial solu-
tions that are specific to customer needs.
Key takeaways:
 Include all your means of expenses and income sources
 Maintain a contingency/emergency account to fund at times of unforeseen situation
 Have a pure term/risk cover
 Be rational on what you spend, know to differentiate between your wants and needs
Choose the best investment avenues via systematic investment plan

11. Financial resolutions for 2015
Sep 22, 2014 | Rediffmail.com
To ensure a better financial future, resolve yourself to follow these simple money tips.
1. Analysing spending patterns
One should analyse spending patterns to observe how much is essential spends, and how much is luxury spends.
When there is a significant amount of personal debt, it is best to put off luxury purchases for later and stick to the essential ex-
penses. This will leave more money at the end of the month.
Also, see if there are ways to reduce essential expenses, such as option for a car pool, or buying a cheaper brand of coffee.
2. Keeping a strict budget
It is advisable to create a budget, which takes into account current expenses, and helps you to keep money aside
to repay debt. This budget needs to be realistic and take into account one's lifestyle and spending patterns.
Following a strict budget will assist you in achieving your financial goals.
3. Choose the time line
Fix a time line to achieve your goal, a long term investment always reaps you the benefit of your money com-
pounding.
For example, let us assume you have a financial goal of reaching Rs 50 lakh as your target amount in 10 years. If
rate of interest is 14 per cent, then you need to invest Rs 18,853 every month to reach your financial goal.
If on the other hand, the goal is to have a corpus of Rs. 50 lakh to be reached in 15 years with the same interest
rate, then you need to invest only Rs 8,316 every month.
This is because of the power of compounding, so the earlier one starts investing, the better.

12. . Credit card oes
Most people ha e uliple edit a ds, leadi g to high i te est osts a d othe
ha ges. The est soluio is to edu e the u e of a ds, to o e o a e t o
a ds, hi h should e used o l i e e ge situaio s.
It is ete to use a de it a d fo all shoppi g, as o e a spe d o l ithi o e's
ea s a d ot o e spe d as happe s he usi g a edit a d
.
. Prioriisi g goals
Without p io iisi g ou i a ial goals it is i possi le fo ou to a hie e those goals.
O e ou de ide ou i a ial goals, it is ad isa le to p io iise the i o de of i -
po ta e, su h as hild e 's edu aio , follo ed u i g a e a , et .
O e should the look at ho u h is e ui ed to a hie e these goals a d pla a
i est e t st ateg a o di gl . This should e a ealisi i est e t pla , ith o -
e ei g set aside ea h o th fo sa i g agai st the goals.
. Set up i est e t pla s
It is also i po ta t to sta t to sa e si ulta eousl , a d the est a to do this is to
auto ai all t a sfe fu ds f o ou sala a ou t i to so e fo of i est e t -
- e it a e u i g deposit, utual fu d, o i ed deposit. This ill lea e less te pta-
io to spe d, a d ill also help o e uild a est egg fo futu e o i ge ies.
. Keep a co i ge cy fu d
T to sa e o e i a o i ge fu d. This o e should e used o l i the ase
of a e e ge . Fo e a ple, if o e has ee laid of a d has to pa ills a d e t,
o e a use the o i ge t fu d o e . This fu d is ill e ai tai ed sepa atel
f o sa i gs, a d should o situte at least - o ths' li i g e pe ses
aa

13. Key takeaways:
 Make a budget and analyse spending patterns to ensure no overspending happens
 Invest in mutual funds through Systematic Investment Plan (SIP) scheme.
 Reduce the number of credit cards and use a debit card for shopping
 Ensure you save some money each month

14. Money is What Money does
13th March 2015|
Source :Financial Chronicle
Key takeaways:
 Choosing an asset class that will not only offer good returns
but also help save tax will enhance overall returns, thus
making it easier to achieve your goal.
 The tax saving that you get also enhances your take-home,
which in turn allows you to invest more towards your retire-
ment.

15. Retirement Planning

16. How good is the
National Pension
Scheme in India for
long term
investment?
Key takeaways:
 A key advantage of getting
extra 50000 Rs under sec-
tion80CCD (1B)
 Individual in 30% tax
bracket will be able to save
up to 15450rs on tax
Mar 23, 2015 | Source: Times of India

17. Key Takeaways :
 A key advantage of getting
extra 50000 Rs under sec-
tion80CCD (1B)
 Individual in 30% tax
bracket will be able to
save up to 15450rs on tax
 For investor who doesn't
decide asset allocation
NPS is a good
Mar 9, 5 | Source :Eco o ic Ti es

18. WHY TO
INVEST
NOW?
Mar 09, 2015 | Source: Economic Wealth