Financial Planning (4)

8/22/2019 Financial Planning (4)

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Investment and financial planning


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Economic Purpose of Life


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our aspirations

Dream car A beautiful house Child education

Holidays and Tours Childrens marriage Happy Retirement


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Why financial planning?

The only permanent th ing in l i fe is change!

Life is uncertain. We do not know what mayhappen tomorrow. All of us hope for a better futureahead.

Dont we all want to lead a worry-free andfinancially secure life?

We should be able to deal with all kind of risks inlife.


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Financial Planning

Financial decisions form the basis of much ofwhat we do in our lives. Poorly thought outpersonal finance decisions can at best cause

great anxiety and at worst lead to bankruptcy,whereas well thought out, sound financialdecisions can lead to a prosperous lifestyle.

Financia l Plann ing is the process of ident i fy ing a

persons financial goals, evaluating existing

resou rces, and designing the f inancial strategies that

help the person achieve those goals.


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What if no financial planning?

Example:

Michael Gerard Tyson

Former American world heavyweight boxing champion.

Youngest man to have won a boxing world heavyweighttitle belt.

Made US$30 million during his career.

Declared bank rup t in 2003

Reason:

Indiscriminate Spending

No Financial Planning


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What if sound financial planning?

Example:Kapil Dev

captained India to their maiden and only Cricket WorldCup in 1983.

His businesses: 5% stake in Zicom Electronics

Invested money in his own Kapil's Eleven restaurantand Kaptain's RetreatHotel.

Established a company Dev Musco Lighting Pvt Ltd

Result He is living comfortably even after retirement.


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Components of financial planning

Financial planningcomprises

Insurance Planning

Investment Planning

Tax Planning

Estate Planning

Retirement Planning

Financial

Planning

InvestmentPlanning

TaxPlanning

EstatePlanningRetirementPlanning

InsurancePlanning


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Why investment Planning

Identify Goals that have financial implicationsDream

home, Children's education, marriage, managing life post

retirement

Implement Budgeting and spending plans

Optimization of Insurance Premiums

Manage Debt Efficiently

Identify Investment Asset Allocation to meet the goals

Take maximum benefit of tax laws and regulation to createadditional surplus for investment

Distribute wealth according to ones wish and not

according to law


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What is investment planning ?

Once we have saved enough money foremergencies, how can we grow our weal th?

Investment refers to a commitment of funds to

one or more assets that will be held over some

future time period.


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All of us work for money. It is equally importantto ensure that money works for us.

We invest to improve our future welfare. Fundsto be invested come from assets alreadyowned, borrowed money, and savings orforegone consumption.

By foregoing consumption today and investingthe savings, we expect to enhance our futureconsumption possibilities.In investment planning asset allocation plays

important role.

Why investment planning?


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Asset allocation

Its paramount for wealth creation

There is no fixed rule for asset allocation

But as the age goes up the risk assets such as equity has to

be lowered For instance if you are 40 you can restrict your exposure to

equity between 50-60 per cent.

Asset allocation can be in the range of

50:20:20:10(equity,debt,real estate and gold) for aconservative investor.

Fixing target and profit booking are the two important keyfor wealth creation.


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Why insurance planning ?

Needing insu rance is l ike needing a

parachute. If i t isn' t there the f irst t ime,chances are you won 't need i t again!

Insurance is not for the person who passesaway, it is for those who survive.


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what is insurance planning ?

Insurance Planning takes into account the risksthat surround you and then provides anadequate coverage against those risks.

Insurance is the most common method used fortransferring risks. It shifts the risk from anindividual to a group. It also provides a meansfor paying unforeseen losses. Insuranceprovides an important means of preventing riskfrom interfering with your financial objectives.


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Term Insurance

If you are 30 years and wish to buy a term insurance

for Rs 50 lakh till age of 60 the premium out go

per annum will be Rs 13401 and it will be Rs21067 if you are 40 and if you are 50 for the same

cover it will be Rs 37171 for a period of 10 years(

till age of 60).How many times of my annual

earnings I require insurance? The idea is toprotect monthly income even if the bread winner

is not there.


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Retirement planning?

Some may l ike i t and others may not! Bu t

reti rement is a reali ty for every work ing

person.

It is important to plan for your post-retirementlife if you wish to retain your financialindependence and maintain a comfortable

standard of living even when you are no longerearning. According to NSSO 93 per cent ofworking classes has no social security.


