If You fail to plan, You are planning to fail

Set your goalsMy 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.

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

Philosophy for life..You DecideY C = S or Y S = 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 happinessOur Financial ConcernsWhere 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 DistressUncertain futureLimited timeLack of financial goalsConflict regarding financial goalsInsufficient assetsVolatile financial marketsInadequate knowledge about financial productsToo many advices and financial productsPoor and Free Advice

If Money is not available when equired..

What are different stages of LIFE ?Identify Where you are.Life StagesYoung unmarried Young married Young married with children Married with older children Pre-retirement Retirement

Life Cycle Stage PlanningIncomeBirth & EducationEarning YearsRetirementAge22 yrs38 yrsOver 25 30 yrsPhase IIIPhase IIPhase IChild MarriageChild EducationHousingChild birthMarriage22 yrs60 yrsHuman Life Value

Life Line PresentationWhy Financial Planning ?Rising Life expectancyestimated to increase from 80 to 85 in next decadeInflation Cost of Food/Education / Medical increasing exponentiallyProtect lifestyle of familyProtection against the uncertaintyBalanced Asset AllocationWealth creation and protection

What was life expectancy in 1947 ?

What is life expectancy today ?

What it is in income group you belong ?Life ExpectancyLife ExpectancyWhat 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 ValueWhat is the Biggest Concern ? Living costs will increase dramatically in the futureSo 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

10 years agoToday% IncreaseExpected after 10-15 years1 Kg of PotatoRs. 5.00Rs. 25.00400.00%Rs. 125.001 Kg of ApplesRs. 20.00Rs. 80.00300.00%Rs. 320.001 Kg of RiceRs. 25.00Rs. 75.00200.00%Rs. 225.001 Litre of MilkRs. 20.00Rs. 40.00100.00%Rs. 80.00School Fees (PM)Rs. 500.00Rs. 2,000300.00%Rs. 8,000.00MBARs. 7,50,000Rs. 15,00,000100.00%Rs. 30,00,000.00Medical Science has advanced, but so have diseases and medical costs...InflationDisease20 years agoToday% IncreaseExpected after 20 yearsSpondylitisRs. 2,500.00Rs. 8,000.00220.00%Rs. 25,600.00ArthritisRs. 250.00Rs. 3,000.001100.00%Rs. 36,000.00AsthmaRs. 175.00Rs. 2,500.001328.57%Rs. 35,714.29DiabetesRs. 225.00Rs. 3,000.001233.33%Rs. 40,000.00OPDRs. 100.00Rs. 500400.00%Rs. 2,500.00Bypass SurgeryRs. 1,00,000Rs. 3,00,000200.00%Rs. 9,00,000.00Exercise : 1. Analyse the cost of living of you with your spouse after your retirement

2. Analyze the estimated cost of doing MBA for your childExercise (Rank) : Priorities in Financial PlanningFamily ProtectionBuying a carRetirement PlanningAsset creation/ Wealth creationChildren educationWorld tour

Exercise : Priorities in Financial PlanningRetirement PlanningFamily ProtectionAsset creation/ Wealth creationChildren educationBuying a carWorld tour

So What isFinancial PlanningSo What isFinancial PlanningFinancial Planning is the process of formulating, implementing and monitoring multifunctional financial decisions that enable us to achieve financial goals.Objectives of Financial PlanningCertain eventsUncertain eventsEmergency fundingCash flow managementEstate planningReview, review, and review.

Make a list of certain events of lifeMake a List of Certain Events of LifeRepayment of education loanMarriageChildrenChildren Education- primary & secondaryBuying a carBuying a houseParents getting oldYour RetirementYour Old ageDeath

Make a List of Uncertain Events of LifeMake a List of Uncertain Events of LifeUntimely deathAccidentPermanent disabilityIllnessCritical illnessNatural calamitiesUnexpected loss of jobAny other unexpected emergency in familyWhy People Fail to Plan?Why People Fail to Plan?Lack of assets and expense of serviceFear of planningFear of Loss of ConfidentialityProcrastinationWhere is the adviser??

How Financial Planning Helps Us ?Develop Realistic GoalsThe full pictureExplains interconnectionTurns problems into ChallengesSimplifies Financial understandingHelps us to understand all alternativesRoadmapAssessing 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 beIt helps you to focusGoals are what you wish to haveplaces to gothings to dogenerally the major thingsMake a list of GOALS of your life.EXERCISE

What are you ST and LT GOALs ?Goals We all have dreamsAlmost every goal in life has a financial implicationGoals are very specific to you as an individualGoals vary based on your life situationSetting your goals is the first step in the process of your financial planning Goals changeS.M.A.R.T goalsS.M.A.R.T goalsEffective goals SHOULD have the following features:specificMeasurableActionableRealisticTiming

SMART GoalsTo 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 GoalsCrucial GoalsFor most people following goals are crucial- example-Being debt free at 45,Having retirement corpus ready at 55Having adequate risk cover, at least to cover all debtsPrimary education of childrenEmergency FundsNon-crucial GoalsCorpus to be readied for son/daughters education abroadIn case there is a shortage, son/daughter can borrow (Education loan)Corpus to be readied for son to buy a ShopSon can borrow the balance..and repay from his earningsGoing for a family trip to Europe Goal setting for each life stageOur goals are scattered over different periods of timeGoals depends upon the stage in life that we are inAlthough financial needs change as you move through life, it helps to look at typical goals through each stage of lifeExercise

Process of FP in Practice..1Step I: Establish a trust relationship with the clientStep 2: Define the clients goalsStep 3: Analyze and evaluate clients financial statusStep IV: Determine clients risk tolerance level55Indicate that these steps are crucial.Process of FP in Practice..2Step V : Ascertain clients tax situationStep VI: Recommend the appropriate asset allocation and specific investmentsStep VII: Executing the planStep VIII: Periodic Review

56What is Asset Allocation ?Asset AllocationProduct allocation cash, debt, equityCountry allocationIndustry allocationFund house allocationTime allocation long and short term

Steps in Asset AllocationSelect potential asset classesDefine the mixDefine permissible variationSample Allocation

What Should be the Basis of Allocation ?

62Typical Investor ProfilesConservative Investor with no experience in stocks, risk averse, retiredModerate Some experience in stocks, willing to take risks, high risk investor but retiring soonAggressive Young investor, long time horizon, experienced in stocks, retired but high net worth with sufficient stable income from bondsRisk Profiling of an Individualhttp://www.moneycontrol.com/personal-finance/tools/risk-assessment-tools.html#resCore Knowledge AreasDevelop financial statements and budgetsCash flow & Credit managementPersonal Risk management and InsuranceInvestment Decisions and StrategiesTax implicationsRetirement and Estate planning issues

Group Project PresentationsSheet1LIFE CYCLE OF INVESTMENTSLife Cycle PhasesAgeLow RiskMediumHighGroupRiskRiskAccumulation20s-30s10 to 30%40 to 60%20 to 40%Saving30s-40s20 to 40%40 to 60%10 to 30%Pre RetirementEarly 50s30 to 60%30 to 50%10 to 20%Retirement+Late 50s40 to 80%20 to 40%5 to 15%Illustrative AllocationsConservativeModerateAggressiveCash25%10%5%Bonds55%45%25%Large Cap Equity15%25%40%Small Cap Equity5%15%20%Derivatives0%5%10%

Sheet2

Sheet3