financial planning for all

Spearhead FinServe

Be Financially Wise…

Be Financially Wise …

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How do we manage our personal Finance?

• Traditional Wisdom

• Luck & windfall

• Trial and Error

• Depend on property and Gold

• Goal achievement –Random

• Spending and Investments



Guess! What is common?

“Having higher income does not make you rich”

Outline…

�Discovering the path to Financial

Freedom

� Investment Avenues

�Tax Planning

�Ways of doing Financial Planning



Types of Goals Defining the goal

� Primary goals

� Secondary goals

� One time

� Recurring

� Long term

� Short term

� Target Year

� Current Value

� Risk Capability

� Inflation

� SIP or one time


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My child PG in 15 years, which requires Rs. 10 L of today. I want to take less risk and want to invest a constant amount on a monthly basis.

The Future Value = Rs. 30 lacs

Investment Required = Rs.9300 per month

Rs. 5000 per month in balanced fundRs. 4300 in PPF



� Financial Plan is a Blue print for management of all

financial affairs of entire life

� It answers 3 straight questions:

1. Where am I today?

2. Where do I want to go?

3. How do I reach there?

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CORPUS REQUIRED FOR CHILDREN'S EDUCATION

Current Age Graduation

Current Expenses

Future Value @

8%Savings per month @

12%

0 18 5,00,000 19,98,010 Rs. 2,600

5 18 5,00,000 13,59,812 Rs. 3,600

10 18 5,00,000 9,25,465 Rs. 5,800

15 18 5,00,000 6,29,856 Rs. 14,600





Life cycle Financial Planning

Striking a balance between life today and a secured tomorrow


House

hold

Expens

es, 35%

EMI,

25%

Risk ,

10%

Saving

s, 30%



Top RulesTop RulesTop RulesTop Rules

• Maintain a Household Budget

• Understand/Estimate current spending patterns

IncomePlanned

Savings=

Money available for

spending

“I was sad, but then I bought something I feel better now”

� Unnecessary purchases

� Temporary relief for the

mood- angry, happy, sad

etc.

� Lead to debt problems

� Impulse buy

� Effects-Confidence “What “What “What “What a Week! I a Week! I a Week! I a Week! I Deserve that Deserve that Deserve that Deserve that XXXX."XXXX."XXXX."XXXX."


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� Set up an emergency Fund (3-6-9 Rule)

� Covering life risk through term cover

� Health cover

� Income loss due to disability-Personal

Accident cover

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Summary of Insurance Premiums for various Age Groups

Annual Premiums (in Rs.)

Age (in years)

Particulars 30 35 40 45 50 55

Life Insurance Cover of

Rs.1 crore (Pure Term Cover) 15,600 22,800 35,500 47,200 63,700 86,200

Health Insurance Cover of

Rs.5 lakh (2A+1C)8,700 8,700 9,800 9,800 17,300 22,800

Personal Accident Insurance Cover of

Rs. 25 lakh 3,000 3,000 3,000 3,000 3,000 3,000

Total Annual Premium 27,330 34,535 48,340 60,045 84,050 112,055

Monthly Premium 2,278 2,878 4,028 5,004 7,004 9,338

Be Financially Wise……..

Liquidity

Return

Taxation

Safety



� Setting aside hard cash

� Parking it in extremely

safe, and liquid

instruments

� The goal - capital

preservation, with a

secondary goal to keep

pace with inflation, if

possible.

� Using saving to buy an

asset that will generate a

safe and acceptable

return over time

� E.g. a real estate, stocks

bonds, small business to

fine art

� It takes time, perhaps

even years, to work out



FUTURE VALUES FOR DIFFERENT RATE OF RETURNS

No. of Years

Amount (Rs.) Returns Instrument

Future Value (Rs.)

Difference In Value (Rs.)

