Guidance on Personal Finance

8/9/2019 Guidance on Personal Finance

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February 17, 2010 1

Personal Finance

A presentation on

16th February 2010

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We must treasure the achievers of our

land because it's they who raise thesights of all the others.

Rightly quoted

You are here as you are Heroes The true achievers

Congratulations - You are Best of the BEST.

The NADT Brigade

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The Torch Bearers of the nation

The ones who take the Key Positions &

responsibilities to lead from the front

The Ones who would be able to guide others

You are

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When we step into our new roles, we face various

questions

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The most important being how to safeguard the

interests of ourselves and dear ones as also make

present life enjoyable

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THE CASH FLOW QUADRANT

Source: Rich Dad Poor Dad Robert T. Kayosaki

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E The Employee

Safe and secure job

Good Pay

Excellent benefits

Dislikes uncertainties

Employees can be the Presidents, CEO, COO

etc.

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S The Self Employed

I am my own boss

They do not want their income to be

dependent on others

They own their own job.

Motto: Do it yourself

Doctors, lawyers, hair stylists, shop keepers,

consultants etc.

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B The Business Owner

Opposites of S They are surrounded by smart people

from all the four quadrants i.e. E, S, B, I.

B loves delegating.

Motto: why do it yourself if you can hire

someone to do it for you.

Tatas, Birla, Ambani, Azim Premjee,

Narayan Murthy etc.

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I The Investor

Makes money with money

I quadrant is the play ground of the rich

The quadrant of rich people

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Rich V/S Middle Class Rich earns

30% from E or S

70% from I

Others earn

80% or more from

E and S

20% or less from I

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Definition: Investments

Use money in order to make more money.

Rs.1000/- should give you Rs.1000/- + X.

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Types of investments

Education Increases your income earning

potential

Loyalty and hard work Pension

Large families: children will take care of

parents

Pension Plans / Retirement Plans

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The I Quadrant Investment

The I quadrant focuses on investments

that generate income on ongoing basis

during your working years.

How much income you generate without

working for it.

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Types of Investments I

Insurance

Mutual Funds

Direct Equity

Real Estate

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Must haves

Personal Accident Policy (PA Policy)

Covers not only death but also temporary &

permanent disablement

(cost Rs 1,000 for cover of Rs 5.00 Lacs)

Mediclaim Insurance Policy

Covers all hospitalisation pertaining to accidental ornaturals . Benefit u/s 80 D

(Rs 5.00 Lacs cover for whole family @ Rs 15,000)

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LICs Health Plan (In addition to mediclaom)Benefit policy for long term carein case of hospitalisation:Hospital Cash Benefit, ICU Benefit MajorSurgical Benefit

Critical Illness Policy

Compensation payable to insured in casediagnosed as suffering from a critical illnessspecified in policy

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Public Provident Fund (PPF Account)One of the best options available in the

market as on today giving 8% tax free returns

Post Office SchemesMIS, RD, Sr. Citizen Scheme etc.

Bhavishya Nirman BondsAttractive return, better safety than FDs &

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Section I

Life Insurance

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Why Life Insurance???

Human Life Value Concept

When a child is born, a life is born

He acquires education andexperience

His knowledge andskill gives himearning power

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Human Life Value isEconomic Interpretation of Life Insurance

At any time the human life value in society is fargreater in magnitude than value of all property puttogether. The life values are the cause and creatorof property values

There are two types of Capitals

Human Capital Material Capital

There are two types of Economic Values

Life Value Property Value

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Family welfare economics

The second C

Consumptionof Income

The Third C

Continuationof Income

The Fourth C

Conservationof Income

The First C

Creation ofIncome

The second C

Consumptionof Income

The Third C

Continuationof Income

The Fourth C

Conservationof Income

The First C

Creation ofIncome

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Continuation of Income

Economic life Value

MI x 150

For Example : Your monthly income is Rs. 30,000/-.Then Your Economicallife value is Rs.45,00,000/-. Because in case of you death if your family can

deposit Rs. 45,00,000 in tax free interest @ 8% interest.

Your family shall be receiving Rs. 3,60,000/- p.a. Which means your familyshall continue to get the same Rs.30,000/- even after we are not there.

Therefore Adam Smith said we must make sufficient arrangement of funds

equivalent to our Economic Life Value from the very first day of earning. Buthow to do? Tax India


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What Life Insurance can do??

It is a bridge from where you are today financially, to whereyou would like to be in future.

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Need of Life Insurance

In Life Insurance, what we cover is not the loss oflife but the loss of income for the dependants

People dont really buy life insurance because theymight die. They buy it because someone they loveand care about will live.

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Most of us regret at the time of retirement

that we have not saved enough.

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Small savings today, give you dual advantage

Chase your passion

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29February 17, 2010

Section II

Mutual Funds

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What is a SIP?

An Example

Investing Rs 1,000 each month in a mutual fund

The investment is done at the applicable NAV of the

mutual fund on the date of investment

fixed

amountsat the

prevailingNAV

+ +at regular

intervals

A Systematic Investment Plan (SIP) is aninvestment strategy used in mutual fund

investing that allows investments of

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Regular InvestingA MUST

Using the concept of

Rupee CostAveraging

It may help

regular additionsto your investment

kitty

It helps you

average out your

investment cost

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Rupee Cost Averaging

Regular investing works on the principle of

rupee-cost averaging It means buying more units when the prices are

low and fewer units when the prices are high

This helps to average out your purchase price

Example:

Month Amount Invested (Rs .) Purchase Pr ice (Rs .) No. of Units Purchased

1 1,000 10 100

2 1,000 9 111.11

3 1,000 10 1004 1,000 11 90.9

Total Investment = Rs. 4,000

No. of units purchased = 402.01

Average cost per unit = Rs. 9.95 < 10

Equity investingis not about timing

the market but

time inthe market

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Advantages of SIP

Instillsdiscipline

forcedsaving

Helps avoidinvesting largesums in volatileand overheated

markets

Forces theinvestor to

commitinvestments in

any market

scenario

Allowsinvestments ofsmall amounts(as low as Rs

1000)

Easy tounderstandand

operate

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Want to be a Millionaire?

No. of

Years

Amount

(In Rs. Lacs)

No. of

Years

Amount

(In Rs. Lacs)

No. of

Years

Amount

(In Rs. Lacs)

1 0.32 11 7.34 21 32.91

2 0.69 12 8.68 22 37.78

3 1.11 13 10.19 23 43.314 1.58 14 11.92 24 49.62

5 2.12 15 13.89 25 56.79

6 2.73 16 16.13 26 64.95

7 3.43 17 18.68 27 74.23

8 4.23 18 21.58 28 84.809 5.14 19 24.88 29 96.83

10 6.17 20 28.64 30

110.52110.52

Lets say you invest Rs. 2500 per month how will your

money grow?

1

CRORE!!!

Assuming 13% CAGR and that investments are

made at the beginning of each monthAll figures cited in the illustration are notional

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Tiny drops of water make the mighty ocean

Remember the more you save makes a difference

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Section III

Home Loans

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Start young fulfill your desire

Create asset

Create your second income

Benefit u/s 24 on interest

Benefit u/s 80C principal repayment

Your dream homeHome loans

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A brief on important


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A brief on importantsections of Income Tax

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So many options

Why now?

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OH! I CANT INVEST NOW

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Thank You


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Thank You

Q & A
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