PROJECT REPORT ON

FINANCIAL PLANNING FOR DIFFERENT

STAGES

UNIVERSITY OF MUMBAI
FOR ACADEMIC YEAR 2017-2018

PROJECT GUIDE

PROF. DR. RASHMI MAURYA

PREPARED AND SUBMITTED BY

KIRTI AMBOLKAR
T.Y.BMS (SEMESTER – V)

K.P.B. HINDUJA COLLEGE OF COMMERCE

CHARNI ROAD

1
 Smt. P.D. Hinduja Trust’s

K.P.B. HINDUJA COLLEGE OF COMMERCE

315,
315,New
NewCharni
CharniRoad, Mumbai 400 004 
Road, Mumbai Tel
Tel.:.:022- 40989000
022-40989000  Fax:
Fax:2385
238593
9397.
97.Email:
Email:hindujacollege@gmail.com
hindujacollege@gmail.com

NAAC Re-Accredited ‘A+’

ISO 9001:2008 COLLEGE WITH POTENTIAL FOR EXCELLENCE
Prin. Dr. Minu Madlani (M. Com., Ph. D.)

CERTIFICATE

This is to certify that Ms. /Mr. Kirti Vijay Ambolkar of Bachelor of

Management Studies Semester 5 [2017-2018] has successfully completed the

Project on “Financial Planning For Different Stages” under the guidance of

Dr. Rashmi Maurya .

________________
________________
Project Guide Co-ordinator

________________
________________
Internal Examiner External
Examiner

________________
________________
Principal College Seal

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 DECLARATION
To,

The Principal,

K.P.B. Hinduja College of Commerce,

315, New Charni Road,

Mumbai -400 004.

Respected Madam,

I, the undersigned hereby declare that the project report entitled

“FINANCIAL PLANNING FOR DIFFRENT STAGES ” is an original work
developed and submitted by me under the guidance of Prof. Dr. Rashmi
Maurya.

The empirical findings in this report are not copied from any report and are true
and best of my knowledge.

DATE:

PLACE:

ROLL NO:

SEAT NO:

Signature of Student

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 ACKNOWLEDGEMENT

I, the undersigned would hereby like to thank “University of Mumbai” for giving
me an opportunity to present my skills in the form of this project which will not
only prove to be useful for my academic profile but will also prove to be fruitful
for my future for attaining jobs and also will help me to face the growing
competition in the corporate level.

I would also like to thank “Prof. Dr. Rashmi Maurya” for assisting and guiding
me in every possible way she could have to prepare for preparing this wonderful
project or else completion of this project would not be possible.

I would also like to thank “K.P.B. Hinduja College of Commerce” for timely
availability of books and use of internet which have been an important input into
completion of this project.

Lastly, I would also like to thank my parents for providing all necessary funds
which were required for making of this project.

Place: Mumbai (Kirti Ambolkar)

Date:

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 INDEX
SR.NO PARTICULARS PAGE
NO.
1. CHAPTER 1 – INTRODUCTION 3-11

2. CHAPTER 2 - REVIEW OF LITERATURE 12-15

3. CHAPTER 3 - CONCEPTUAL FRAMEWORK 16-25

4. CHAPTER 4 – INVESTMENT STRATEGIES 26-40

5. CHAPTER 5 – FINANCIAL PLANNING 41-54

AMONG RESPONDENTS

6. CHAPTER 6 – FINANCIAL PLANNING 55-61

ATVARIOUS SATGES

7. CHAPTER 7 – SUGGESTION AND 62-64

CONCLUSION

8. CHAPTER 8 – BIBLIOGRAPHY 65

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CHAPTER 1: INTRODUCTION

1.1 : Introduction

The only thing permanent in life is changing, Times change, People change, so doe’s life. You
expect life to be much better tomorrow than it is today. Tomorrow, you hope to fulfil all your
dreams and aspirations.

An unexpected change in your financial situation can be incredibly stressful. Hence here is
some help to plan your financial life, whatever is the situation; financially, your life should
never go unrestrained.

So here is the most preferred solution: Financial Planning!

There’s just no way around it: absolutely everyone needs financial advice.

Financial planning is a process of setting objectives, assessing assets and resources, estimating
future financial needs, and making plans to achieve monetary goals. Financial Planning can
be as simple or complex as you make it, but no matter how you create your plan if you follow
it, you'll be on your way to Financial Independence.

The process of determining a persons or firm's financial needs or goals for the future and the
means to achieve them. Financial planning involves deciding what investments and activities
would be most appropriate under both personal and broader economic circumstances.
Financial planning is an ongoing process, not a product.

All things being equal, short-term financial planning involves less uncertainty than long-term
financial planning because, generally speaking, market trends are more easily predictable in

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the short term. Likewise, short-term financial plans are more easily amendable in case
something goes wrong as a result of the short time frame.

1.2 Objective:

To manage income
To regular cash flow
To maintain capital
To investment for maintain standard of living
To family security after retirement
To maintain standard of living after retirement
To savings

1.3: Scope of financial planning

1. Helpful in tax planning:

Chartered accountants (CA’s) have the responsibility of advising clients on various

investment options.
Along with it, they also help the clients with their tax planning to minimise tax and save more
money, and in accounting, investment and in financial planning.

2. Helpful in selection of investment strategy:

A wealth management professional provides advice to his clients about the investment in
various schemes to ensure maximum returns with minimum risk.

3. Public issue of companies:

Since 1991, a series of large families listed their needs on exchange which led to significant
financial planning and generation of tremendous share holder value.

4. Structure of wealth management:

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Large investment banks helped promoters with their needs on taxation, investment, etc. By
helping them to manage and invest their wealth.

5. Seeking Accumulation:

Around 69% of the Indian HNWI population is in the age group of 30-35, that have long term
investment plans and thus require wealth management and advisory asset management
services.

6. Financial development and protection:

Once wealth has been accumulated, it can be developed (increased) by diversification and
proper financial planning. In order to protect your wealth, developed ways to minimise taxes.

7. Globalization:

Several Indian clients have their operations in various countries across the globe and are
advised by a number of international advisor and specialist.
Clients spend a reasonable amount of their time in understanding estate and succession
planning to ensure continuity in business and wealth expansion.

8. Regulatory actions:

The Securities and Exchange Board of India (SEBI) has become very active and aware over
the year to block and safeguard against malpractices.

1.4: Research methodology:

Sampling technique:

Initially, a rough draft will be prepared keeping in mind the objective of the research. A
pilot study will be undertaken in order to know the accuracy of the questionnaire. The final
questionnaire will be arrived at only after certain important changes are incorporated.

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Convenience sampling technique will be used for collecting the data from different
investors. The investors are selected by the convenience sampling method. The selection of
units from the population based on their easy availability and accessibility to the researcher
is known as convenience sampling. Convenience sampling is at its best in survey dealing
with an exploratory purpose for generating and hypothesis.

Sampling unit:

The respondents who will be asked to fill out the questionnaires are the sampling units.
These comprise of employees of MNC’s, government employees, housewives, self-
employed, professionals and other investors.

Sampling size:

The sampling size will be restricted to only, which comprised of mainly people from
different regions of Mumbai due to time constraints.

Sampling area:

The area of the research is Mumbai.

SOURCES OF INFORMATION:
PRIMARY DATA:

Information is collected by conducting a survey by distributing a questionnaire to 50

investors in Mumbai. These 50 investors are of different age group, different occupation,
different income level, and different qualifications.

SECONDARY DATA:

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The data of collected by using following means: Articles in financial newspapers [economic
times and business standards] Investment Magazine, financial chronicles. Expert’s opinion
published in various print media. Data available on investment through various website.

1.5: Limitations of Financial Planning

1. Difficulty in Forecasting:
Financial plans are prepared by taking into account the expected situations in the future.
Since, the future is always uncertain and things may not happen as these are expected, so the
utility of financial planning is limited. The reliability of financial planning is uncertain and
very much doubted.

2. Difficulty in Change:
Once a financial plan is prepared then it becomes difficult to change it. A changed situation
may demand change in financial plan but managerial personnel may not like it. Even
otherwise, assets might have been purchased and raw material and labour costs might have
been incurred. It becomes very difficult to change financial plan under such situations.

3. Problem of Co-ordination:
Financial function is the most important of all the functions. Other functions influence a
decision about financial plan. While estimating financial needs, production policy,
personnel requirements, marketing possibilities are all taken into account.

