Financial Planning- Final Ppt

7/29/2019 Financial Planning- Final Ppt

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Project Report Presentation on the Topic-

Financial Planning for the Investors


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Financial planning is the process of successfully meetingfinancial needs of life through the proper management offinances.

It is your roadmap to Financial Health, & Sustainable Wealth

creation.

Financial Planning is a process of framing objectives, policies,procedures, programmes and budgets regarding the financialactivities of a concern. Therefore this project ensures effectiveand adequate financial and investment policies


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Life without Financial planning is like Unplanned Vacation.

If you wish to achieve your financial goals successfully &

peacefully you must plan your financial life.


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Whatever may be level of your income or assets , you needfinancial planning.

It is myth that only rich people need financial planning


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By scientific Asset Allocation.

Basic aim of Financial planning is to get sufficient fund atspecific time for defined financial goal, not to get Super highreturn.


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It will help you to obtain funding if you need it.

It will set out clearly the money that you need to puttogether to start the business and then to run it for a period.

It will help prevent you from going into a business that willnot be successful.

It will highlight periods where your business may need extrafinancial help.


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It can take a lot of time.

It can be a costly process because you will need the assistance

of your accountant or financial adviser.


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A financial plan is a path to help you achieve your lifesfinancial goals.

Helps in learning money management decisions.A financial plan helps people: live within their income. identify financial priorities. allocate funds to meet expenses. meet financial emergencies and reduce credit use.

reduce uncertainty and conflict about financial affairs. gain a sense of financial independence and control. save and invest to reach financial goals.


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Step 1. Establish Your Financial Goals Types of goals

Car, home, college, wealth, charity

Set realistic goals Stronger likelihood of reaching goals

Timing of goals

Short term (within one year) Intermediate (between 15 years)

Long term (beyond five years)


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Step 2. Consider Your Current Financial Position

How your future financial position is tied to youreducation?

Consider your skills, interests, and career paths How your future financial position is tied to your

career choice?

Choose a career that will be enjoyable and suityour skills.


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Step 3. Identify and Evaluate Alternative Plans ThatCould Achieve Your Goals

Plans could be conservative or aggressive

Step 4. Select and Implement the Best Plan for AchievingYour Goals

The Internet has valuable financial planning

information


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Focus on Ethics: Personal Financial Advice

Your objective is to get the best adviceappropriate to your needs

Be wary of unethical behavior

Be alert, ask questions, carefully consider advice


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Step 5. Evaluate Your Financial Plan Keep plan in an accessible place and monitor your

progress Step 6. Revise Your Financial Plan

Change plan as financial condition and financialgoals change


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Budgeting and tax planning

Managing your liquidity

Financing your large purchases

Protecting your assets and income (insurance)

Investing your money

Planning your retirement and estate


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Budget planning: The process of forecasting futureexpenses and savings.

Evaluate your current financial position-

Assets: what you own? Liabilities: what you owe?

Net worth: the value of what you own minus the

value of what you owe?


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Liquidity: access to funds to cover any short-term cashdeficiencies.

Money management: decisions regarding how much moneyto retain in a liquid form and how to allocate the fundsamong short-term investment instruments.


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Credit management: decisions regarding how much creditto obtain to support your spending and which sources ofcredit to use.


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Loans often needed for large expenditures

College tuition, car, house

Managing loans

How much can you afford to borrow?

Determining maturity of the loan?

Selecting a loan with a competitive interest rate.


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Funds not needed for liquidity can be invested

Stocks, bonds, mutual funds, real estate

All investments have some level of riskRisk: uncertainty surrounding the potential return on an

investment


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This includes insurance planning, retirement planning, andestate planning

Retirement planning: determining how muchmoney should be set aside each year forretirement and how those funds should be

invested Estate planning: determining how your wealth

will be distributed before or upon your death


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1. Determine current financial situation.

2. Develop financial goals.

3. Identify alternative courses of action.

4. Evaluate alternatives.5. Create and implement financial plan.

6. Re-evaluate and revise the financial plan.


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Personal financial planning is the process of managing yourmoney to achieve personal economic satisfaction.

Maintain and improve our standard of living - thenecessities, comforts and luxuries that we have or desire.

Control consumption patterns to live well today andtomorrow!

Average propensity to consume - % of each dollar of

income that is spent rather than saved.


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1. Life situation and personal values.

2. Economic factors

3. Market forces

4. Financial institutions5. Global influences

6. Economic conditions


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Personal opportunity costs

Financial opportunity costs

Interest calculations

Future value of a single amount

Future value of a series of deposits

Present value of a single amount

Present value of a series of deposits


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Wrong selectionflavor of the month.

Wrong timingmostly near top.

Short term investment.

Inadequate investment.


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Investment Planning- Current Asset Allocation

Proposed Asset Allocation

Protection Planning- Insurance Health Insurance, etc

Planning for Goals- Education Marriage

House

Others


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Investing predefined percentage of your savings in

different Asset classes


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Diversification. Thumb rule No. 1

Never put all your eggs in one basket.

Different asset classes give better return for specific timeduration.

94% of portfolio return will depend on Asset allocationonly.


