Overview of Personal Finance Management of Money

Structure The importance of Personal Finance B. Cost of Loans C. Investing Options D. Magic of Compounding E. Rupee Cost Averaging

The importance of Personal Finance

B. Cost of Loans

C. Investing Options

D. Magic of Compounding

E. Rupee Cost Averaging

Why Personal Finance is difficult? Lack of proper information Use of Jargons and numbers What is the most surprising thing in the world was one of the questions, asks Yaksha in Mahabharata. Yudishthira answers that the most amazing thing is that even though every day one sees countless living beings that are old and dying but no one can imagine him/herself as old or taking that last journey!

Lack of proper information

Use of Jargons and numbers

What is the most surprising thing in the world was one of the questions, asks Yaksha in Mahabharata.

Yudishthira answers that the most amazing thing is that even though every day one sees countless living beings that are old and dying but no one can imagine him/herself as old or taking that last journey!

Investing Options Four Parameters of Investing Growth Liquidity Security Expenses

Four Parameters of Investing

Growth

Liquidity

Security

Expenses

Investing Options PPF NSC/KVP/Bonds ULIPs Mutual Funds Shares Real Estate Exchange Traded Funds

PPF

NSC/KVP/Bonds

ULIPs

Mutual Funds

Shares

Real Estate

Exchange Traded Funds

Starting Early Magic of Compounding : Starting with Rs 1000 and by investing Rs 1000 every month compounded at 10% amounts works out to Rs 78171 after 5 years. In 10 years it more than doubles to Rs 202457. The figures at the end of 15, 20, 25, 30 40, 50 years are Rs 402621, Rs 724986, Rs 1244159, Rs 2080292, Rs 5595607, Rs 1,47,13,428!!

Magic of Compounding :

Starting with Rs 1000 and by investing Rs 1000 every month compounded at 10% amounts works out to Rs 78171 after 5 years.

In 10 years it more than doubles to Rs 202457.

The figures at the end of 15, 20, 25, 30 40, 50 years are

Rs 402621,

Rs 724986,

Rs 1244159,

Rs 2080292,

Rs 5595607,

Rs 1,47,13,428!!

Investing Regularly Investing regularly can fetch you more shares of a stock through rupee cost averaging . In the example, when investing in lumpsum, the share price was Rs 20 -- meaning, you end up buying 500 shares. Instead, if one were to invest Rs 1,000 every month for 10 months, the total number of shares purchased adds up to 520, since these were bought at different price levels and the average cost of each share comes down to Rs 19.6.

Investing regularly can fetch you more shares of a stock through rupee cost averaging . In the example, when investing in lumpsum, the share price was Rs 20 -- meaning, you end up buying 500 shares.

Instead, if one were to invest Rs 1,000 every month for 10 months, the total number of shares purchased adds up to 520, since these were bought at different price levels and the average cost of each share comes down to Rs 19.6.

Example 520 19.6 10,000 Total 45 22 1000 10 56 18 1000 9 43 23 1000 8 63 16 1000 7 59 17 1000 6 63 16 1000 5 53 19 1000 4 42 24 1000 3 48 21 1000 2 50 20 1000 1 Shares purchased Price per share (Rs) Fixed amount invested (Rs) How it pans out Time (mths)

Cost of Loans If you take a loan for Rs. 100,000.00 for 150 months @ 15%, it will cost you Rs 1,479.55 a month. In taking out this loan, you'll pay a total of Rs. 121,932.27 in interest. The true cost of this loan is Rs. 221,932.27 Charges: Interest Charges Attractive Initial Rates for Personal Loans Late Charges Processing Fees

If you take a loan for Rs. 100,000.00 for 150 months @ 15%, it will cost you Rs 1,479.55 a month. In taking out this loan, you'll pay a total of Rs. 121,932.27 in interest. The true cost of this loan is Rs. 221,932.27

Charges:

Interest Charges

Attractive Initial Rates for Personal Loans

Late Charges

Processing Fees

Do’s and Dont’s of Loans Taking Loan for building assets (like buying a house) is OK But taking loans for daily expenses is NOT OK Compare the best available options before taking loan Try to avail Corporation’s loan facilities Avoid Personal Loans and high cost loans from moneylenders and private banks

Taking Loan for building assets (like buying a house) is OK

But taking loans for daily expenses is NOT OK

Compare the best available options before taking loan

Try to avail Corporation’s loan facilities

Avoid Personal Loans and high cost loans from moneylenders and private banks

Credit Cards Traps Beware of Attractive & Inviting Offers Very High Interest Rates: 2-3 % per month means 24-36% annual rates Hidden Charges Late payment Charges Cash Transaction Charges Recovery by Musclemen

Beware of Attractive & Inviting Offers

Very High Interest Rates: 2-3 % per month means 24-36% annual rates

Hidden Charges

Late payment Charges

Cash Transaction Charges

Recovery by Musclemen