financial planning raj
TRANSCRIPT
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Financial planning
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What is Financial Planning?It’s the process of achieving your life goals by using :- Different investment options With your current resources Through proper and disciplined money
management
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Financial Planning : CR+IO=FG
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Rewards of Sound Financial Planning Maintain and improve standard of living Control spending in order to live well today
and tomorrow Accumulate wealth
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Steps for setting Financial Goals1. Write your goals (Should be specific and
realistic)
2. Identify your time-specific goals Short Term ( within 2 year) Medium Term (within 5 years) Long term (after 5 years)
Priorities your goals
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Analysis of present financial situation1. Total Assets2. Total Liabilities3. Net Worth : (Assets – Liabilities)4. Present Cash Flow statement (income and
expenditure)
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Budgeting Income (from all sources) Expenses (Controllable + Uncontrollable) Present net saving Proposed net saving after reducing
controllable expenses.
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Categories your financial goals Protection Medical Emergency Fund Investment / Wealth Creation Tax Saving Retirement Estate
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Protection / Medical Life Insurance Critical Illness Insurance Hospitalization Insurance Personal Accident Insurance Disability Insurance Non-Life Insurance
How much insurance I need ?Which policy should I take ?
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Emergency Fund How much fund I require ? At what time I might require the funds ? Where to keep my emergency fund ?
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Investment Planning Where to invest ? How to invest ? What is my risk appetite ? How much risk should I take ? Time frame for my investment ? Churning of Investment ?
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Investment planning – Asset Class Fixed Deposit /Cash Provident Fund PPF / APF /NPS Equity- Mutual Fund / Stock Market Debt instrument /Bonds / Gold Commodity Real Estate Art Money Market ULIP
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Guaranteed return / Non Guaranteed returnGuaranteed Return Non Guaranteed ReturnFixed Deposit (Bank/Post office / Govt Scheme)
Equity
Provident Fund / Additional PF GoldPPF Commodity
Real EstateUlip
Guaranteed Return : Low risk & Low return
Non Guaranteed Return : High risk & High return
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Asset Allocation Risk Appetite Time Horizon Different Life Stages Past Experience Net worth
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Impact of Inflation Real return = Return – Inflation
Scheme AmountInterest rate Return
Tax Rate Tax
Post tax return
Post tax value
Inflation
Inflation erosion
Net value
SB A/c 100000 4% 4000 30% 0 4000 104000 7% 7280 96720FD A/c 500000 9% 45000 30% 13500 31500 531500 7% 37205 494295
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Impact of Inflation-Cont
Purpose Current cost / Estimate Inflation Term Future CostHigher Eduction for kids 1000000 9% 20 2800000Child Marriage 1500000 8% 25 4500000Medical Exp 500000 7% 30 1550000Retirement Saving 5000000 8% 30 17000000
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Liquidity / Contingency fund : Option to withdraw the money as per my
wish / need
Investment products Bank deposit / Fixed Deposit / NSC Mutual funds
Strategy should be : Low risk- Low to Medium gain
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Tax saving + Investment planningSection 80C, 80 CCC, 80 CCD : Rs 1,50,000/- Repayment of principal amount on Housing Loan Stamp duty / Registration fees and other expenses for the
purpose of transfer of such house property to the assesse PPF Accounts 5 Year tax saving fixed deposit/ 5 Year RD with post office NSC / Notified Bonds /Senior citizen saving scheme Equity Oriented Mutual funds Contribution to Employees Provident Fund Life Insurance Policy Pension Plans Sukanya Samridhi Account Children Education
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Tax saving + Investment planning- ContSection 80CCD : Additional Saving of Rs 50000/-
For investment in National Pension Scheme (NPS)
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Tax saving + Investment planning-ContSection 80D, 80DD, 80 DDB
Section 80D : Medical Insurance premium of self or spouse or children – Rs 25000-30000/-
Section 80DD : Medical Treatment of Handicapped Dependents
Section 80DDB : Treatment of Specified Diseases
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Tax saving + Investment planning-ContSection 24: Interest on Housing Loan
Self-occupied property: Rs 2 Lakh Not Self-occupied property : No maximum limit (Rental
income to be subtracted)
Condition : The house should be constructed within 5 years.
If not : the eligibility will reduce to Rs 30,000/-
Rs 30000/- if loan is for repair and maintenance of self occupied house.
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Tax saving + Investment planning-ContSection 80EE : Interest on Home Loan (First time buyers)
Additional deduction of Rs 50,000/- for interest.
Conditions Value of property <50lakhs and Loan < 35
lakhs
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Tax saving + Investment planning-ContSection 80 E : Education Loan
For higher education of himself or spouse or children :
Only allowed for repayment of interest and not for principal repayment
No maximum limit
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Tax saving + Investment planning-ContSection 80CCG : RGESS
Annual income < Rs 12 Lakhs P.A. Investment in specified companies and mutual
funds Only for first time investors Investment upto Rs 50000/- 50% deduction of the amount invested during
the year. Benefit can be availed for 3 consecutive years
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Tax saving + Investment planning-ContSection 54, 54EC, 54 F : Capital Gains
Asset Min Holding period for Long term
Taxation
Equity 1 Year 0%Debt 1 Year Whichever is beneficial- 10 % without
indexation or 20% with indexation benefitReal Estate
3 Year 20% with indexation benefit
Gold 3 Year physical gold
20% with indexation benefit
1 Year Gold ETF /MF
Same as for debt
Bonds/ NCDS
1 Year 10% without indexation
Long term vs Short term capital gains
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Tax saving + Investment planning-ContSection 80 G: Donations
Contribution to National Relief Fund Donation for charity, social purpose.
In some cases 100% of donation can be deducted while in certain cases the deduction is restricted upto 50%
Cash donation : Rs 10000/-
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Retirement Planning Corpus required Identify the assets for investment Diversification Risk taking capacity Portfolio churning as per the change in age
profile / performance of portfolio etc Pension plan Annuity scheme
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Estate PlanningWhom I would like to give the property after my life:
Preparation of will Amendment of will Allocation of resources as per my wish.
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Estate Planning -ContWill is a legal document in which a person gives instruction about the distribution of his/her assets and the legal guardian (if require).
Parties in a will Executor Beneficiary Power of Attorney
https://sbicaptrustee.in : My will services online
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Financial planning is an on-going process
Pre work
Asset allocation
MonitoringAnalysis of
current situation
Risk profiling
Implementation
Goal Setting
Rebalancing
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Section 80 D: Medical Insurance Insurance of Self, Spouse and dependent
children: Rs 25000 If senior citizen : Rs30000 Health insurance premium for parents : Rs
30000
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Section 80 DD: Medical Expenditure for a Handicapped Relative Expenditure incurred on medical treatment,
training and rehabilitation of handicapped dependent relative
Payment or deposit to specified scheme for maintenance of dependent handicapped relative
Where disability is 40%-80% - 75000/-Disability > 80% -125000/-
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Section 80DDB : Deduction for medical expenditure on self or dependent relative For treatment of specified disease or ailment –
Rs 40000/- For senior citizen – Rs 80000/-
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Insurance Term Plan : Only risk cover, no survival benefit Endowment Plan : Risk cover + survival
benefit
Types of Insurance products Term Plan Endowment Annuity Whole life insurance
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Risk Systematic risk : Movement in market / economy Non Systematic risk : Unique to particular investment
Other risks are Liquidity risk Exchange rate risk Political risk Interest rate risk Management risk Financial risk Business risk Re-investment risk Purchasing power risk
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Risk profile of an individual Age Income level Time horizon of investment Dependents Market knowledge / investment products Capacity to absorb loss