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Case Study

Assume if you are at 40 and your currentlymonthly expenses is Rs 40000 and annualrequirement is Rs 4.8 lakhs.Taking a inflation at 6

per cent at the end of 20 years( at the age of 60)you need annual pension of Rs 15.4 lakh.To getthis pension at the time of retirement you shouldhave a corpus of Rs 1.63 crore and it should earn 8

per cent interest. To reach this target he should

save monthly a sum of Rs 16340 for next 240months and it should earn an interest of 12 percent.


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Paying tax

It wou ld be great i f al l of us could pay

ou r taxes with a sm ile on ou r face,

bu t un for tunately, th is is not so

Therefore, the question arises

How to minimize our tax liabilities?


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ways to reduce tax liabilities

Three ways used by thetaxpayers are

Tax evasion Tax Avoidance Tax Planning

Tax Evasion means trying toreduce taxes by concealingincome, inflation of expenses,

falsification of accounts andwilful violation of the provisionsof the Income-tax Act.

.

TaxEvasion

Taxpayers

TaxAvoidance

TaxPlanning


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ways to reduce tax liabilities contd

Tax Avoidancemeans minimizing theincidence of tax by adjusting the affairs insuch a manner that it falls within the four

corners of the lawsTax plann ingis an arrangement of financialactivities in such a way that maximum taxbenefits, as provided in the income-tax act

are availed of. It envisages use of certainexemptions, deductions, rebates and relief's

provided in the act.


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What is estate planning?

Estate is the total property, real and personal,owned by an individual prior to distributionthrough a Trust or Will. Real property is realestate and personal property includes everythingelse, for example cars, household items, andbank accounts.

Estate Plann ing dis tr ibutes the real andpersonal property to an ind iv idual's heirs.


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Why estate planning?

Example:

Parveen Babiconsidered to be one of the mostsuccessful Bollywood actresses in the 1970s.

She did not leave a will.

Result.

Fights amongst relatives on her property afterher death.


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Why estate planning?

Dhr iubhai Am bani started the Reliance Commercial Corporation with acapital of Rs. 15,000

passed away on July 6, 2002.

Reliance Group had a gross turnover of Rs. 75,000Crore or USD $ 15 Billion at the time of his death

Had not done proper estate planning. His will was notclear.

Result

Arguments between his sons for Reliance.

Is writing a WILL is difficult?


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Thanking you

My contact no 98211 99096


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Role, Scope and Opportunities

for Wealth Creators in IndianEconomy


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Retail Financial Services Industry

an overview

Over 100 Million Retail investors and still

growing

53,000 + Bank Branches in the Country

8913+ Pvt&LIC Insurance Branches

10000+ Brokerages Service Branches

100,000 + CAs

Growing number of Financial Products


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aspirations to create wealth..

Some Statistics from Income Tax dept

Rs. 200,000+ in mutual funds by 320,000+investors = Rs. 685,000 crore.

Rs. 100,000+ in primary issues by 60,00,000investors = Rs. 60,000 crore.

Rs 495,000 crore invested in gold

Rs. 200,000+ spent by 300,000+ credit card

holders = Rs. 6400 crore. 1000,000 cars sold = Rs. 5000 crores


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Confusion & Fear

need for someone Trustworthy, who can

hold his hand


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Financial Planning

By Suresh Parthasarathy,

Sr.Research Analyst,

Business Line, Chennai.

Mobile 98404 54737

E mail [email protected]


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Mutual Fund Products
http://www.utimf.com/home/home.asp


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Life Insurance Products
http://www.birlasunlife.com/insurancenet/main.htm


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Health and Property Insurance
http://itgi.co.in/home.html


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Banks
http://www.citibank.com/domain/?BVE=https://web.da-us.citibank.com&BVP=/cgi-bin/citifi/scripts/&M=S&US&_u=visitor&_profile=NNNNNNNNNNNNN&_products=NNNNNNNNNNNNNNNNNhttp://www.statebankofindia.com/index.htm?lang=0&id=0http://www.kotak.com/Kotak_BankSite/index.htm


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Abundance
http://www.citibank.com/domain/?BVE=https://web.da-us.citibank.com&BVP=/cgi-bin/citifi/scripts/&M=S&US&_u=visitor&_profile=NNNNNNNNNNNNN&_products=NNNNNNNNNNNNNNNNNhttp://www.statebankofindia.com/index.htm?lang=0&id=0http://www.kotak.com/Kotak_BankSite/index.htmhttp://itgi.co.in/home.htmlhttp://www.cholamandalam.com/home.asphttp://www.utimf.com/home/home.asphttp://www.utimf.com/home/home.asphttp://www.birlasunlife.com/insurancenet/main.htm

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Financial Planning (4)

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