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1. Financial Planning:
The Road Ahead
By : Jitender Chaudhary
FinVise India
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2. Agenda
3
Financial
Health
Diagnostic

3. Section A
3 4

4. Understanding My Finances
4 5
“I earn enough, but where does my money go?”
How many of you ask this question?
Cash Flow Statement or Budget

5. Other
Income
Preparing My Monthly Cashflow
Rs.INCOME Rs. EXPENSES Rs. EMI
Salary Living Expense Home Loan
Spouse Salary Rental Car Loan
Rental Income Insurance Premium Education Loan
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Other Monthly Other Loan
Expenses

6. How Am I Doing?
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● EMIs < 25% of income
Suggested ranges:
●Expenses < 40% of income
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● Monthly savings > 35% of income

7. ASSETS Rs.
Real Estate
Bank Balance
FD/ Mutual Fund
Other
Financial
Investment
Car, Jewellery
Calculating My Networth
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Net Worth = Total Assets – Total
Liabilities
LIABILITIES Rs.
Home Loan
Car Loan
Personal Loan

8. Section B
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9. Getting Rich
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What does being rich mean?
• Creating alternate sources of income that give you
financial freedom
• Its NOT about earning a higher salary, but what
you do with that salary
• Create assets......which create income so that you can
achieve your dreams

10. The Money Cycle
Rise in Income
How most of us manage
money?
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Rise in
Consumption
Decrease in
NetworthRise in Loans
Rise in EMI

11. THE MONEY CYCLE
How most of us manage
money?
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12. The Money Cycle
Rise in Income
How rich people manage
money?
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Increase
in
Networth
Rise in
Investment
Income
Rise in
Savings/Assets

13. The Money Cycle
13
How rich people manage
income?
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14. 07/17/09
Getting Rich and Staying Rich
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Invest and generate alternate income from investments
Before taking any financial decision, think what it will do to
your networth:
- Increase networth, or
- Decrease networth
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15. Section C
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16. Buying a home
What Are Your Dreams – financial goals?
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Buying your dream car

17. What Are Your Dreams?
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Foreign education for child
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Having a fulfilling retired life

18. Case Study, How Inflation matters
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Dream:
My dream is to send my child to U.S.A for higher education,
when she turns 18.
Goal:
Today's Value (Rs): 50 Lakhs When (year): After 5 years
Inflation: 8%
Money required (Rs): 73 Lakhs

19. Ways to meet my financial goal
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Buying a house/ car/ funding child education, etc
1.My current assets – FDs, savings acct balance, Equity,
Mutual funds, real estate, etc
2.My month on month savings – surplus generated
every month – where to be invested
3.Loan – Is it right to take a l an or not? How much loan
will I be allowed? Will my cash flow support proposed
EMI today or on future date?
•The question in my mind – are the above enough, is the
future value of education being met by above means, if
no what’s the deficit?

20. Financial Planning Helps to understand
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• Helps to know what’s the future value of my goals
• What’s the future value expected of my current assets
• Helps to know if my surplus is enough to fund this deficit
• Helps to know if loan is required and if yes, will I be able
to pay the projected EMI
• Helps to run alternate scenarios by deferring goal/
Preponing goals/ changing the income level/ advice on
estimated expenses

21. Albert Einstein:
Beat Inflation With Compounding
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“Compounding is mankind’s greatest
invention because it allows for the reliable,
systematic accumulation of wealth.”

22. 07/17/09
Impact Of Compounding
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Raj and Rita are twins, but see the world of investing very
differently.
Rita: Starting age 25, invested Rs 2 lakhs per annum for 10 years
and then stopped
Raj: Starting age 35, invested Rs 2 lakhs per annum for 30
years till he turned 65

23. 07/17/09
Impact of Compounding
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Age Investment Rate of
Return
Networth at
65
Rita 25 2 Lakh p.a.
for 10 years
8% 2.71 crores
Raj 35 2 Lakh p.a.
for 30 years
8% 2.25 crores

24. Where Should I Invest?
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No simple answer - all of us are unique
•Personality
•Risk tolerance
•Existing situation
•Doctors don’t give the same medicine to all
patients
•Prescribed medicine depends upon
• Diagnostic to identify symptoms
• Tolerance for dosage
• Pre-existing conditions and allergies

25. Finding Out My Risk Profile
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26. My Risk Profile
Risk Profile
Conservative Moderately
Conservative
Moderate
Moderately Aggressive
Aggressive
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Score
50 - 100
101 -
150
151 -
200
201 -
250
251 -
300 28

27. What Should Be My Asset Allocation?
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Risk Profile Cash Debt Equity
Aggressive 5% 10% 85%
Moderately
Aggressive
5% 25% 70%
Moderate 5% 35% 60%
Moderately
Conservative
5% 65% 30%
Conservative 5% 85% 10%
Increasing Risk
Keep time
horizon of
goal in mind

28. Section D
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29. What Uncertainties Do We Face In Life?
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• Death
• Disability or loss of health
• Burglary at house
• Earthquakes and other natural disasters
• Uncertainty about achieving goals

30. Protecting Life
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Life Insurance - Key questions to ask
•Do I need Life Insurance?
•How much insurance cover do I need?
•Which is the right kind of policy for me?
•How much does insurance cost?

31. Present value
of HH Expense
of survivor
(A)
+
Present value
of Financial
Goals
(B)
+
TOTAL
(A+B+C)
-
Less : All
current assets
-
Calculating My Life Insurance Need
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Current value
of LOANS
(C)
=
TOTAL
(A+B+C)
Less: Present
value of
Survivors
Income
-
Less: Current
Life
Insurance
coverage
=
Actual SUM
ASSURED
REQUIRED
Present value of
Future Expenses
(A)

32. Emergency Protection
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Do you have a contingency fund for emergencies?
These emergencies could be:
•Loss of Job
•A medical condition not covered by insurance
•Temporary disability or accident
•Other unplanned circumstances

33. Emergency Fund
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How much is enough?
For salaried people:
3 – 6 months of committed expenses, which
include EMIs, insurance premiums, house rent,
household expense, etc.
For self employed:
6 - 9 months of committed expenses.

34. Role of Written Financial Plan
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Irrespective of how you do it, you should have a written financial
plan in place because of following facts:
1. 88% or pre-retirees with written financial plan vs. 50%
without it (Study conducted in US)
2. Higher savings rate
3. Confidence to achieve goals on time for yourself and family

35. Yes, you can.
Provided you have...
•expertise
•experience, and
•time
Can You Make Your Own Financial Plan?
DIY – Do it yourself!
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37. Gold vs FD vs Sensex vs PPF vs LIC Bonus

38. PPF vs ELSS Mutual Funds

40. Real Estate vs Equity MF vs Gold

41. Seminar Take Aways
1. understand my finances – my cash flow and net worth.
2. work for my dreams by converting them into goals.
3. watch out for inflation, money in my savings accounts is just losing value.
4. make sure that compounding is on my side, and not against me.
5. choose an asset allocation that is best suited for me.
6. prioritize my goals and create a plan to fund each one of them.
7. buy insurance for my family and my assets.
8. always maintain an emergency fund.
9. watch out for distractions, won't spend on things that I don't really need.
10. choose and stick to a financial advisor I can trust.
I will...
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42. Please give us Feedback!
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