Financial Planning

PersonalFinance
Personal Finance is maintaining

financial freedom through out the life

span of an individual
Financial freedom means not being
dependent on anybody for financial
needs at any point of time in life.
The concept of Financial Planning will
help to acquire financial freedom at
various stages of ones life.

FinancialPlanning

Financial planning is the process of

money
management so as to ensure
money is
available to meet current as well
as future
financial commitment

 We can not afford to spend in the

same month all that is earned

We need to set aside a portion of
our income for current living and
another portion for future living.
How much to use for current living
and how much for future living will
be answered by Financial Planning
Process.

Basic principles of
M oney M anagem ent
Spend less than your earnings
Budget your expenses
Avoid carrying more cash than

required
Have a savings habit because how
much you save is more important
than how much you earn
Create Emergency Fund
Savings Vs. Investment

Savings Vs.Investm ent

Savings

Investment

It is for accumulation

It is for enhancement

of Wealth
It is to be done for
short period of time
Savings is not for
returns
Savings does not
involve Risk

of Wealth
It needs to be done
for a long period
Investment should be
for returns only
Investment is always
prone to Risk

FinancialTerm inologies
Financial Fitness
Net worth / Net worth growth Ratio
Liquidity Ratio
Savings Ratio
Debt Ratio
Solvency Ratio

Analyse your needs

Resources
Income
Salary / profit

Current
Living
Expenses

Emergency
Fund

Predictable
Commitments

Future
Needs

Unpredictable
Commitments or
Contingencies

Predictable expenses
Owning your dream house
Childrens Education
Childrens Marriage
Comfortable Retirement
A car of your choice
A visit to your favourite place
Any other ambitions or needs

Contingencies
Risk
Risk
Risk
Risk
Risk

of
of
of
of
of

Disease
Disability
Death
Duty
Dependency

Setting G oals and prioritizing

Insurance Planning
Health Protection / Income Protection
Home Planning
Education Planning
Marriage Planning
Retirement Planning
Estate Planning

H ealth Protection
Combine a Mediclaim Insurance
with
Jeevan Arogya a fixed benefit
plan
1. Claim payable in addition to
Mediclaim
2. Premium is charged to the age
The premium paid for Mediclaim policy up to Rs. 15,000/- is
at entry
eligible for self and family and Rs. 20,000/- for parents
(Senior Citizens)

Rs.5,816/- 4 Lac 18, Rs. 18,208/- 4 Lac

Incom e Protection
Life Insurance
How much insurance is required?
Human Life Value Method
Capital Need Analysis Method
Life Insurance does not prevent ones death but it
definitely prevents his ambitions also dying with him
Term Insurance
Personal Accident Insurance
Long term savings oriented insurance plan

H um an Life Value
Age of the prospect : 30 years
Annual Income : Rs. 6,00,000
Personal Expenses : Rs. 1,00,000/Amount spent for family : Rs. 5,00,000/Earning span up to 60 years : 30 years
Discounting rate : 8%
Human Life Value : Rs. 56,28,892/Rs. 56,28,892 is the present value of his
future income
Premium
paid is eligible for deduction under
section 80C up to maximum of Rs. 1,00,000/-

H om e Planning
Time for purchase
Home budget
Source of funds - Loan
Loan Eligibility
Down payment Save (short
term goal)
Principle Section
80C Rs.
EMI Period

1,00,000/-

Interest Section 24 Rs.

1,50,000/-

Education Planning
Age of the child or Class studying 0
Choice of education Engineering
Current Cost of education 1.5 X 4 Lac
Inflation to education cost 8%
Amount required?
Suitable instrument or product 10%
How much to pay?

Assume the current cost of education is Rs. 1,50,000/- per

annum for an Engineering course and assuming inflation at 5%
per annum 10% Return
Rs.
18
Rs.601 - 0 age, Rs.1,135 - 5 yrs,
3,60,99
years
Rs.2,469 - 10 yrs
3
Rs.561 - 0 age,
Rs.1,042 - 5 yrs,
Rs.2,178 - 10 yrs
Rs. 524 - 0 age,

Rs.491 - 0 age,

Rs.960 - 5 yrs,
10 yrs
Rs.888 - 5 yrs,

Rs.1,943 -

Rs.
3,79,04
3

19
years

Rs.
3,97,99
5

Rs.1,750 - 10 yrs

20
yea

Rs.
4,17,89
4
21
years

Suitable products for meeting this commitment eligible for tax

deduction are PPF, ELSS, ULIP, LIFE INSURANCE (6%-7%)

M arriage Planning
Age of the child Just Born
Style and time of marriage ceremony

22 Yrs
Current Cost of Marriage ceremony
Rs. 10 Lac
Inflation to Marriage cost 5%
Amount required? Rs. 29,25,261/Suitable instrument or product
How much to save? Rs. Rs.5,38,074/(8%)
Or Rs.
4,ELSS,
081/-ULIP,
per month
(8%)
PPF,
Life Insurance
Or Rs. 2,280/- month (12%)

Retirem ent Planning

Age of the client 25 years

Retirement Age 60 years
Life Expectancy - 80 years
Current living cost - Rs. 10,000/- month
Living cost on retirement Inflation 5%
Rs. 6,61,922 / 12 = Rs. 55,160/Corpus required for annuity Rs. 82,74,000/- at
8% discounting rate (perpetual)
Existing investments meant for retirement
Where to invest and How much to invest?
Rs. 3,607/- month at 8%
Rs. 2,179/- month at 10%
Rs. 1,287/- month at 12%
EPF, PPF, Diversified Equity Fund, ULIP, Life Insurance

Tax Planning
Total Income
Benefit under Section 80C
Benefit under Section 80CCF / 80CCG
Benefit under Section 80D
Benefit under Section 24
Benefit under section 10-10D
Short Term Capital Gain
Long Term Capital Gain
Indexation Benefit

Budgeting

Income - Expenses =
Income - Savings =

Savings

Expenses
Fixed Expenses
Variable Expenses
Discretionary Expenses
Disposable Surplus

Budget
Income

Expenses
Fixed Expenses -

Income from Salary

Income from Business
Income from

Profession
Rental Income
Investment Income

EMIs, Premium,
Investments, Savings,
Education
Variable Expenses Food, Clothing,
entertainment
Discretionary
ExpensesDonation and gifts

Thank you
Now open forum for questions