Unless there is a proper-coordination among all the functions, the preparation of a financial
plan becomes difficult. Often there is a lack of co-ordination among different functions.
Even indecision among personnel disturbs the process of financial planning.

4. Rapid Changes:
The growing mechanisation of industry is bringing rapid changes in industrial process. The
methods of production, marketing devices, consumer preferences create new demands every
time. The incorporation of new changes requires a change in financial plan every time.

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Once investments are made in fixed assets then these decisions cannot be reversed. It
becomes very difficult to adjust a financial plan for incorporating fast changing situations.
Unless a financial plan helps the adoption of new techniques, its utility becomes limited.

CHAPTER 2: REVIEW OF LITERATURE

No loan waiver for big defaulters: Arun Jaitley

NEW DELHI: Finance minister Arun Jaitley vigorously rejected a “rumour” about bank
loan waivers to “capitalists,” accusing the previous Congress-led UPA government of being
responsible for the profligacy that has burdened the sector with non-performing assets.

Not only has the current government sought to fix India’s banks with the Insolvency and
Bankruptcy Code (IBC), Jaitley said the previous government had sought to brush Rs 4.54
lakh crore of bad loans under the carpet.

In a signed article released on Tuesday entitled ‘The Fiction of Loan Waiver to Capitalists’,
Jaitley categorically denied any move to let big defaulters off the hook, pointing to the
action that’s being taken against them under the insolvency law?

“Between the years 2008 and 2014, public sector banks disbursed disproportionate sums of
loans to several industries,” he wrote. “The public needs to ask the rumour mongers at
whose behest or under whose pressure were such loans disbursed.
Bankruptcy proceedings have been initiated at the National Company Law Tribunal (NCLT)
for time-bound recovery from the 12 largest defaulters in six to nine months in NPA cases to
the tune of Rs 1.75 lakh crore, he said. He pointed out that Rs 7.33 lakh crore of bad loans
originated during the term of the Congress-led United Progressive Alliance (UPA).

New Finance panel to study impact of GST on finances: N K Singh

NEW DELHI: N K Singh, the newly appointed Chairman of the 15th Finance Commission,
today said it is imperative for such a panel to examine implications of GST on finance of the
Centre and states.
"The fact that GST was propelled through several constitutional amendments which
included the states being participants in these constitutional amendments enjoins upon any

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Finance Commission the need to examine implications of GST in terms of finances of both
the Centre and states because this is about the fiscal issue of the general government," he
said.

Soon after the appointment, he said it comes as no surprise that the Goods and Services Tax
(GST) is included in terms of reference.

Earlier, the government appointed the former Planning Commission Member as head of the
15th Finance Commission.
Other members of the commission, which is required to submit its report by October 2019,
are former economic affairs secretary Shaktikanta Das, former chief economic advisor
Ashok Lahiri, Niti Aayog Member Ramesh Chand and Georgetown Georgetown University
professor Anoop Singh.

The commission will review the current status of the finance, deficit, debt levels, cash
balances and fiscal discipline efforts of the Union and the states.
It will also recommend a fiscal consolidation road map for sound fiscal management.
As per Article 280 of the Constitution, the commission is required to make
recommendations on the distribution of the net proceeds of taxes between the Centre and the
states.

The new Finance Commission will cover five-year period commencing April 1, 2020.
The 14th Finance Commission was set up on January 2, 2013. Its recommendations cover
the period from April 1, 2015 to March 31, 2020.

What to do when you have doubts about your mutual fund investments
By Kartik Swaminathan
I have seen many investors who are not sure about their recent mutual fund investments.
This doubt or afterthought is largely fuelled by the following factors:
The investment decision was made quickly on a recommendation.
The investment was done because someone they knew has invested in it.

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The investor heard of some adverse news about the scheme or AMC.
The performance of fund is not good after the investment has been made.
The investor suddenly thinks that the fund does not suit his/her risk profile/needs/goals.
The investor wants to validate the investment with an expert.
Now, what should you do when you have doubts about your recent investment. Before
proceeding let me inform you this column is not about selecting a scheme. That is
something you should do before investing in a scheme. This column deals with how to deal
with your doubts regarding your recent investments.

If you have invested a lump sum

If there is some adverse news about the scheme, first verify the news. If the news is found
true, do a review with an expert for the switching options. It is very important for retirees or
investors who want to preserve their capital. Please note that many investments like fixed
maturity plans (FMPs) carry big risks due to underlying investments. So, it is important to
review the underlying investment portfolio of the scheme when there is adverse news on the
companies the fund has invested.

If it is a Systematic Investment Plan

SIPs are all about medium to long-term disciplined investing. In fact, SIPs by design handle
volatility and uncertainty better. Still, you can take the following course of action if you
have trouble with your investments.

- If there is any adverse news, it is better to validate and review the fund with an expert.
- If you’re SIP has not performed well over two quarters or so. Ideally, you should not
worry as it is too short a period to review your investments. The only exception is a real bad
performance of the scheme, compared to peers.
- If you have been asked to wrongly invest in an SIP. For example, if the SIP term is in line
with the goal, SIP frequency or date is not suited to your cash flows, etc. These are minor
procedural changes which can be addressed by you. So, if you are clear, you simply need to
communicate these changes to the AMC.

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The CFP Board Centre for Financial Planning

The CFP Board Centre for Financial Planning is pleased to announce the launch
of Financial Planning Review, a double-blind, peer-reviewed academic journal from
the CFP Board Centre for Financial Planning.

Published by John Wiley & Sons quarterly beginning in mid-2018, the Review will
feature high quality scholarly research, featuring rigorous empirical and
methodological analyses directly and indirectly related to financial planning practice.
These topics include, but are not limited to:

• Financial planning
• Portfolio choice
• Behavioural finance
• Household finance
• Psychology and human decision-making
• Financial therapy, literacy and wellness
• Consumer finance and regulation
• Human sciences.

Accepted papers will span the broad spectrum of research methodologies and data
analyses.

Financial Planning Review will be available electronically from the Wiley Online
Library and the CFP Board Centre for Financial Planning. Each edition of the
Review will also be distributed to nearly 80,000 CERTIFIED FINANCIAL
PLANNER™ professionals throughout the United States.

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CHAPTER 3: CONCEPTUAL FRAMEWORK

3.1: Financial Planning:

Many individuals do not have a clear picture about their finances. While we do have some
basic goals, like our kids' education, buying a house and retirement, in mind, the point is they
are not well documented. Once you have a plan for yourself, it works much better as you go
by what is written down and well documented.

Simply put, a financial plan is a budget for spending and saving for future income.
Financial experts reckon that every individual should have a financial plan. In fact, before you
start investing even a rupee, you should make a financial plan for yourself.
Financial planning allows you to ensure you will have funds available to meet your present
and future needs.

As we age, expenses tend to increase — from kids who want toys, to teens who want cars
and need tuition, to being an adult, buying a home, a car. In addition, we often find
unexpected things happening all the time, like a medical emergency. So, being financially
ready for such things makes life much easier. Once you have a financial plan, a lot of
financial issues smooth out.

People who don't plan often find themselves living from this month’s salary to the next
months or struggling to come up with money in case of an unexpected situation.

Creating a Financial Plan

Everyone should have a financial plan, but that does not mean you can replicate a plan devised
for someone else. One must realize that each individual is very different from the other. So,
the financial plan for even two people earning the same salary would be different. This is

15
because financial situations and risk-taking ability would be different. If someone, for
example, has to take care of his parents and pay home loan EMI, his risk-taking ability would
be far lower than an individual who does not have an EMI. Financial plan will be different for
different individuals.
To start with, it would make sense to assess your finances, and take stock of what you have.
Make a list of your bank accounts and the various investments you have — be it fixed deposits,
mutual funds or direct equities. Then take stock of your expenses per month — how much do
you spend on rent or EMI, your kid’s education, your monthly expenditure on provisions and
so on. Try and understand where you stand with respect to your income and savings.

Once you have a grip on that, the next step would be to list down your goals. These could be
for the short term or long term. You could have time horizons of three years, five years, 10
years, 20 years and 30 years for these goals. Buying a car could be a short term goal, while
planning for your kids’ education 10 years down the line could be a long term goal. Ask
yourself when you want to retire, and how much savings do you want to have to meet any
emergency or unexpected loss of income.

