ASSIGNMENT : 1

PERSONAL FINANCIAL
PLANNING

TOPIC:

INVESTING OUR SAVING IN THE

BEST AVAILABLE OPTION

Submitted To:
Mr.Vikas Anand

Submitted By:
Shyama
R1813A01
10807705

INTRODUCTION
Financial planning is the process and discipline of matching your financial
decisions to personal goals and objectives. These objectives can be long-term,
such as passing on as much wealth as possible to future generations;
intermediate-term, such as planning for a secure retirement income that will
support your desired lifestyle, and shorter-term goals, such as saving up for a
down payment on a home or paying for a child's education. The term "financial
planning" generally connotes a broad approach to personal finance topics,
integrating cash management, insurance and protection needs, investing,
retirement planning, budgeting and sometimes even examining relationships as
they relate to finances. The Certified Financial Planning Board of Standards, the
certifying body in charge of the Certified Financial Planner credential, has
identified six steps in the financial planning process.

1. Establishing the Financial Planner/Client Relationship

This obviously doesn't apply if you are doing your own financial planning. But
if you meet with a financial planning professional, you will work together to
determine the scope of your relationship. You will determine what aspects of
your financial life are most in need of professional advice, and ensure that your
planner has the specific expertise necessary to provide it. You may also discuss
the planner's compensation, including commissions and fees, and the services
you can expect.

2. Gathering Data
You will fill out a detailed fact-finder, or questionnaire. The planner uses this
document, together with your open-ended responses about your goals, fears and
attitudes toward money, to help determine a suitable course of action for you. A
good planner will not make product recommendations before taking at least a
short fact-finder.

3. Analysis of Your Financial Situation

The next step is a sober-minded analysis of your present financial situation. The
planner will look for areas in which you have taken on too much risk, or a hole
in your investment portfolio where you may have skipped over an important
asset class. The planner will look at your present situation in light of your goals
and the financial means available.
4. Developing Recommendations

The planner will then make some recommendations on changes you may wish
to make to meet your financial objectives. If your obectives are not realistic in a
reasonable amount of time, your planner will let you know. Examples of typical
recommendations may involve the purchase of life insurance or disability
insurance, the use of tax-advantaged savings vehicles, such as IRAs, 401ks and
Section 529 plans, to accomplish specific financial goals, establishing a will or
trust, or a reallocation of your investment portfolio to ensure you aren't
overexposed to any one risk.
5. Implementation

The next step is to actually put the planner's recommendations into practice.
This may involve coordinating with other professionals, such as accountants,
attorneys, stockbrokers or insurance agents, who can actually sell the financial
products required to accomplish your financial objectives.
6. Monitoring

Things change, both in your personal life and in the market. You will need to
update your plan periodically to ensure your finances are still on track to help
you accomplish your goals. If your goals change, your finances will change as
well. If you work with a financial planner, clarify who is responsible for
monitoring investment behavior and whether you will receive periodic updates
or statements from the financial planner's office.
 LIST OF INSTITUTIONS PROVIDING FINANCIAL
SERVICES

DEPOSITORY INSTITUTIONS:

 Commercial banks
 Savings and loan associations
 Mutual savings Banks
 Credit Unions

OTHER INSTITUITIONS:

 Life insurance companies

 investment institutions
 Financial
 Mortgage companies

PLANNING OUR MONEY

1. My monthly income= Rs 30,000

Annual income = Rs 30,000x12

= Rs 3,60,000

Taxable income = Rs 3,60,000- Rs 1,90,000

= Rs 1,70,000(as no tax is charged upto the amount of Rs

1,90,000 in case of working women)

Tax that will be charged on the taxable income = 10% of the taxable income

= 10% of Rs 1,70,000

= Rs 17,000

Income after the deduction of tax = Rs 1,70,000 – Rs 17,000

= Rs 1,53,000
2. My father monthly income = Rs 60,000

Annual income =Rs 60,000 x 12

= Rs 7,20,000

Taxable income = Rs 7,20,000- Rs 1,60,000

= Rs 5,60,000 (as no tax is charged for Rs 1,60,000 in

case men )

Tax that will be charges on the taxable income = 30% 0f taxable income

30% of Rs 5,60,000= Rs 1,68,000

Income after tax deduction = Rs 5,60,000- Rs 1,68,000

= Rs. 3,92,000

Total income of the family = Rs (3,92,000 + 1,53,000 )

= Rs 5,45,000
3. Household expenses (i.e fixed and variable)

Grocery = Rs 6000 x 12

= Rs 72,000 per annum

Annual Fixed cost:-

 Electricity bill = Rs10,000 p.a

 Telephone charges = Rs 140 x 12
= Rs 1,680
 Others = Rs 60,000 p.a
 Monthly fees of sibling = Rs 2000p.m
(2000x12)
= Rs 24,000

Total fixed cost= Rs 95,680

 Annual variable cost:-

 Telephone bill= Rs 15,000 per annum

 Medical expenses:- 20,000 per annum
 Occasions and festival = Rs 20,000(annualy)
 Travelling charges = Rs10000 per annum
 Fuels= Rs 3,000 x 12
= Rs 36,000 per annum
 Others= Rs 10,000 per annum

Total variable cost = Rs 1,11,000

Total expenses = Rs72,000+95,680+1,11,000
= Rs 327000

4. Saving = Income – expenses

= Rs 5,45,000- Rs 327000
= Rs 2,18,000

After the deduction of expenses from the income we are left with the amount of
Rs 2,18,000. So now we can set our long term and short term objective which
we want to achieve and for this we have to opt different investment option.

SETTING OF THE OBJECTIVE:

 Now, as seeing the saving I have decided to set up my short term goal
which I will complete in within 1 year that is for buying SCOOTY PEP
which will cost me Rs 44,000 approx.

 My long term goal is to have a car that is HYUNDI i20 which will cost
me around Rs. 4,50,000 to Rs. 5,00,000 approx. That I will complete in
within 4 years or maximum upto 5 years.

 The other institutions where I would like to invest my saving is in mutual

fund (15-18% compounding) that will be near about Rs 50,000. Annually
 I will get Rs 7,500 as rate of return and at the same rate I will get back a
amount of Rs 37,500 in 5 years.

 After investing Rs 50,000 in mutual fund I will be left with the amount of
Rs (2,18,000- 50,000) i.e. Rs 1,68,000 with which I will purchase a LIFE
INSURANCE which will cost me Rs 10,000 as it has a locking period of
3 years and before that I can’t take off my money. And it would provide
me with a profit of Rs. 4,500.

 Then I will invest Rs 30,000 in gold(22-30%) that will provide me a

profit of Rs.6,600 annually and at the end of 5years it will pay me back
an amount of Rs.33,000

 Other to this alternative, now-a-days the best option to invest in is REAL-

Estate (25-40%) as it provides maximum return to an individual. So I will
invest Rs. 1,00,000 which will provide me return of Rs 30,000 annually
at a rate of 30% and if calculated totally at the end of 5 year it will
provide me a return of Rs 1,50,000.

On calculating my investment returns in the various alternatives for 5 years, on

the average it satisfies the achievements of my goal both long term and short
term without any problem.