10 30,000 4% Insurance 44,17,494

10 30,000 8% PPF, NSC 54,88,381 10,70,887

10 30,000 12%

Mutual

Funds 69,01,161 24,83,667



Rule no. Rule no. Rule no. Rule no. 72727272

Desired Rate of Return

6% 8% 12% 15% 20%

Years to double the money

12 9 6 5 4

Risk Low Low Medium High High

Example FD/Post office

Instruments

Gold/Corporate

bonds/Tax free bonds

BalancedMF’s/Large cap equity funds

Equity & Real

estate

Equity & Real

estate



Equity Real Estate

Debt Gold

Asset Allocation/Diversification



IDENTIFYING PROFILES

ParametersRisk Profile

Conservative Moderate Aggressive

Age 50 & above 35 - 50 20 - 35

Dependents Parents & Kids Kids Spouse

Commitments High Moderate Low

Liquidity Needs High Moderate Low

Loans/liabilities Yes No

Risk appetite Low Moderate High

Income stability Unstable Stable

Time horizon Short Moderate Long

Understanding Investments& financial mkts No Yes



Basic nature Top rules

� Sense of security

� Simple to understand

� Tangible

� Low volatility

� Returns to the portfolio

� Study stream of Income

� Professional help

� Workout a budget

� Select Carefully



� Shortage of nearly 20 million homes in India…

� Why are more than 12 million homes are vacant in India?



2001 to

2011

38 million

new homes

available

24 million

new house

holds

Excess of

14 million





� Outperformed every other asset class in long run

� Best Hedge to Inflation

� Returns ranging between 15% to 25% annually

� Tax Advantage

� India Considered as an Emerging Market

� Volatile and Uncertain Market

� Government Policies

� Lack of Professional Guidance

� Close Supervision of the performance of the market

� Element of Inevitable Risk.





� Equities may be risky, over long term nullifies the

volatility

� Invest for long term

� Be patient and keep cool while investing

� Take experts help

� First time Investors- Through SIP in Mutual Funds

Features SIP

� Diversification

� Affordability

� Ease of operation

� Special features

� Taxation

� Wide range of funds

� Small periodic amounts

instead of lump sums

� The frequency of

investment is usually

weekly, monthly or

quarterly

� Rupee cost averaging



Why? How to Invest in Gold?

� Hedge against

Inflation

� Store of value

� Status Symbol

� Emergency funding

� Jewellery

� Gold coins

� Bars/Biscuit

� Gold fund

� ETF



Cash…

Banks

• Savings Bank Account

• Bank FDs

• Recurring Deposit Account

• Special Bank Term Deposit



Bonds

• Tax Saving Bonds

• Regular Income Bonds

Others

• Debentures

• Company Fixed Deposits

• Equity

“Early investment is very much like growing a tree, if you take

care of it at the start, it will take care of itself later”

10 Years Delay

Investment required per month to generate 5 crores in 35 years @ 12% return

Investment required per month to generate 5 crores in 25 years @ 12% return

Rs.3400

Rs.15000



Savings

FD

Mutual Funds

Property

Stocks

CareerInvest in yourselfInvest in yourselfInvest in yourselfInvest in yourself


�875% more is the earning of high performer vs

underperformer over 35 years

� Returns from career – Poor -5%, average-8%, good-12%,

High- 15%

� Update skills, make smart choices….

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� Know how much you need when you Retire

� Decide on how is it going to be Accumulated

� Decide on asset allocation

� Choose appropriate products

� What if I Retire Early?



CORPUS REQUIRED

Current

Age

Retirement

Age

Current

Expenses

Future Value

of Expenses at

Retirement

@8% inflation

Required amount

at Retirement

Investment per

month @ 12%

25 60 30,000 4,43,560 Rs. 8,76,80,359 Rs. 13,634

30 60 30,000 3,01,880 Rs. 5,96,73,779 Rs. 17,074

40 60 30,000 1,39,829 Rs. 2,76,40,506 Rs. 27,940

50 60 30,000 64,768 Rs. 1,28,02,902 Rs. 55,655



Investing for retirement If you start saving late

� Save 10% of your income

for retirement

� Increase investment as

your income grows

� Don’t dip into corpus

before you retire

� Borrow for kid’s

education, but save for

retirement

� Focus on saving, not

returns

� Cut down on risks

� Cut down on wasteful

expenses

� Review your retirement

plan

� Consider reverse

mortgage



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� In time Income Tax Return Filing

� Using all benefits of exemptions/deductions

- 80C: Insurance/EPF/PPF/Housing Loan/ELSS etc.