Elucidate your financial goals; put a number to each goal. There are three parameters based
on which you can make your plan — time, money you can save, and the rate of return.
Financial planning helps you optimize across these three parameters. So, for example, if you
are conservative and are happy with a lower rate of return from debt, you need to increase the
time frame needed to reach your goal. However, if you are ready to take some risks in your
early stages of life and are ready to invest in equity, you may need only shorter time duration
to reach your goal. Based on your goals, and your risk-taking ability, you could create an
asset-allocation plan for yourself. Asset allocation means diversifying your money among
different types of investment categories and asset classes, such as stocks, bonds and cash. So,
if you are conservative and want lower risk, you could have higher exposure to debt. On the
other hand, if you are aggressive and can take higher risk, you could take a higher exposure
to equities.

Monitor Your Plan

It’s not enough to just have a financial plan. It is equally crucial to execute it and monitor it
on a regular basis. The starting point would be to invest in the various avenues as per your

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asset-allocation ratio. For example, if your financial plan merits 70% equity, 20% debt and
10% gold, then you have to invest in the relevant products in the desired ratio, to execute the
plan. Every six months or once a year, you need to review and re-balance your plan so that it
is in tune with the market conditions and in line with your goals .

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3.2: The Financial Planning Process
When you actually get right down to it, financial planning consists of a series of steps. This
section examines each of these steps in detail.

Step 1: Identify your current financial situation

Sit down with all the earning members of your family and gather all information about your
sources of income, debts, assets, liabilities, etc. This gives you a picture of your current
financial situation.

Financial Expected Cost Time Investment

Goals (at today’s prices in Frame Horizon
Rs)
Anil’s 0.5 Lakhs Next month Short-term
Computer
Sunita’s school 0.35 Lakhs 6 month Short-term
admission
Vacation 0.5 Lakhs 1-2 years Medium-term
Buying a 5 Lakhs 2-3 years Medium-term
second car
Anil’s 4 Lakhs 10-12 years Long-term
Education
sunita’s 4 Lakhs 12-15 years Long-term
education
Retirement 20 Lakhs 20-25 years Long-term

Step 2: Identify your goals

Ask each member to list what they think are current and future family goals. Prioritize each
goal by establishing consensus and put a time period against each. This exercise enables
recognition of short term and long term goals, and how much money you need for each.

Typically, any financial need or goal would translate into determining the tenure of your
investment (investment horizon). All investment needs and goals can therefore be translated
into short-term (less than 1 year), medium-term (more than 1 year) and long-term (more than
5 years). Here is an example of the financial goal of a typical household (a couple with two
children).

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Step 3: Identify financial gaps
Once you know where you stand financially, and where you want to be, i.e., how much you
have or can expect regular sources of income to generate, and how much you need to fulfil
various goals.
A simple calculation gives you an idea of the shortfall. This is important, because, identifying
the right investments to cover the shortfall depends on you quantifying the income from your
investments.

Step 4: Prepare your personal financial plan

Now review various investment options such as stocks, mutual funds, debt instruments such
as PPF, bonds, fixed deposits, gilt funds, etc.(which are explained below in detail) and identify
which instrument(s) or a combination thereof best suits your needs. The time frame for your
investment must correspond with the time period for your goals.

Step 5: Implement your financial plan

It’s now time to put things into action. Gather necessary documents, open necessary bank, d-
mat, trading accounts, liaise with brokers and get started. Most importantly, start investing
and stick to your plan.

Step 6: Periodically review your plan

Financial planning is not a one-time activity. A successful plan needs serious commitment
and periodical review (once in six months, or at a major event such as birth, death,
inheritance). You should be prepared to make minor or major revisions to your current
financial situation, goals and investment time frame based on a review of the performance of
your investments.
Financially challenged individuals who feel this is just beyond them, can of course always
consult professional financial planners, who takes one through the whole process. Being a
long term commitment, financial planning goes on until one meets his last goal. It is also a
personal decision, which implies that a person must select someone who he is comfortable
with, and can build a long term relationship that is mutually beneficial.

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3.3: Features of a good financial plan

How do you evaluate the quality and effectiveness of your financial plan? Here’s a checklist
you can use.

• Does it indicate your current financial situation?

• Does it list out all your goals in measurable terms?

If professional help is sought, your financial planner will ensure that your financial plan also
contains the following:

List of possible risks and a risk management plan.

• Expected returns from each investment.

• A mapping between the investments and goals.
• Details of one time and recurring fees charged by him.

3.4: Financial Planner

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Recently, a new breed of professionals has emerged who are making financial plans for
everyone and not restricting themselves to investment planning. A financial plan includes
planning for your taxes, retirement, kids’ education and marriage, buying a home, estate
planning or any other goals you may have. This new breed of professionals, known as
financial planners, writes a plan for you with all your goals specifically laid down and then
provides you with a road map on how to achieve these goals. They always give you a
holistic account of all your finances, taking into account all your assets and liabilities,
besides taking care of all the risks associated with you and your family and also the assets
owned by you. These financial planners will first collect all the data related to your finances
and the goals you have for future. These goals may be anything ranging from buying a
home, to planning for your child’s education, to going on a vacation. After this exercise of
data collection, the financial planner will analyze your goals and accordingly write a
financial plan for you. This financial plan will carry recommendations you need to follow as
they will help you achieve all the goals. These financial planners may charge professional
fees for making this plan for you. You will find various planners who can do this job for
you. But how to choose a financial planner who can handle your finances in the best
possible way for you below are the pointers you can keep in mind while scouting for a
professional who can write a complete financial plan for you.

1. The planner should start by collecting data relating to your finances, analyze your goals
and then recommend through a written financial plan and not just recommend a plan to you
without understanding either your finances or your goals. Your financial planner should
provide you with a holistic picture of your personal finances and provide you with a road
map for your finances rather than just trying to sell your products.

2. Ideally, you should always go for a fee only financial planner. This will ensure that the
planner doesn’t have any interest in selling any particular product along with the plan.
Along with that, this will also make sure that the recommendations provided to you in the
plan are completely unbiased and to your benefit. A fee-only financial planner will disclose
his fees upfront.

3. The financial planner should analyze all your goals and take a holistic picture of your
finances. Once the analysis is done, he should draw out an asset-allocation plan for your

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goals. All the product recommendations should follow the asset allocation suggested. The
financial plan may or may not carry any product recommendation. In case the plan is
carrying product recommendations, then be sure that you have an option of buying the
product from any other broker or distributor.

4. The financial planner should be well qualified to take care of all the decisions concerning
your money. You must verify if your planner holds professional degrees like a certified
financial planner (CFP) qualification or chartered accountancy and has specialized in
financial planning. Both knowledge and qualifications will build up your confidence in the
financial planner and will assure you of good management of your study.

5. If, your financial planner is suggesting you to buy products like a traditional insurance
policy, then be sure that he is just trying to make money for himself through commissions for
himself or some of his associates. Stay away from a financial planner who suggests you to
buy such dead products, which cannot be justifiably recommended by any financial planner.

6. Do some research on your planner and his reputation in the market? You can go on Google
and search for his/her name. A financial planner with good reputation will always be very
popular with the media and you will find enough to read about them over the internet.

7. Stay away from a financial planner who starts off with advising you a product without
analyzing all your goals. Most importantly, go with your gut feeling after the first meeting.

3.5: Types of Risks in Financial Planning

Risk and returns go hand in hand. Higher the risk, higher is the possibility of earning a good
return. Thus, it follows that all types of investment have some form of risk attached to it.

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Theoretically, even 'safe' investments (such as bank deposits) are not without some element
of risk. Broadly, here are the various types of risks that you might have to face as an investor.

1. Inflation Risk
• Rising prices cause lost buying power
• Decide whether to buy something now or later. If you buy later, you may have to pay
more.

2. Interest Rate Risk

• Changing interest rates affect your costs (when you borrow) and your benefits (when
you save or invest).
• Borrowing at a low interest rate when interest rates are rising can be to your advantage.
But if you save when interest rates are dropping, you will earn a lower return with a
six-month savings certificate than with a certificate having a longer maturity.

3. Income Risk
• The loss of a job could be the result of such things as changes in consumer spending.
• Individuals who face the risk of unemployment need to save while employed or
acquire skills they can use to obtain a different type of work.

