Your SlideShare is downloading. ×
Fundamental of-personal-finance-1229495983251410-1
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

Fundamental of-personal-finance-1229495983251410-1

23
views

Published on


0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
23
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. 1 Fundamentals of Personal Finance Participants - Team CTS Finerva Financial Wisdom 4 Young Indians
  • 2. FINERVA www.finerva.com 2 Learning Objectives 1. List the benefits of studying personal finance. 2. Summarize the key steps in successful personal financial engineering. 3. Understand the basic terms in personal finance 1. Assets Vs Liabilities 2. Savings Vs Investments 4. Understanding time value of money 5. Applying time value of money concept to 1. Wealth Creation 2. Retirement 3. Insurance
  • 3. FINERVA www.finerva.com 3 Financial Literacy Financial literacy is knowledge of...  Facts  Concepts  Principles  Technological tools ...fundamental to being smart about money.
  • 4. FINERVA www.finerva.com 4 Financial Responsibility Financial responsibility is being accountable for: Your financial decisions and Your own financial well-being. “If it is to be, it is up to me”
  • 5. FINERVA www.finerva.com 5 Personal Financial Engineering What is it? Personal Financial Engineering is the development and implementation and monitoring of long-term plans to achieve Financial Freedom. What are the steps in the financial engineering process?
  • 6. FINERVA www.finerva.com 6 Financial Planning Benefits  Financial planning helps you achieve:  Financial Success – achievement of financial aspirations.  Financial Security – being able to fulfill any needs and most wants.  Wealth – an abundance of money and other financial resources.  Financial Freedom – the state where work is an option, you choose. Not compelled to opt.
  • 7. FINERVA www.finerva.com 7 The Building Blocks of Financial Freedom
  • 8. FINERVA www.finerva.com 8 Important Personal Finance Terms Asset – is one that gives a positive cash flow Liability – is one that gives a negative cash flow Examples?
  • 9. FINERVA www.finerva.com 9 …Important Personal Finance Terms…  Inflation–Steady rise in the general level of prices (reduces purchasing power)  Deflation–Falling prices.  Examples?
  • 10. FINERVA www.finerva.com 10 …Important Personal Finance Terms Comparisio n Savings Investment Returns Low, Fixed, Less Risky Higher, Variable, Risky Types of Returns Cash Flow only (if any) Cash Flow and Capital Appreciation Term Short Term Long Term Purpose Festivities, Gifts, Small down-payments, Religious purpose Education, Marriage, Wealth creation, Large down-payments, Retirement Savings Vs Investment
  • 11. FINERVA www.finerva.com 11 Opportunity Costs and Trade- offs in Decision Making  Opportunity Cost – Value of the next best alternative that must be foregone.  Opportunity cost reflects the best alternative of what one could have done instead of choosing to spend, save, or invest money. Examples?  Trade-offs occur when you give up one thing for another.
  • 12. FINERVA www.finerva.com 12 The Time Value of Money in Financial Decision Making  The Time Value of Money compares:  value in the future of a Rupee received today (FV)  value today of a Rupee amount to be received in the future (PV)  Key factors: Time, Interest, Principal  Annuity - a series of payments/deposits
  • 13. FINERVA www.finerva.com 13 Compound Interest  Compound Interest – interest earned on interest.  Compounding – the process of earning compound interest – is the best way to to build wealth over time.
  • 14. FINERVA www.finerva.com 14 Calculating Future Values  Future Value (FV) – Value of an asset at the end of a particular time period.  Example: Wealth Creation ?
  • 15. FINERVA www.finerva.com 15 Easy Thumb Rule - The Rule of 72  Calculates the number of years it takes for principal to double  Years = 72 divided by interest rate.  Example: 72 divided by 8% = 9 years  Calculates the interest rate it takes for principal to double  Interest rate = 72 divided by number of years  Example: 72 divided by 10 years = 7.2%
  • 16. FINERVA www.finerva.com 16 Illustration: The Rule of 72
  • 17. FINERVA www.finerva.com 17 Future Value of an Annuity  What lump sum will be got over time if a series of deposits are made (assuming same amount is deposited each time)  Example: Power of Compounding: Kaun Banega Crorepathi?
  • 18. FINERVA www.finerva.com 18 Present Value of a Lump Sum  Present Value (PV) - Today’s value of an amount to be received at a future date.  Example: How much should I deposit?
  • 19. FINERVA www.finerva.com 19 Present Value of an Annuity  Present value of a stream of payments to be received in the future.  Example: Retirement Planning
  • 20. FINERVA www.finerva.com 20 Risk Management  Insurance helps to transfer risk at low cost  How much insurance do I need?  Milestone Planning  Income Replacement Method
  • 21. FINERVA www.finerva.com 21 Golden Rules of Personal Finance 1. “Pay yourself first” by spending less than you earn 2. Stay up-to-date about current economic conditions 3. Map your financial future by establishing goals and making realistic plans to achieve them 4. Insure your risks 5. Take advantage of tax benefits on investments 6. Develop expertise in financial matters 7. Remember that you are responsible for your own financial success.
  • 22. FINERVA www.finerva.com 22 Thank you Questions Session This training was delivered by FINERVA www.finerva.com