� Using best tax saving instruments to save tax

TAX SAVING INVESTMENT PRODUCTS

SchemeMax Amount

(Rs.)Tenure Returns TaxabilityRemarks

Rajiv Gandhi Equity Savings

Scheme (RGESS) 50,000 3 yrs 10-12% NO

Only first time

equity investors

Employee Provident Fund (EPF) No Limit 8.75% NO Only employees

Public Provident Fund (PPF)1,50,000

15 yrs 8.70% NO All Individuals

NSC 5 yrs or 10 yrs 8.5% -

8.8%YES All Individuals

NPS No Limit 8 -12% YES All Individuals

Fixed Deposits 5 yrs 8.5 - 9.5% YES All Individuals

Equity linked savings schemes

(ELSS)3 yrs 8 -10% NO All Individuals

SCSS 5 yrs 9% YESIndividuals above

60 yrs

Insurance 3 Yrs 5 - 6% NO All Individuals



Income from Salary 6,75,000

Basic Exemption 2,50,000

-

Total Income 4,25,000

Deductions under 80C 1,50,000 PPF, EPF, Insurance, Fixed Deposits, Home Loan principal amount etc

NPS investment 50,000 Additional Rs. 50 k apart from 1.5 lacs

Deduction under 80D 25,000 Medical Insurance premium

Home loan interest 2,00,000 Rs. 2lacs for self occupied property, let out property- no limit

Total Taxable Income -



� Periodic readjustment

� Proactive

� Review –Short term goals- Quarterly

- Long term goals – Annually

� Rebalancing the asset mix



� Do you have a fair knowledge of investments?

� Do you enjoy reading about investments and doing

research?

� Do you have expertise in investments?

� Do you have the time to monitor, evaluate them and

make periodic changes to your portfolio?

AND do your Regular Job?



Sources Result

� Friends

� Family

� Colleagues

� Banks

� Insurance Agent

� Stock Broker

� Tax consultant/CA

� Several people-Different

views

� Intentions are good

� worked well

� Conflict of interest

� Copy and paste



� Qualification

� Reputation

� Independence

� Multidimensional Approach

� Strategy over Product

� Research capabilities

� Accessible to you

� Fee



I don’t have time

� Terribly Busy. Too much work, Everything urgent.

Working overtime. Tired of this.

� Cash lying in bank account without earning. What to

do? Terribly busy… How much I will lose because I

have not invested? May be 30K. Is it OK ?

No Problem I will make it up.





Cost of Delay Calculator

Retirement Age 60 60

Interest Rate p.a. 12% 12%

Monthly Investment Rs.10,000 Rs.15,000

Delay in Investment 1 year 1 year

Age (in yrs.)Amount lost until age 60

(in lakhs)

Amount lost until age 60

(in lakhs)

30 41 61

35 22 34

40 12 19

45 7 10

50 4 6

I have taken care of my Parents

and

“Why not my Son or Daughter”



Be Financially Wise……..

� Number of Old Age Homes have doubled in the last

three years

� In 2009, Help age India, an NGO working for the

welfare of elderly people, counted 60 homes for aged

in Bangalore and now this number has crossed 120.



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� Savings., investments etc…..

� Boring. Calculations even more boring, advices, excel sheets. No not interested.

“Great match I watched yesterday” How much time I have spent? Just about 5 to 10 hours. What a match!


Investment deficit…Investment deficit…Investment deficit…Investment deficit…

• My finances are simple

• Financial planners help people only with investing

• Financial planners are interested only in making

money

• I like free lunches only

• Have our parents not survived without Financial

Planning?

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� Start early

� Set financial goals

� Have a Financial Plan

� Don’t be dependent on someone else for your financial

management

� Do not hesitate to take professional help

� Be proactive in managing your personal finance

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Be Financially Wise…..



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financial planning for all

Economy & Finance

month rs

life risk

balanced fund rs

ia week

life cycle financial

types of goals

higher income

lacs investment