4. Personal Risk
• Many factors create a less than desirable situation. Purchasing a certain brand or from
a certain store may create the risk of having to obtain repairs at an inconvenient
location.
• Personal risk may also take the form of the health risks, safety risks, or additional costs
associated with various purchases or financial decisions.

5. Liquidity Risk
• Some savings and investments have potential for higher earnings. However, they may
be more difficult to convert to cash or to sell without significant loss in value.

3.6: The Financial Planning Flow Chart

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Once financial goals have been set, certain aspects that must be considered are:

1. Expenditure Budgeting:
Budgets are detailed projections of income and expenses over a specified period of time.
It requires a prediction of one's needs at various points. To ensure a proper expenditure
budgeting, ways of increasing income and reducing unnecessary expenses must be
identified.

2. Income:
Income would refer to any amount of money earned.

3. Tax Planning:
Taxes exert an enormous impact on one's personal finances. It reduces cash flow,
influences investment decisions made, affects the way borrowing is done, the type of life
insurance bought and the method of saving for retirement. An effective tax planning
would help one keep the money earned. By taking maximum advantage of tax saving
opportunities and by adopting clearly-defined tax plans, will greatly increase the speed
with which financial goals are achieved. From these 3 aspects, relevant information can

24
 be gathered and each data can be individually analyzed before a proper financial plan is
determined.

4. Saving:
Based on the income earned the amount for budgeting and taxation can be determined
and allocated accordingly. The amount left over from these would be the saving. There
are various savings and investment tools that can utilize in order to save, create and invest
money so as to ultimately achieve financial independence.

CAPTER4: INVESTMENT STRATEGIES

25
You can make your own investment picking approach or adopt one after consulting financial experts
or investment advisors. Whatever method you use, keep in mind the importance of diversification, or
variety in your investment portfolio and the need for a strategy, or a plan, to guide your choices.

4.1: Investment Approaches

The options you choose to put your money in, reflect the investment strategy you are using -
whether you realize it or not. Most people adopt the following approaches:

Conservative - these investors take only limited risk by concentrating on secure, fixed-
income investments etc.

Moderate - Such Investors take moderate risk by investing in mutual funds, bonds, select
blue chip equity shares etc.

Aggressive - These are investors who take major risk on investments in order to have high
(above-average) returns like speculative or unpredictable equity shares, etc.
The investment approach of an investor is directly linked to his or her ability to shoulder
risk. The ability to take risks depends largely on personal circumstances and factors like age,
past experiences with investing, level of responsibility, etc.

26
 4.2: Various Financial Instruments
A financial instrument is either cash; evidence of an ownership interest in an entity; or a
contractual right to receive, or deliver, cash or another financial instrument. Financial
instruments can be categorized by form depending on whether they are cash instruments or
derivative instruments:

• Cash instruments are financial instruments whose value is determined directly by markets.
They can be divided into securities, which are readily transferable, and other cash
instruments such as loans and deposits, where both borrower and lender have to agree on a
transfer.

• Derivative instruments are financial instruments which derive their value from the value
and characteristics of one or more underlying assets. They can be divided into exchange-
traded derivatives and over-the-counter (OTC) derivatives.

Alternatively, financial instruments can be categorized by "asset class" depending on

whether they are equity based (reflecting ownership of the issuing entity) or debt based
(reflecting a loan the investor has made to the issuing entity). If it is debt, it can be further
categorized into short term (less than one year) or long term.

Equity
The market in which shares are issued and traded, either through exchanges or over-the-
counter markets. Also known as the stock market, it is one of the most vital areas of a
market economy because it gives companies access to capital and investors a slice of
ownership in a company with the potential to realize gains based on its future performance.
This market can be split into two main sectors: the primary and secondary market. The
primary market is where new issues are first offered. Any subsequent trading takes place in
the secondary market.

ETF:
A security that tracks an index, a commodity or a basket of assets like an index fund, but
trades like a stock on an exchange. ETFs experience price changes throughout the day as
they are bought and sold. Because it trades like a stock, an ETF does not have its net asset
value (NAV) calculated every day like a mutual fund does. By owning an ETF, you get the

27
diversification of an index fund as well as the ability to sell short, buy on margin and
purchase as little as one share. Another advantage is that the expense ratios for most ETFs
are lower than those of the average mutual fund. When buying and selling ETFs, you have
to pay the same commission to your broker that you'd pay on any regular order.

Mutual Funds:
A mutual fund is just the connecting bridge or a financial intermediary that allows a group of
investors to pool their money together with a predetermined investment objective. The mutual fund
will have a fund manager who is responsible for investing the gathered money into specific
securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of
the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to others they are
very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund,
investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on
their own. But the biggest advantage to mutual funds is diversification, by minimizing risk &
maximizing returns.

Debt:
Following are the instruments in Debt market:

Issuer Instrument Maturity Investors

Central Government Dated Securities 2-30 years RBI, Banks,

Insurance
Companies,
Provident Funds,
Mutual Funds, PDs,
Individuals
Central Government T-Bills 91/182/364 days RBI, Banks,
Insurance
Companies,
Provident Funds,
Mutual Funds, PDs,
Individuals

28
State Government Dated Securities 5-13 years RBI, Banks,
Insurance
Companies,
Provident Funds,
Mutual Funds, PDs,
Individuals
PSUs Bonds, Structured 5-10 years Banks, Insurance
Obligations Companies,
Corporate, Provident
Funds, Mutual
Funds, Individuals
Corporate Debentures 1-12 years Banks, Mutual
Funds, Individuals,
Corporate
Corporate, PDs Commercial Paper 7 days to 1 year Banks, Corporate,
Financial
Institutions, Mutual
Funds, Individuals,
FIIs
Scheduled Certificates of 7 days to 1 year Banks,
Commercial Banks Deposits (CDs) Corporations,
Individuals,
Companies, Trusts,
Funds, Associations,
FIs, NRIs
Financial Certificates of 1 year to 3 years Banks,
Institutions Deposits (CDs) Corporations,
Individuals,
Companies, Trusts,
Funds, Associations,
FIs, NRIs
Scheduled Bank Bonds 1-10 years Corporations,
Commercial Banks Individuals,

29
 Companies, Trusts,
Funds, Associations,
FIs, NRIs
Municipal Municipal Bonds 0-7 years Banks,
Corporation Corporations,
Individuals,
Companies, Trusts,
Funds, Associations,
FIs, NRIs

4.3: Cash Equivalents (Money Market Instruments)

The money market is the arena in which financial, nonfinancial, and banking institutions
make available to a broad range of creditors, borrowers and investors, the opportunity to buy
and sell, on a wholesale basis, large volumes of bills, notes, and other forms of short-term
credit. These instruments have maturities ranging from one day to one year and are
extremely liquid. Consequently, they are considered to be near-cash equivalents, hence the
name money market instruments.

The suppliers of funds for money market instruments are institutions and individuals with a
preference for the highest liquidity and the lowest risk. Often, money market instruments
are a parking place for temporary excess cash of investors and corporations. Interest rates
on money market instruments are typically quoted on a bank discount basis. These include
debt instruments for a period less than a year. Some of the instruments in money market
include:

1. Treasury Bills
2. Certificates of Deposits
3. Commercial Papers
4. Bankers Acceptance
5. To Sum Up

30
 Asset Instruments Risk
Classes
Cash Savings deposits in a bank, Liquid Low
Mutual funds
Debt GOI Relief Bonds, Public Provident Low to Medium, depending
Fund, National Savings Certificate, on the type of issuer. In case
Company Fixed Deposits, Debt-based the issuer is Govt, the risk of
Mutual funds ,Debentures/Bonds default is negligible
Equity Equity-based Mutual Funds High
Stocks/shares issued by various
companies

Others:

Insurance:
A contract (policy) in which an individual or entity receives financial protection or
reimbursement against losses from an insurance company. The company pools clients' risks
to make payments more affordable for the insured.

When shopping around for an insurance policy, look for the best priced package that is right
for you - prices can vary from one insurance company to the next. And make sure you know
what you want. Some individuals, for example, prefer 24-hour claims service or face-to-face
contact with an insurance representative. Also consider the claims settlement process, the
amount of the deductible and the extent of the replacement coverage. Insurance companies
and the policies they offer are not all the same, so think about more than just the price.
For example, Health Insurance, Property Insurance, Auto Insurance, Life Insurance, Car
Insurance, etc.

