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Financial planning seminar(updated)
The document outlines a comprehensive financial planning framework, covering topics such as assessing financial health, creating wealth, investment strategies, and managing risks. It emphasizes the importance of understanding cash flow and net worth, setting financial goals, and the impact of inflation and compounding on wealth accumulation. It also highlights the necessity of having a written financial plan and maintaining an emergency fund to ensure financial security.
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Financial planning seminar(updated)
- 1. Financial Planning: The RoadAhead By : Jitender Chaudhary FinVise India 1
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- 4. Understanding My Finances 45 “I earn enough, but where does my money go?” How many of you ask this question? Cash Flow Statement or Budget
- 5. Other Income Preparing My MonthlyCashflow Rs.INCOME Rs. EXPENSES Rs. EMI Salary Living Expense Home Loan Spouse Salary Rental Car Loan Rental Income Insurance Premium Education Loan 6 6 Other Monthly Other Loan Expenses
- 6. How Am IDoing? 6 ● EMIs < 25% of income Suggested ranges: ●Expenses < 40% of income 7 ● Monthly savings > 35% of income
- 7. ASSETS Rs. Real Estate BankBalance FD/ Mutual Fund Other Financial Investment Car, Jewellery Calculating My Networth 7 Net Worth = Total Assets – Total Liabilities LIABILITIES Rs. Home Loan Car Loan Personal Loan
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- 9. Getting Rich 9 What doesbeing rich mean? • Creating alternate sources of income that give you financial freedom • Its NOT about earning a higher salary, but what you do with that salary • Create assets......which create income so that you can achieve your dreams
- 10. The Money Cycle Risein Income How most of us manage money? 11 Rise in Consumption Decrease in NetworthRise in Loans Rise in EMI
- 11. THE MONEY CYCLE Howmost of us manage money? 12 12
- 12. The Money Cycle Risein Income How rich people manage money? 13 Increase in Networth Rise in Investment Income Rise in Savings/Assets
- 13. The Money Cycle 13 Howrich people manage income? 14
- 14. 07/17/09 Getting Rich andStaying Rich 14 Invest and generate alternate income from investments Before taking any financial decision, think what it will do to your networth: - Increase networth, or - Decrease networth 15
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- 16. Buying a home WhatAre Your Dreams – financial goals? 16 17 Buying your dream car
- 17. What Are YourDreams? 17 Foreign education for child 18 Having a fulfilling retired life
- 18. Case Study, HowInflation matters 18 19 Dream: My dream is to send my child to U.S.A for higher education, when she turns 18. Goal: Today's Value (Rs): 50 Lakhs When (year): After 5 years Inflation: 8% Money required (Rs): 73 Lakhs
- 19. Ways to meetmy financial goal 19 20 Buying a house/ car/ funding child education, etc 1.My current assets – FDs, savings acct balance, Equity, Mutual funds, real estate, etc 2.My month on month savings – surplus generated every month – where to be invested 3.Loan – Is it right to take a l an or not? How much loan will I be allowed? Will my cash flow support proposed EMI today or on future date? •The question in my mind – are the above enough, is the future value of education being met by above means, if no what’s the deficit?
- 20. Financial Planning Helpsto understand 20 21 • Helps to know what’s the future value of my goals • What’s the future value expected of my current assets • Helps to know if my surplus is enough to fund this deficit • Helps to know if loan is required and if yes, will I be able to pay the projected EMI • Helps to run alternate scenarios by deferring goal/ Preponing goals/ changing the income level/ advice on estimated expenses
- 21. Albert Einstein: Beat InflationWith Compounding 21 22 “Compounding is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.”
- 22. 07/17/09 Impact Of Compounding 2223 Raj and Rita are twins, but see the world of investing very differently. Rita: Starting age 25, invested Rs 2 lakhs per annum for 10 years and then stopped Raj: Starting age 35, invested Rs 2 lakhs per annum for 30 years till he turned 65
- 23. 07/17/09 Impact of Compounding 23 AgeInvestment Rate of Return Networth at 65 Rita 25 2 Lakh p.a. for 10 years 8% 2.71 crores Raj 35 2 Lakh p.a. for 30 years 8% 2.25 crores
- 24. Where Should IInvest? 26 26 No simple answer - all of us are unique •Personality •Risk tolerance •Existing situation •Doctors don’t give the same medicine to all patients •Prescribed medicine depends upon • Diagnostic to identify symptoms • Tolerance for dosage • Pre-existing conditions and allergies
- 25. Finding Out MyRisk Profile 25 27
- 26. My Risk Profile RiskProfile Conservative Moderately Conservative Moderate Moderately Aggressive Aggressive 26 Score 50 - 100 101 - 150 151 - 200 201 - 250 251 - 300 28
- 27. What Should BeMy Asset Allocation? 27 Risk Profile Cash Debt Equity Aggressive 5% 10% 85% Moderately Aggressive 5% 25% 70% Moderate 5% 35% 60% Moderately Conservative 5% 65% 30% Conservative 5% 85% 10% Increasing Risk Keep time horizon of goal in mind
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- 29. What Uncertainties DoWe Face In Life? 29 31 • Death • Disability or loss of health • Burglary at house • Earthquakes and other natural disasters • Uncertainty about achieving goals
- 30. Protecting Life 30 32 LifeInsurance - Key questions to ask •Do I need Life Insurance? •How much insurance cover do I need? •Which is the right kind of policy for me? •How much does insurance cost?
- 31. Present value of HHExpense of survivor (A) + Present value of Financial Goals (B) + TOTAL (A+B+C) - Less : All current assets - Calculating My Life Insurance Need 31 Current value of LOANS (C) = TOTAL (A+B+C) Less: Present value of Survivors Income - Less: Current Life Insurance coverage = Actual SUM ASSURED REQUIRED Present value of Future Expenses (A)
- 32. Emergency Protection 32 34 Doyou have a contingency fund for emergencies? These emergencies could be: •Loss of Job •A medical condition not covered by insurance •Temporary disability or accident •Other unplanned circumstances
- 33. Emergency Fund 33 35 Howmuch is enough? For salaried people: 3 – 6 months of committed expenses, which include EMIs, insurance premiums, house rent, household expense, etc. For self employed: 6 - 9 months of committed expenses.
- 34. Role of WrittenFinancial Plan 34 36 Irrespective of how you do it, you should have a written financial plan in place because of following facts: 1. 88% or pre-retirees with written financial plan vs. 50% without it (Study conducted in US) 2. Higher savings rate 3. Confidence to achieve goals on time for yourself and family
- 35. Yes, you can. Providedyou have... •expertise •experience, and •time Can You Make Your Own Financial Plan? DIY – Do it yourself! 35 37
- 37. Gold vs FDvs Sensex vs PPF vs LIC Bonus
- 38. PPF vs ELSSMutual Funds
- 40. Real Estate vsEquity MF vs Gold
- 41. Seminar Take Aways 1.understand my finances – my cash flow and net worth. 2. work for my dreams by converting them into goals. 3. watch out for inflation, money in my savings accounts is just losing value. 4. make sure that compounding is on my side, and not against me. 5. choose an asset allocation that is best suited for me. 6. prioritize my goals and create a plan to fund each one of them. 7. buy insurance for my family and my assets. 8. always maintain an emergency fund. 9. watch out for distractions, won't spend on things that I don't really need. 10. choose and stick to a financial advisor I can trust. I will... 44 44
- 42. Please give usFeedback! 45 45
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