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he Indian youth never had it so good. On the consumption side, the choice of goods and services
available is unprecedented. And, as far as income is concerned, given the booming economy and its
ever improving prospects, opportunities have never been better! So the youth are earning a lot and
spending a lot as well. It is definitely a happy situation to be in.
In times like these, when everything seems to be going right for so many people, there is a tendency to
ignore that one great habit saving money. The rationale is simple-since the future looks great from here,
why set aside money for the future needs and contingencies. But in our view, this is an ideal time to save
money as surplus monies are high. Rather than spending this money on a product that you dont really
need, you would do well to invest in the future for some later date critical need.
In this book of financial planning, we discuss this and a lot more, including investment avenues available.
We also discuss the concept of spending wisely and creating wealth in a systematic way.
Happy Investing!
Financial decisions are critical decisions, which decide how comfortably we end up monetarily in life.
Poorly planned financial decisions can cause, at best, great anxiety and at worst lead to bankruptcy,
whereas well thought-out decisions can lead to a prosperous lifestyle.
The complexities of our financial circumstances are many and we need to take a careful well thought-out
solution to such problems. The concerns could be many. Some of them are:
How can I maximize the tax benefits which can be availed of?
How can I save enough to be able to retire comfortably and maintain the current lifestyle?
Definition:
Financial Planning is the process of identifying a persons financial goals, evaluating existing resources
and designing the financial strategies that help the person to achieve those goals.
The key basic steps toward reaching this end as a financial advisor are:
Evaluating and choosing the best option amongst the various strategies.
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Understand the effect your financial decisions have on other financial issues.
Start now. Do not assume that financial planning is for when you are older.
Start with what you have got. Do not assume that financial planning is for the wealthy.
Look at the bigger picture. Financial planning is more than retirement planning or tax planning.
Set specific targets of what your client wants to achieve with a specific time line. For example, instead of
saying that he wants to be comfortable when he retires, or that he wants to send his children to good schools,
he should be able to quantify what comfortable and good means. He will have to as specific as I need
Rs.100000pm income post retirement for 25 years from the age of 60, considering the anticipated inflation
rate at 5%. These plans may have to be changed keeping in view the market scenario or a changed need.
Make the client realize that each financial decision that he takes will affect several other areas of his life.
For example, an investment decision may have tax consequences that are harmful to his estate plans or
a decision on the retirement plans may affect his retirement goals. If he has invested in real estate and
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would like this investment to provide for his retirement income that he has to realize that real estate
investment would invite long term capital gains tax which can reduce the post tax returns and keep
margins for this deduction.
Financial planning is a dynamic process. These goals may change over the years due to changes in
lifestyle or circumstances such as an inheritance, marriage, birth, house purchase or change in job
status. Revisiting these goals periodically is very important to keep track of how much our client is on
course, both from a long term perspective and a short term perspective.
Explain to the client consequences of waiting and how any delay in financial planning affects the whole
big picture that he has in mind for himself and his family. Developing good habits like saving, budgeting,
investing and regularly reviewing ones finances early in life, makes one better prepared to meet changes
and handle emergencies. If one starts investing Rs. 500, one can expect to have Rs.58 Lakhs at age 60.
Remember that every Rs.500 that you can save from the age of 21 can get you Rs. 58 Lakhs towards
your retirement, but if you start at age 41, you will get only Rs.5 Lakh.
Financial planning is a commonsensical approach to managing ones finances to reach ones life goals.
It is a life long process. There are certain extraneous factors like inflation, changes in macro economic
policies or interest rates that may affect ones financial results.
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Chapter Review
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