31
4.4: Tax Planning
Proper tax planning is a basic duty of every person which should be carried out religiously.
Basically, there are three steps in tax planning exercise. They are as follows:
Calculate your taxable income under all heads i.e. Income from Salary, House Property,
Business & Profession, Capital Gains and Income from other Sources.

Calculate tax payable on gross taxable income for whole financial year (i.e. from 1st April
to 31st March) using a simple tax rate table, given on next page.
After you have calculated the amount of your tax liability, you have two options to choose
from:

A) Pay your taxes

B) Minimize the amount of tax you pay with prudent tax planning.

Most people rightly choose Option 'B'. Here you have to compare the advantages of tax
saving schemes and depending upon your age, social liabilities, tax slabs and personal
preferences, decide upon a right mix of investments, which shall reduce your tax liability to
zero or the minimum possible.

Every citizen has a fundamental right to avail all the tax incentives provided by the
Government. Therefore, through prudent tax planning not only income-tax liability is
reduced but also a better future is ensured due to compulsory savings in highly safe
Government schemes. We sincerely advise all our readers and clients to plan their
investments in such a way, that the post-tax yield is the highest possible keeping in view the
basic parameters of safety and liquidity.

First, let's start by assessing your income tax liability. Once you have identified your tax
liability, you can then create the right plan. Please note that this applies only to salaried
individuals.

Following rates are applicable for computing tax liability for the current Financial Year i.e.
April 1, 2017 to March 31, 2018 (Assessment year 2017-2018). Our endeavour is to present
the complex provisions of the Income Tax Act in a simplified manner, which could be
understood by a common investor as well as by a layman.

32
For other Resident Individuals below 60 years of age and HUFs whose net taxable income is
10, 00, 000 Rs.

Income Tax Slab (in Rs.) Tax

0 to 2,50,000 No Tax
2,50,001 To 5,00,000 10%
5,00,001 To 10,00,000 20%
Above 10,00,001 30%

For other Resident Individuals above 60 years but less than 80 years of age and HUFs
whose net taxable income is 10, 00, 000 Rs.

Income Tax Slab (in Rs.) Tax

0 to 3,00,000 No Tax
3,00,001 To 5,00,000 10%
5,00,001 To 10,00,000 20%
Above 10,00,001 30%

For other Resident Individuals above 80 years but of age and HUFs whose net taxable
income is 10, 00, 000 Rs.

Income Tax Slab (in Rs.) Tax

0 to 5,00,000 No Tax
5,00,001 To 10,00,000 20%
Above 10,00,000 30%

The rules for "Senior Citizen" are the same as for 'Men' as well as 'Women'. Any person
who turns 65 on any day prior to or on March 31, 2010 will be treated as a senior citizen.

Filing of Income Tax Return

Filing of income tax return is compulsory for all individuals whose gross annual income
exceeds the maximum amount which is not chargeable to income tax i.e. Rs. 1, 90,000 for
Resident Women, Rs. 2, 40,000 for Senior Citizens and Rs. 1,60,000 for other individuals
and HUFs. The last date of filing income tax return is July 31, in case of individuals who are
not covered in point 3 below. If the income includes business or professional income
requiring tax audit (turnover Rs. 40 lakhs), the last date for filing the return is September 30.
The penalty for non-filing of income tax return is Rs. 5000 (after assessment year).

33
Tax Saving
After assessing your tax liability, the next step is tax planning. It involves selecting the right
tax saving instruments and making investments accordingly.

4.5 : Deductions from Taxable Income:

Deduction under section 80C

What is Section 80C?
Under section 80C of the Income Tax Act, certain investments are deductible (up to a
maximum of Rs 1 lakh) from gross total income. This tax exemption is available across
individual tax slabs. If you earn Rs 4 lakh per annum and make investments of Rs 1 lakh in
80c instruments then the taxable amount will be Rs 3 lakh. It is not at all complicated and the
following chart simplifies even more.

Fixed Income instruments, which offer fixed returns, are suitable for risk adverse investors
who want to protect their investment from the uncertainties of the market. All these
instruments are backed by the Government and hence they are risk free. But the returns may
just beat the inflation and you should not expect any meaningful appreciation in investments.
Per annum returns will vary from 6% to 10% depending upon the instrument you choose.

34
Market Linked: Market linked products are ELSS (Equity Linked Saving Scheme) and
ULIPs (Unit Linked Insurance Plan). These instruments invest the money in equities (Except
some debt based ULIPs) and hence there is an inherent market risk. However it has been seen
that over a long period return from equities beat inflation by a comfortable margin and create
wealth for the investor.

ELSS is similar to mutual fund except that it has a lock in period of 3 years. The money is
invested into diversified stocks by a fund manager/AMC. On the other hand ULIPs are a form
of life insurance where a part of the premium is invested into equity or debt market (or
combination of two). ULIPs usually have longer lock-in periods.

ELSS: ELSS has some advantages over other investments and people with moderate to high
risk appetite should consider them seriously. Some key features of ELSS are:
· Lock-in period of 3 years.
· SIP (Systematic Investment Planning) available
· Diversified equity investments
· Different funds for different risk profiles in terms of exposure to large cap, mid cap and
small cap
· Dividend paid out is tax exempt
· At maturity the proceeds are exempt from long term capital gains tax

To sum up
Section 80C benefit has been provided to encourage long term savings and investments. You
should choose a combination of fixed income and market linked investments depending on
your age and risk profile. For example if you are in your 20s, give a higher allocation to ELSS
whereas if you are nearing retirement, concentrate more on fixed income investments.

But remember that Investment is to be done keeping your overall financial situation and future
goals. Tax advantage is just an add-on benefit. Never make investments just for saving tax.

Deduction under section 80D

35
Under this section, deduction of up to Rs 40,000 can be claimed in respect of premium paid
by cheque towards health insurance policy of various General Insurance companies like
Royal Sundaram Health Shield Gold, Reliance Health wise etc. Such premium can be paid
towards health insurance of spouse, dependent parents as well as dependent children as per
following table:

On whose life health Individual taxpayer, Additional Deduction Total

Insurance Policy is his/her spouse, and for parents of the
taken dependent children Individual whether
Rs. dependent or not
Rs.
General Deduction 15,000 15,000 30,000
Additional Deduction if 5,000 5,000 10,000
one of the insured is
Senior Citizen
Total 20,000 20,000 40,000

Accordingly a person who is falls/in the 30% tax bracket can save income tax up to Rs
4,635 (or Rs. 5099 if the annual income exceeds Rs 10,00,000) by paying Rs 15,000 as
premium for "Mediclaim" policy in a year.
Deduction under section 24(b)

Under this section, interest on borrowed capital for the purpose of house purchase or
construction is deductible from taxable income up to Rs. 1,50,000 with some conditions to
be fulfilled.

36
4.7: Retirement Planning:
Everyone wants to have a comfortable retirement, but without adequate planning it probably
won't happen. People are living longer than ever before, which is obviously good news, but
that means retirement is becoming more expensive.

Some like it. Some don't. But retirement is a reality for every working person. Most young
people today think of retirement as a distant reality. However, it is important to plan for
your life post-retirement if you wish to retain your financial independence and maintain a
comfortable standard of living even when you are no longer earning.
In simple words you need retirement planning. This is extremely important, because,
unlike developed nations, India does not have a social security net. Also the fact that though
longevity has increased, the number of working years haven't, makes retirement planning
empirical.

Retirement Planning Services:

Computing that amount that would be required post-retirement. This is done after taking
inflation and time value of money into account.
Building your Retirement Corpus using Systematic Investment Plans (SIPs) and other long-
term growth orient products.
Ensuring adequate post-retirement income through safe investments.
Retirement should be the best period of your life, when you can literally sit back and relax
or enjoy your life by reaping benefits of what you earn in so many years of hard work. But it
is easier said than done. To achieve a hassle-free retired life, you need to make prudent
investment decisions during your working life, thus putting your hard-earned money to
work for you in future.

Retire and Prosper

In simple words, retirement planning means making sure you will have enough money to
live on after retiring from work. Retirement should be the best period of your life, when you
can literally sit back and relax or enjoy your life by reaping benefits of what you earn in so
many years of hard work. But it is easier said than done. To achieve a hassle-free retired
life, you need to make prudent investment decisions during your working life, thus putting
your hard-earned money to work for you in future.

