Wealth

&

Management
Alternative

We

Can

not

stop

the

rain

but

can

Investments
carry

umbrella

There are 2 ways of living the LIFE..

Pandeyji Type

(Osho Type)

My type

Context : Only for Managing Personal Finance View

Personal Financial Panning

is Different from
Investment Management

Remember
You can create financial plans for others only
if you can convincingly do it for yourself.

What is the Ultimate

Financial GOAL of Life..
Earning High Salary or Being Rich .
Two friends started together with similar
profiles, company and salary..What is
the probability that one is wealthy and
other is not after 25 years ?

Wealth Creating Mindset

Wealth creation is a mind set and it requires
discipline in consumption, savings and
investment behavior

Philosophy for life..You Decide

YC=S
or
YS=C

Key Learning's from the Course!

How can I grow and protect my financial wealth?
How can I pay and manage my debt?
How much should I save to be able to pay for my childrens education?
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?
How can I maximize what my heirs will inherit?
How do I live in peace (Financial) and happiness

Our Financial Concerns

Where should I invest my savings ?

Do I HAVE Emergency Funds ?
When I will buy my sweet home?
Whether my family enough protected from financial
uncertainties ?
Can I afford to send my kids for higher education ?
Will I be ever go for a world tour ?
Can I be debt free after the age of 45 ?
Do I have sufficient for days I will not be working ?
How to plan repayment of my EDUCATION LOAN ?
And many more..

Causes of Financial Distress

Causes of Financial Distress

Uncertain future
Limited time
Lack of financial goals
Conflict regarding financial goals
Insufficient assets
Volatile financial markets
Inadequate knowledge about financial products
Too many advices and financial products
Poor and Free Advice

If Money is not available when

equired..

What are different stages of LIFE ?

Identify Where you are.Life Stages

Young unmarried
Young married
Young married with children
Married with older children
Pre-retirement
Retirement

Life Cycle Stage Planning

Income

Phase I

Phase II

Phase
III

Child Marriage
Child Education
Housing

Marriage
22 yrs

Child birth

38 yrs

Over 25 30 yrs

Birth & Education Earning Years

22 yrs

60 yrs

Retirement

Age

Human Life Value

Life Line Presentation

Wealth
Accumulation
30-50
Wealth
Protection
20-30
Learning
Age
0-20

Wealth
Preservation
50-65

Wealth
Distribution
65-80

Why Financial Planning ?

Rising Life expectancy
estimated to increase from 80 to 85 in next decade

Inflation
Cost of Food/Education / Medical increasing exponentially

Protect lifestyle of family

Protection against the uncertainty

Balanced Asset Allocation

Wealth creation and protection

Life Expectancy
What was life expectancy in 1947 ?
What is life expectancy today ?
What it is in income group you belong ?

Life Expectancy
What was life expectancy in 1947 ?
32 years

What is life expectancy today ?

65 years

What it is in income group you belong ?

Not less than 80 years

Human Life Value

What is the Biggest Concern ?

Inflation
Living costs will increase
dramatically in the future
10 years ago

Today

% Increase Expected after 10-15 years

1 Kg of Potato

Rs. 5.00

Rs. 25.00

400.00%

Rs. 125.00

1 Kg of Apples

Rs. 20.00

Rs. 80.00

300.00%

Rs. 320.00

1 Kg of Rice

Rs. 25.00

Rs. 75.00

200.00%

Rs. 225.00

1 Litre of Milk

Rs. 20.00

Rs. 40.00

100.00%

Rs. 80.00

Rs. 500.00

Rs. 2,000

300.00%

Rs. 8,000.00

Rs. 7,50,000 Rs. 15,00,000

100.00%

Rs. 30,00,000.00

School Fees (PM)

MBA

So what do you think is Retirement for you?

Shouldnt you have enough provisions to take care of the increasing costs
during your vacations- Retirement??

Inflation
Medical Science has advanced,
but so have diseases and medical costs...

Disease
Spondylitis

20 years ago

Today

220.00%

Rs. 25,600.00

Arthritis

Rs. 250.00 Rs. 3,000.00 1100.00%

Rs. 36,000.00

Asthma

Rs. 175.00 Rs. 2,500.00 1328.57%

Rs. 35,714.29

Diabetes

Rs. 225.00 Rs. 3,000.00 1233.33%

Rs. 40,000.00

Rs. 100.00

400.00%

Rs. 2,500.00

200.00%

Rs. 9,00,000.00

OPD

Rs. 2,500.00 Rs. 8,000.00

% Increase Expected after 20 years

Rs. 500

Bypass Surgery Rs. 1,00,000 Rs. 3,00,000

Exercise
1.