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1. Gold

2. Debt

3. Equity

4. Real Estate5. Commodities

6. Insurance


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1. Determine the Current financial situation.

2. What you wish to achieve?

Your Financial Goals.

3. How much risk you wish to take?Your Risk Profile


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Current Status is the first step in the Asset AllocationProcess under which we have two steps:

1. Find out Net saving available for Investment?

1. Wealth accumulated till today?


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Goal Setting is the second step in Asset Allocation Process..Under which we have another few steps as follows:

1. What is your intention of investment?

2. Simply put, How much money you need? & When you needthe money? (Time horizon)

3. Specific financial goals are vital to financial planning.


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(1) Up gradation of Residence.(2) Luxury Car.(3) Purchase of Luxury items at Home.(4) Vacation Abroad.(5) Wealth creationCrorepati, Billionaire.

(6) CharityReligious or Social.(7) InheritanceEstate planning.(8) Early Retirement - Financial freedom


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Specify amount required & approximate time period whenmoney required.

Types of goals.

(1) Short term Goals 1-2 years.

(2) Medium term goals 3-5 years.

(3) Long term goals 5-10 years.

(4) Distant goals > 15-20 years


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Two types of Risk in any investment.(1) Risk of Purchasing power loss.(2) Risk of Capital loss.

Note:- Strong correlation between risk & reward.

Aim of financial planning is to get maximum return withminimum risk.


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Financial Capacity(1) Income status, more important Net Saving status.

(2) Age:- Younger the age higher is risk taking capacity.

(3) Dependents in family.

(4) Liabilities, Loans taken


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Mental capacityTemperament.How will you react to temporary fall in value of yourinvestment?

(1) Risk averse , Conservative.

(2) Moderate risk taking personality.

(3) Aggressive investor


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Technical Knowledge.

Even if financial & mental capacity strong, technical

knowledge required to invest in Shares, ArtPainting, RealEstate.

Note:- Either take professional help or take Mutual Fundroute.


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Dont buy on tips, impulse or under influence of left behindfeeling.

Dont chase last year topper

Stick to your asset allocation.

Basic aim of Financial planning is to get sufficient fund atspecific time for defined financial goal, not to get Super highreturn


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1. Liquid AssetsCash, Savings a\c, Floating rate mutualfund. Ideal for short term goals.

2. Income generating AssetsBank F.D.,PPF, NSC, Bonds.Ideal for medium term goal.

3. Capital appreciation AssetsEquity- Shares, Real Estate,Gold, Art. Ideal for long term goal.


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Thumb rule 2100-Age in years = Maximum % allocation to Equity.

Equity will give highest return in long run but Equity isvery risky product for < 2 years horizon.

Risk of capital loss in Equity investment almost zero ifinvested for > 5 years but as high as 30% in 3 months.


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Before planning new investment, it is very important toprepare emergency kit to Protect your Current financialstatus.

Insurance is first & vital step in any financial planning.


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1. Investment in Income generating assets.2. Investment in Expense generating assets (Liabilities).


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Income

Business Expense = Take home cash. Take Home Cash Home expense Taxation -

Interest & Installment payments on loan taken =Saving ( cash available for investment)


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1. Tax planning is legal.2. Purchasing power of Unaccounted money will slowly go

down.

3. No cash transaction possible in Mutual fund.PAN card

copy required.4. Make maximum use of tax free income limit.

5. Create multiple heads of income tax payer.

6. ELSS investment can be used for income tax planning &wealth creation


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1. Home loan- Principle payment eligible for 80C rebate,Interest deducted from income up to 1.5 lac per year perhead.

2. Real estatebuy cheap , sell at highest possible price after

3 years.3. Capital gain- tax can be saved by investing in Capital gain

bonds up to 50 lacs.

4. Up to 1 kg gold per married women & 500 gram gold perunmarried women in family, will be allowed during incometax search.


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1. Retirement doesn't mean stoppage of work, it meansfreedom from compulsion to work for moneyFinancialfreedom.

2. Why to maintain same life style even after retirement?3. Life expectancy is increasing. 80+ age not unusual. Female

spouse will live 5 years more then male.4. Inflation will make difficult to maintain same level of living

standard.5. You & your spouse may not like to remain dependent on

children.6. We dont have govt. social security scheme.


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Increasing life expectancy Protection for Spouse/Dependents

Falling Interest Rate Scenario

Breakdown of traditional support systems

Protect Post-Retirement Lifestyle

Retirement PlanAn essential need


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Compounding is called eighth wonder of world.Rule of 72

72/ Interest rate = No. of years required to double money.72/ No. of years required to double money =% interest return.

If you earn 24% compounded return your money double in3 years, multiplies 10 times in 10 years, 100 times in 20years & 1000 times in 30 years.

Average return of diversified mutual fund is >24% in last14 years.


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Investing is not Rocket Science. Keep it simple. Start investing early in life.

Save & invest regularly, systematically.

Stay invested for long term till your goal achieved.

Stick to asset allocation.

Monitor 3-6 monthly.

If necessary take expert help.

You have worked hard to earn money, now make the moneywork hard for you.

Financial Planning- Final Ppt

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