37
Why is it important?
India, unlike other countries, does not have state-sponsored social security for the retired
people. And after several decades when pensions provided many people with a large chunk
of money they needed to live comfortably after they retired, things are changing. While you
may be entitled to a pension or income during retirement, in the new economic era, you are
increasingly likely to be responsible for providing for your own needs.
Although the compulsory savings in provident fund through both employee and employer
contributions should offer some cushion, it may not be enough to support you throughout
your retirement. That is why retirement planning is extremely important for everyone.
There are many reasons for the working individuals to secure their future emergence of
nuclear families and its attendant insecurity, increasing uncertainties in personal and
professional life, the growing trends of seeking early retirement and rising health risks are
among few important risks. Besides falling interest rates and the sustained increase in the
cost of living make it a compelling case for individuals to plan their finances to fund their
retired life.

Planning for retirement is as important as planning your career and marriage. Life takes its
own course and from the poorest to the wealthiest, no one gets spared. "Everyone grows
older". We get older every day, without realizing. However, we assume that old age is never
going to touch us.

The future depends to a great extent on the choices you make today. Right decisions with
the help of proper planning, taken at the right time will assure smile and success at the time
of retirement.

People have different plans for retired life. For example you may think of retirement as a
time to relax, to laze around, to spend more time with family, travel or write a masterpiece.
Attaining financial independence after retirement will not be just a dream if the following
steps are followed with steady discipline, perseverance and if smart investment strategies.

38
Start saving early:

Nobody takes retirement seriously. But the fact is that even a small sum of money saved
regularly and invested regularly makes a big amount which will come in very handy after
retirement. One should not believe that after retirement, one can place all savings into
income generating investment and spend rest of life in happiness. If you don't plan early,
you could end up eroding your principal savings in order to supplement your monthly
income.

Retirement should be your top priority:

Retirement should be kept as a top priority because if one does not keep it at the top one might end
up depending on one's children, which probably no one would relish.

Create a Retirement Plan:

Develop a plan for saving based on your requirements at the time of retirement. The goals you keep
for saving depend on your lifestyle but you will need at least about 66% of your pre-retirement
income to maintain your standard of living when you stop working.

Understand your Pension Plan:

If your employer offers pension plan, understand carefully your benefit level, financial stability of
plan and the vesting period. Use retirement plans even if you already have enough money. With
retirement plans your money grows in a tax efficient manner and compounding interest over time
makes it one of the best investment options.

Balance your risk tolerance and your investment strategy:

Evaluate your risk profile and then balance your investment strategy to invest in various avenues to
get the most out of your retirement money keeping your risk profile unhampered.

Diversify your investments & allocate your assets carefully:

Depending on your work profile divide your savings into equity, bonds, Mutual Funds, and
other investment avenues. Don't invest too heavily in one sector or one company, since the risk
associated with putting all your eggs in one basket is indeed very high.

39
Save and Invest Regularly:
Saving and investing regularly makes a big difference at the time of retirement. Investing at regular
intervals builds your retirement fund over time and helps you to minimize risk and gives a tension
free retirement-a time to pursue your hobbies, fulfil your dreams and passions.

If you are in young, retirement may be the last thing on your mind. But if you think you have a long
way to go for to plan for retirement, think again. It is never too early to prepare for retirement,
especially if you want to maintain the same standard of living that you would have got
accustomed to by then.

Let us take a hypothetical example. Let's assume that you are a 35 year old, earning Rs.3
lakh per annum. Your salary grows at 5% per annum and you plan to retire after 25 years.
Under these circumstances, assuming your post-retirement requirement would be 60% of
your last annual income (Rs.10 lakh approx); you would need about Rs.6 lakh per annum
after retirement. To achieve this, you need a retirement corpus of Rs.75 lakh assuming you
earn a return of 5% per annum over a period of 20 years. To meet this goal, you would have
to invest more than Rs.9, 000 per month at 7% per annum for the next 25 years. Inflation
and tax implications have not been considered for simplicity.

Steps for making Retirement a Success:

People have different plans for retired life. For example you may think of retirement as a
time to relax, to laze around, to spend more time with family, travel or write a masterpiece.
Interest accrued in respect of NSC VIII issue. Attaining financial independence after
retirement will not be just a dream if the following steps are followed with steady discipline,
perseverance and if smart investment strategies.

Start saving early:

Nobody takes retirement seriously. But the fact is that even a small sum of money saved
regularly and invested regularly makes a big amount which will come in very handy after
retirement. One should not believe that after retirement, one can place all savings into
income generating investments and spend rest of life in happiness. If you don't plan early,
you count end up eroding your principal savings in order to supplement your monthly
income. The key to a financially independent future is "sooner the better". Cautious
investors believe in this principal and plan their retirement accordingly. They not only save,

40
they save early and regularly. . The catch is to make the power of compounding work in
one's benefit.

Retirement should be your top priority:

Retirement should be kept as a top priority because if one does not keep it at the top one
might end up depending on one's children, which probably no one would relish.

Create a Retirement Plan:

Develop a plan for saving, based on your requirements at the time of retirement. The goals
you keep for saving depend on your lifestyle but you will need at least about 66% of your
pre-retirement income to maintain your standard of living when you stop working.

Understand your pension plan:

If your employer offers pension plan, understand carefully your benefit level, financial
stability of plan and the vesting period. Use retirement plans even if you already have
enough money.
With retirement plans your money grows in a tax efficient manner and compounding
interest over time makes it one of the best investment options.

Balance your risk tolerance and your investment strategy:

Evaluate your risk profile and then balance your investment strategy to invest in various
avenues to get the most out of your retirement money keeping your risk profile unhampered.

Diversify your investments & allocate your assets carefully:

Depending on your work profile divide your savings into equity, bonds, Mutual Funds, and
other investment avenues. Don't invest too heavily in one sector or one company, since the
risk associated with putting all your eggs in one basket is indeed very high.

Save and Invest Regularly:

Saving and investing regularly makes a big difference at the time of retirement. Investing at
regular intervals builds your retirement fund over time and helps you to minimize risk and
gives a tension free retirement-a time to pursue your hobbies, fulfil your dreams and
passions.

41
Chapter 5: FINANCIAL PLANNING AMONG RESPONDENT

Q.1. Do you go for investment?

Go for investment 73 Respondents

Don’t go for investment 27 Respondents

investment

27%

yes

no

73%

INTERPRETATION:

According to the respondents 73% think that they go for investment and 27% respondent
are not go for investment because of low income, lack of standard of living , lack of
knowledge and they are not having any goals or aims.

Q.2. Are you aware about financial planning?

Aware 70 Respondent
Not aware 30 Respondent

42
 Awarwness

30%
Yes
No
70%

INTERPRETATION:

According to the respondents 70% think that they are aware about financial planning and
20% respondent are not aware about financial planning.

Q.3.Finanacial planning is useful or not?

Useful 80 respondent
Not useful 20 respondent

43
 Useful

20%

Yes
No

80%

INTERPRETATION:

According to the respondents 80% think that financial planning is useful for investment and
20% respondent think that financial planning is not useful for investment.

Q.4. Employment Details

Private sector 60 Respondent

Government sector 25 Respondent
Self employed 10 Respondent
others 5 Respondent

44
 employment details

5%
10%

private sector
government sector

25% self emplyed

60% others

INTERPRETATION:

According to the respondents 60% are work in private sector, 25% are work in government
sector, 10% are self employed respondent and 5% workers are work in others. Therefore
private sector employee saves more for financial planning.

Q.5.dependent details

Dependent 1-3 65 Respondent

Dependent 3-5 25 Respondent
Dependent 5-7 10 Respondent
Dependent 7-8 5 Respondent

45
 Dependent details

5%
10%
1 to 3
3 to 5
20% 5 to 7
65% 7 to 8

INTERPRETATION:

According to the responses number of 1 to 3 dependent on investor is 65%,,3 to5

dependent on investor 20%, 5 to 7 dependent on investor is 10% and remaining 5%
investors dependent is 7 to 8. When number of dependent is more than 3 people then they
required fewer saving as compared to the range of dependent is 6 to 7.