Analyse

:
the

cost

of

living

of

you

with

2. Analyze the estimated cost of doing MBA for your child

your

spouse

after

your

retirement

Exercise (Rank) : Priorities in Financial

Planning

Family Protection
Buying a car
Retirement Planning
Asset creation/ Wealth creation
Children education
World tour

Exercise : Priorities in Financial Planning

Retirement Planning
Family Protection
Asset creation/ Wealth creation
Children education
Buying a car
World tour

So What isFinancial Planning

So What isFinancial Planning

Financial Planning is the process of
formulating,

implementing

and

monitoring multifunctional financial

decisions that enable us to achieve
financial goals.

Objectives of Financial Planning

Certain events
Uncertain events
Emergency funding
Cash flow management
Estate planning
Review, review, and review.

Make a list of certain events of life

Make a List of Certain Events of Life

Repayment of education loan

Marriage
Children
Children Education- primary & secondary
Buying a car
Buying a house
Parents getting old
Your Retirement
Your Old age
Death

Make a List of Uncertain Events of Life

Make a List of Uncertain Events of Life

Untimely death
Accident
Permanent disability
Illness
Critical illness
Natural calamities
Unexpected loss of job
Any other unexpected emergency in family

Why People Fail to Plan?

Why People Fail to Plan?

Lack of assets and expense of service

Fear of planning
Fear of Loss of Confidentiality
Procrastination
Where is the adviser??

How Financial Planning Helps Us ?

Develop Realistic Goals

The full picture
Explains interconnection
Turns problems into Challenges
Simplifies Financial understanding
Helps us to understand all alternatives

Roadmap
Assessing our present financial position
Setting our goals
Learning about products/tools that we shall use in making our
financial plan
Designing a financial plan
Implementing the financial plan
Learning how to periodically evaluate our plan.

What is a GOAL ?

What is a GOAL ?
Your goal is a statement of what you want to be
It helps you to focus
Goals are what
you wish to have
places to go
things to do
generally the major things

Make a list of GOALS of your life.EXERCISE

What are you ST and LT GOALs ?

Goals
We all have dreams
Almost every goal in life has a financial
implication
Goals are very specific to you as an individual
Goals vary based on your life situation
Setting your goals is the first step in the
process of your financial planning
Goals change

Set your goals

My goals could be:

To start a business of my own before I turn 40.

To lose 5 kilos In the next two months!
To take my family for a holiday
To get my house painted before Diwali.
To buy a two-bedroom flat
To give my two-year old child the best possible
education.
To buy a car in the next two years.
To work hard till age 43, be debt free at 48 and retire at
the age of 52.

S.M.A.R.T goals

S.M.A.R.T goals
Effective goals SHOULD have the following features:

specific
Measurable
Actionable
Realistic
Timing

SMART Goals
To buy an 2 Bedroom house costing Rs.
150,00,000 by December, 2016, with 80%
borrowing
To travel to Simla with family in June, 2016 at a
cost of Rs. 50,000 and will be funded by
maturing Fixed deposit.

Crucial and Non Crucial Goals

Crucial Goals
For most people following goals are crucialexample Being debt free at 45,
Having retirement corpus ready at 55
Having adequate risk cover, at least to cover all
debts
Primary education of children
Emergency Funds

Non-crucial Goals
Corpus to be readied for son/daughters
education abroad
In case there is a shortage, son/daughter can
borrow (Education loan)
Corpus to be readied for son to buy a Shop
Son can borrow the balance..and repay from his
earnings
Going for a family trip to Europe

Goal setting for each life stage

Our goals are scattered over different
periods of time
Goals depends upon the stage in life that
we are in
Although financial needs change as you
move through life, it helps to look at
typical goals through each stage of life
Exercise

Process of FP in Practice..1
Step I: Establish a trust relationship with
the client
Step 2: Define the clients goals
Step 3: Analyze and evaluate clients
financial status
Step IV:
Determine clients risk
tolerance level

Process of FP in Practice..2
Step V : Ascertain clients tax situation
Step VI: Recommend the appropriate asset
allocation and specific investments
Step VII: Executing the plan
Step VIII: Periodic Review

What is Asset Allocation ?

Asset Allocation

Product allocation cash, debt, equity

Country allocation
Industry allocation
Fund house allocation
Time allocation long and short term

Steps in Asset Allocation

Select potential asset classes
Define the mix
Define permissible variation

Sample Allocation

What Should be the Basis of Allocation ?

62

Typical Investor Profiles

Conservative Investor with no experience in
stocks, risk averse, retired
Moderate Some experience in stocks, willing to
take risks, high risk investor but retiring soon
Aggressive Young investor, long time horizon,
experienced in stocks, retired but high net worth with
sufficient stable income from bonds

Risk Profiling of an Individual

http://www.moneycontrol.com/persona
l-finance/tools/risk-assessment-too
ls.html#res

Core Knowledge Areas

Develop financial statements and budgets

Cash flow & Credit management
Personal Risk management and Insurance
Investment Decisions and Strategies
Tax implications
Retirement and Estate planning issues

Group Project Presentations