Q.6. Income Details

Below Rs. 5 lakhs 5 Respondent

Between Rs.5 lakhs and 7.5 lakhs 11 Respondent
Between Rs.7.5 lakhs and 10 lakhs 17 Respondent
Above Rs. 10 lakhs 67 Respondent

46
 income details

5%
11% Below Rs. 5 Lakh

Between Rs. 5 Lakh and Rs. 7.5

Lakh
17%
Between Rs. 7.5 Lakh and Rs. 10
Lakh
67% Above Rs. 10 Lakh

INTERPRETATION

According to the responses 67% of the respondents have a annual income within RS above
10,00,000, 17% of the respondents have a annual income of RS 7,50,000-10,00,000, 11%
of the respondents have a annual income of RS 5,00,000-7,50,000, and 5% of the
respondents have a annual income below 5,00,000.

Q.7. Liabilities

Housing loan 40 Respondent

Car/two wheeler loan 20 Respondent
Personal/ education loan 25 Respondent
Marriage / hospitalization loan 15 Respondent

47
 loans

15%

housing loan
40%
car/two wheeler loan
25%
presonal/education loan
marraige/hospitalization loan

20%

INTERPRETATION
According to the responses 15% of the respondents having a marriage/ hospitalization loans,
20% of the respondents having a car or two wheeler loans, 25% of the respondents having a
personal/education loans , and 40% of the respondents having a housing loans.

Q.8. Reasons of financial planning?

Family Protection 30 Respondent

Retirement 25 Respondent
Emergency 25 Respondent
Standard of living 20 Respondent

48
 Reasons

20%
30%
Family protection
Retiremet
emergency
25% standard of living

25%

INTERPRETATION

According to the responses 30% of the respondents reason of financial planning is family
protection, 25% of the respondents reason of financial planning is retirement, 25% of the
respondents reason of financial planning is emergency, and another 20% of the respondents
reason of financial planning for maintain standard of living.

Q.9. which are the primary source of your knowledge about financial
planning for saving in future?

Internet 70 Respondent
Newspaper 17 Respondent
Television 5 Respondent
Friends 8 Respondent

49
 source of informations

8%
5%

17%
Internet
Newspaper
Television
Friends
70%

INTERPRETATION:

According to the responses, 70% of the respondents are aware about mutual funds as an
investment option through internet, 8% of the respondents are aware about mutual funds as
an investment option through friends, 5% of the respondents are aware about mutual funds
as an investment option through television and 17% of the respondents are aware about
mutual funds as an investment option through newspaper.

Q.10. where would you invest your retirement corpus accumulated?

Fixed deposits 35 Respondent

Government bonds 30 Respondent
Mutual funds 20 Respondent
Pension funds 15 Respondent

50
 Types of investment

15%

fixed deposite
35%
Government bonds
20%
mutual funds
pension funds

30%

INTERPRETATION:

According to the responses, 35% of the respondents prefer fixed deposits as a safe
investment option, 30% respondents prefer government bonds as a safe investment option,
while 20% of the respondents prefer mutual funds and 9% respondents prefer others pension
as a safe investment option.

Q.11. what percentage of your monthly salary do you save?

Less than 20% 70 Respondent

Between 20%-35% 15 Respondent
Between 35%-50% 10 Respondent
Over 50% 5 Respondent

51
 Savings

5%
10%

Less than 20%

15% Between 20% - 35%

Between 35% - 50%
Over 50%
70%

INTERPRETATION:

According to the responses, 70% of the respondents prefer to save less than 20% of basic
salary, 15% of the respondents prefer to save between20%-35% of basic salary, 10% of the
respondents prefer to save between 35%-50% of basic salary and 5% of the respondents
prefer to save over 50% of basic salary.

Q.12. what amount of pension would you need after retirement?

Equal to my current salary 50 Respondent

Equal to 50% of my current salary 20 Respondent
Equal to my current household expenses 20 Respondent
Equal to 80% of my current household 10 Respondent
expenses

52
 Pension (%)

10%
Equal to my current salary

Equal to 50% of my current salary

20%

50% Equal to my current household

expenses
Equal to 80% of my current
household expenses
20%

INTERPRETATION:

According to the responses, 50% respondents want returns equal to the current salary, 20%
respondents want return equal to the 50% of current salary, 20% of the respondents want
return equal to the current household expenses, while 10% of the respondents want return
equal to 80% of current household expenses.

Q.13. Do you fully utilize Income Tax benefits, e.g. deductions from
salary/income, rebates, etc.?

Tax benefit 90 Respondent

No tax benefit 10 Respondent

53
 Tax benefits

10%

YES

NO
90%

INTERPRETATION:

According to the responses, 90% of the respondents think that financial planning are a good
form of investment for tax saving while 10% of the respondents think that financial planning
are not a good form of investment for tax saving.

Q.14. When making various investments, which of the following

parameters you focus on?

Gross return 20 Respondent

After tax return 30 Respondent
After tax return minus inflation period 50 Respondent

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 Returns

20%
Gross returns

50% After tax returns

After tax returns minus

30% inflation for the period

INTERPRETATION:

According to the responses, 50% respondents want gross returns equal, 20% respondents want
after tax return, 30% of the respondents want after tax return minus inflation for the period.

CHAPTER 6: FINANCIAL PLANNING AT VARIOUS

STAGES:
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6.1: Ages 20s:
This focuses on your twenties, when you've gained the education and/or skills you need for
the career you've chosen, and you're earning money and learning how to handle it.

Why it’s important to start in Your Twenties?

There's no time like your twenties to start putting your money to work for you so that you
can achieve your financial goals throughout your life. Developing good spending and saving
habits, and learning to budget and invest during your twenties, can help you prevent
needless debt, put away money for the things that are important to you, and take advantage
of the power of compounding to amass a fortune for your future.

In fact, compounding of earnings is so powerful that those who start saving for retirement in
their twenties can amass large nest eggs with relatively little effort, as long as they invest
regularly.

For an example of the power of compounding, take a 25-year-old who invests $2,000 a year
for eight years and never invests an additional dollar after the age of 33. He or she will earn
more by the age of 65 than a 35-year-old who invests $2000 a year for 32 years, even
though the 35-year-old invests four times as much.

Identifying your short, medium, and long-term goals –

The first step in financial planning is to identify your goals. Your short-term goals (five
years or less) might include a wedding, a honeymoon, furniture, a new car, etc. Next, think
about medium-term goals, such as owning your own home and financing your kids' college
educations. Finally, list your long-term goals, such as retirement and travel.

Estimate how much money you'll need to meet each of your goals, and use an online
calculator to determine how much you need to save each month to reach that goal within
your timeframe.

Budgeting to meet your goals –

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While budgeting, set money aside to go towards your short-term, medium-term, and long-
term goals. Try not to sacrifice one for the other. Investing to meet your goals - It may be
wise to invest in Certificates of Deposit or Money Market Funds for your short-term goals,
and the stock market for your medium and long-term goals. Historically, the stock market
has out-performed any other type of investment over time, but it's not for the faint of heart.
Its volatility makes it a less than ideal investment for short-term funds, unless you have a
very high risk tolerance. Find out if your employer has a plan or other tax-deferred
retirement plan, and if so, take advantage of it. Your contributions will be made with pre-tax
money and taxes on earnings will be deferred until you withdraw them during retirement.
Even better, many employers will match all or part of your contribution, which results in
huge gains for you.

6.2: Ages 30s and 40s:

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Evaluate your progress and adjust accordingly - By the time you're in your 30s, you're
usually settled in a career, although you'll probably change jobs a number of times before
your retirement. You're likely to have a family of your own, with all the accompanying
expenses such as various activities or lessons for your kids, family vacations, saving for
your kids' college educations, buying a new home, etc. You should have an emergency fund
equal to six to eight month’s worth of expenses as a financial safety net to protect your
assets in case of an illness, disability, job loss, or other unforeseen event.

Throughout your 30s and 40s, you should regularly evaluate your progress towards
achieving the medium- and long-term financial goals you set in your 20s. Make adjustments
to your spending, budgeting, and saving as needed to ensure that you stay on track. There
will be many demands on your income, but it's important to build your long-term
investments despite these immediate demands.

Saving for Your Kids' College Education - If you're saving for your kids' college
education, the earlier you start the less you'll have to save. Let the power of compounding
pay for a good size chunk of the expense by starting to put funds away when your kids are
very young.

Saving for Retirement –

Hopefully by the time you're in your 30s you're well-established in your employer's or other
retirement plan. Many experts recommend putting 10% of your income towards your
retirement, but this is an average. Depending on your income and fixed expenses, you may
not be able to contribute 10%. On the other hand, it may make sense for you to contribute
more than 10%. Take advantage of your employer's plan or other tax-deferred retirement
plan. Your contributions will be made with pre-tax money and taxes on earnings will be
deferred until you withdraw them during retirement. Even better, many employers will
match all or part of your contribution, which results in huge gains for you. If you change
jobs, don't make the mistake of taking possession of your employer’s plan investments. You
may be able to keep your funds in your employer's plan or roll them into a new employer's
plan. If not, you can always set up a bridge IRA specifically for this purpose. If you take
possession of the money rather than rolling it directly into another plan, your plan
administrator is required to withhold 20% for taxes and if you don't put the money

58
(including the withheld tax amount, which may be difficult for you to come up with on short
notice) into a qualified retirement plan or IRA within 60 days, you'll also have to pay a 10%
penalty on the total withdrawal. Your 40s is a good time to estimate how much income
you'll need to live on after retirement. Keep in mind that people are retiring earlier and
living longer, so you may need more money than you think. Will your mortgage be paid off
by then? If so, you may need considerably less income than you do now. Do you plan to buy
a vacation home or travel extensively? How much money will be required to do this? After
you retire, you may have to pay for your own health insurance, which can be very
expensive. Have you factored this into your estimates? By regularly reviewing your
spending, saving, and investing habits, you can keep on track for a secure financial future.

6.3: Ages 50s and 60s

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By the time you're in your 50s, your kids have probably left the nest and are supporting
themselves. You're probably at the highest income level of your career, and can really focus
now on building your retirement assets.

Take Stock of Where You Are –

To take stock of how you've done so far on planning for your retirement, first prepare a
realistic estimate of what your expenses are likely to be during retirement. While many experts
recommend using a percentage of your current income, this isn't a very accurate method
because it doesn't take into account the diversity in personal lifestyles and financial situations.
For a more accurate estimate, think about the lifestyle you plan to have during retirement.
Will you travel? Have a vacation home? Take up an expensive hobby? How much will it cost?
Do a projected budget, keeping in mind that some costs (such as health insurance) are likely
to increase, and some costs (such as your mortgage and costs associated with working) are
likely to decrease or go away altogether.

Determine if you’ll meet Your Goal or Fall Short –

Once you have a handle on your expected expenses, determine approximately how many your
assets will be worth at retirement. You can get a ballpark estimate by using one of the
retirement calculators available on the Internet.

Next, estimate how long your retirement assets are likely to last, considering your projected
expenses and income (don't forget Social Security), the size of your nest egg, the return you
expect to earn on your assets, and your life expectancy. Again, you can get a ballpark estimate
of how long your money is likely to last by using an online calculator, but it may be wise to
consult a financial planner for assistance with this important step. With the above information
in hand, you should have a pretty good idea of whether you can expect to meet your goal or
fall short. If possible, increase your retirement contributions to 15% or more of your income.

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Other Issues to Consider Now –
Your 50s is also a good time to evaluate the asset allocation of your portfolio. Are you being
too conservative by putting a large portion of your assets in fixed income investments? Are
you taking more risk than you're comfortable with by investing too heavily in stocks or mutual
funds? Other issues to consider at this time in your life include a review of your estate plan,
including a will, a durable power of attorney giving the person you designate the power to
make financial decisions in your behalf if you become unable to do so yourself, and a living
will outlining your wishes regarding lifesaving treatments in the case of serious illness or
injury. You would be wise to consult an attorney in developing these legal documents.

As You Enter Your 60s...

As you enter your 60s, continue to fine-tune your projections and your asset allocations.
Obtain an estimate of your Social Security benefits from the Social Security Administration
based on your expected retirement date. Benefits are reduced if you take early retirement.
Research your Medicare options and be sure to enrol by the time you reach age 65. If you
retire before the age of 65, be sure you have medical insurance to cover you until you're
eligible for Medicare.

Now is the time to start thinking about how you'll take your retirement assets. Will you
consolidate all of your investments for ease of recordkeeping? Will you take a lump sum
distribution or an annuity? Because the order in which you withdraw your funds (whether you
withdraw interest, dividends, or capital gains first) can have a significant impact on taxes, it
may be wise to consult a tax advisor before making this decision.

If you've planned wisely, you should be able to live comfortably through your golden years.
You've earned it.

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Live Case Study

To Start of Financial planning…

Surbhi Kapadia’s Profile:

Surbhi’s parents are working and independent. She has no responsibility from home. She stays alone
in the city of Mumbai. She plans to buy a house and a car after 5 years. Here is Surbhi’s profile:

Age 24 years

Qualification MCA

Monthly Salary Rs. 40,000

House Rent Rs. 10,000

Travelling & Communication Expenses Rs. 5,000

Food, Utilities, Entertainment and Other Rs. 15,000

Expenses
Savings Rs. 10,000

Keeping in mind the risk factor I. e. the risk she can take and the needs, following is the portfolio
suggested for her:

SIPs in Diversified Equity/ Tax savings Rs. 7,000 per month

Mutual Funds
Term Insurance & Health Insurance Rs. 1,000 per month*

Emergency Fund (invest in liquid fund, Rs. 2,000 per month

short-term income fund)

*Rs. 500 for a Rs. 50-lakh term cover and Rs. 500 for a health insurance of Rs. 5-lakh.

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CHAPTER 7: SUGGESTION AND CONCLUSION
Conclusion:

Financial literacy is an important predictor of financial planning in the developing countries

around the world. Indeed, even within the relatively homogenous Indian population, levels
of financial literacy vary greatly, and that financial literacy predicts financial planning.
From this empirical study it has been observed that women investors are more familiar and
have gained high financial literacy in compared to their male counter parts. Similarly, the
study reveals that young investors in the age category of 25-35 years are more interested in
investing in financial market products, than the adult investors in age grouping of 40 years
and above. The elaborate data analysis also reveals the fact that the urban households
inhabited in Coimbatore city, prefer to save or invest their money for meeting more of social
obligation like: wards marriage, self’s marriage, or for repaying debts etc. Moreover, the
study identified that households in the study region prefer highly liquid and safe mode of
saving & investment. The study results also concluded that there exist wide differences
between the saving/investment practices of households‟ and their satisfaction levels. Based
on the empirical findings of the study, it is apt to conclude that financial education is
increasingly important, and not just for investors. It is becoming essential for the average
family trying to decide how to balance its budget, buy a home, fund the children’s education
and ensures an income when the people retire. Of course people have always been
responsible for managing their own finances on a day to day basis – spend on a holiday or
save for new furniture; how much to put aside for a child’s education or to set them up in
life – but recent developments have made financial education and awareness increasingly
important for financial well-being. The household individuals must gain more financial
knowledge for the effective financial management and planning.

The Government of India, should educate the urban households about the importance of
financial literacy and planning because: the percentage of investors is nearly 20 in urban
areas while it is much lower (6 per cent) in rural India. The estimated number of investor
households in India is 24.5 million who constitute about 11 per cent of total households.
There is a significant magnitude of small savers among all households. Moreover,
households and individual investors supply a pool of capital that creates liquidity in the
market and make it dynamic. Thus, household income, its consumption and its distribution

63
are fundamental to any economic analysis. These determine the nature and rate of saving in
an economy which, in turn, implies the rate of economic growth.

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Suggestion:

Best Financial Planning

Choosing the Right Investment Options

The choice of the best investment options for you will depend on your personal circumstances
as well as general market conditions. For example, a good investment for a long-term
retirement plan may not be a good investment for higher education expenses. In most cases,
the right investment is a balance of three things: Liquidity, Safety and Return.

To a large extent, the choice of the right investment option will also depend upon your
financial goals. For example, if you want to invest for funding your vacation next year, don't
choose an investment vehicle that has a three-year lock-in. Similarly, if you want to invest for
your daughter's marriage after 10 years, don't invest in 1yr bonds for the next 10 years. Instead,
choose an option that matches your investment horizon.

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CHAPTER8: BIBLIOGRAPHY
1. Economic Times
• The CFP Board Centre for Financial Planning
• No loan waiver for big defaulters: Arun Jaitley
• What to do when you have doubts about your mutual fund investments: By
Kartik Swaminathan
• New Finance panel to study impact of GST on finances: N K Singh
2. www.fpanet.org
3. www.prudentcorporate.com
4. money.cnn.com
5. www.fool.com

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