Personal Finance Workshop

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Personal Finance Workshop

  1. 1. Personal Finance Workshop A G S Infotech Hotel Fariyas, Lonavla 24 th June & 1 st July 2008
  2. 2. Agenda <ul><li>Introductions </li></ul><ul><li>Tools to Create Wealth </li></ul><ul><li>Budgeting to Create Surplus </li></ul>
  3. 3. Introduction <ul><li>Finerva </li></ul><ul><ul><li>Finerva = Finance + Minerva (Roman Goddess for Wisdom) </li></ul></ul><ul><ul><li>India’s First Company (also only one till now) dedicated to Personal Finance Education </li></ul></ul><ul><ul><li>3 core values: </li></ul></ul><ul><ul><ul><li>Simplifying Personal Finance </li></ul></ul></ul><ul><ul><ul><li>Make Meaning </li></ul></ul></ul><ul><ul><ul><li>Create Value </li></ul></ul></ul>
  4. 4. …Introduction <ul><li>Trainer – J.Karthikeyan </li></ul><ul><ul><li>Promoter Director of Finerva </li></ul></ul><ul><ul><li>BE, MBA, AFP </li></ul></ul><ul><ul><li>10 years experience in Manufacturing and Services </li></ul></ul><ul><ul><li>Over 3500 hours of training experience </li></ul></ul><ul><ul><li>Visiting Faculty in Anna University & Bharathiar University for MBA students </li></ul></ul>
  5. 5. Tools to Create Wealth <ul><li>a. Basics of Cash Flow </li></ul><ul><ul><li>Asset Vs Liability Chart </li></ul></ul><ul><ul><ul><li>Mark the table in your workbook appropriately </li></ul></ul></ul>
  6. 6. PAGE 5 WORKBOOK
  7. 7. Asset - Liability Cash Flows WORKBOOK PAGE 6
  8. 8. Applying Cash Flow to our lives <ul><li>Exchange of phones </li></ul><ul><li>Bike with high resale value </li></ul><ul><li>Having assets and heavy loans </li></ul><ul><li>House that we live in </li></ul><ul><li>Vehicle loans </li></ul><ul><li>Borrowing for tax saving investment </li></ul>
  9. 9. Tools to Create Wealth… <ul><li>Balancing Return & Risk </li></ul><ul><ul><li>What is risk? </li></ul></ul><ul><ul><ul><li>Any deviation from expectation is risk </li></ul></ul></ul><ul><ul><ul><li>Which has higher risk? </li></ul></ul></ul><ul><ul><ul><ul><li>When I expected 10 % I got 9%. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>I expected 35% I got 31.5% </li></ul></ul></ul></ul><ul><ul><ul><ul><li>I expected 100% I got 90% </li></ul></ul></ul></ul>
  10. 10. Which decision is better? <ul><ul><li>An army general has 100,000 soldiers. </li></ul></ul><ul><ul><ul><li>If he fights he will lose 20,000 persons. </li></ul></ul></ul><ul><ul><ul><li>If he retreats he will lose only 20% of his army. </li></ul></ul></ul><ul><ul><li>Which decision will reduce the loss of lives? </li></ul></ul>
  11. 11. Risk… <ul><ul><li>Is there zero risk? </li></ul></ul><ul><ul><ul><li>No. That is why Countries are rated too. </li></ul></ul></ul><ul><ul><ul><li>Sometimes the sovereign rating can be lesser than some companies in the country. </li></ul></ul></ul>
  12. 12. …Tools to Create Wealth <ul><ul><li>Tools to meet my requirement </li></ul></ul><ul><ul><ul><li>Comparision chart for different investments </li></ul></ul></ul>
  13. 13. Equity Shares <ul><li>Current Yield – Low </li></ul><ul><li>Capital Appreciation – High </li></ul><ul><li>Typical Returns - 19.25% as per SENSEX returns since 1979 </li></ul><ul><li>Risk – High </li></ul><ul><li>Marketability / Liquidity – High </li></ul><ul><li>Tax Treatment - No long term capital gains tax after 365 days. Dividends received are tax free </li></ul><ul><li>Convenience - High </li></ul>
  14. 14. Debentures <ul><li>Current Yield – Moderate </li></ul><ul><li>Capital Appreciation – Moderate </li></ul><ul><li>Typical Returns - 8% depending on company </li></ul><ul><li>Risk – Low </li></ul><ul><li>Marketability / Liquidity – Average </li></ul><ul><li>Tax Treatment - Interest received is taxable </li></ul><ul><li>Convenience - Average </li></ul>
  15. 15. Mutual Fund - Equity <ul><li>Current Yield – Low </li></ul><ul><li>Capital Appreciation – High </li></ul><ul><li>Typical Returns - 39% Average over 3yrs Highest return - 69% </li></ul><ul><li>Risk – High </li></ul><ul><li>Marketability / Liquidity – High </li></ul><ul><li>Tax Treatment - Section 80C benefits for Equity Linked Savings Schemes. No long term capital gains tax after 365 days. No tax on dividends received. </li></ul><ul><li>Convenience - Very High </li></ul>
  16. 16. Mutual Fund - Debt <ul><li>Current Yield - Moderate </li></ul><ul><li>Capital Appreciation – Low </li></ul><ul><li>Typical Returns - 8% Average over 1yr </li></ul><ul><li>Risk – Low </li></ul><ul><li>Marketability / Liquidity – High </li></ul><ul><li>Tax Treatment - Dividends received are tax free </li></ul><ul><li>Convenience - Very High </li></ul>
  17. 17. Bank Deposits <ul><li>Current Yield – Moderate </li></ul><ul><li>Capital Appreciation – Nil </li></ul><ul><li>Typical Returns - 8% Average </li></ul><ul><li>Risk – Negligible </li></ul><ul><li>Marketability / Liquidity – High </li></ul><ul><li>Tax Treatment - Section 80C benefits for 5 year deposit. All interests are taxable </li></ul><ul><li>Convenience - Very High </li></ul>
  18. 18. Public Provident Fund <ul><li>Current Yield - Moderate but locked till end of the term </li></ul><ul><li>Capital Appreciation – Nil </li></ul><ul><li>Typical Returns - 8% </li></ul><ul><li>Risk – Negligible </li></ul><ul><li>Marketability / Liquidity – Low </li></ul><ul><li>Tax Treatment - Section 80C benefits. Maturity tax free. Can not be attached in case of insolvency </li></ul><ul><li>Convenience - Low </li></ul>
  19. 19. Life Insurance Policies Endowment <ul><li>Current Yield - Moderate but locked till end of the term </li></ul><ul><li>Capital Appreciation – Nil </li></ul><ul><li>Typical Returns - 5.5% Average </li></ul><ul><li>Risk - Moderate </li></ul><ul><li>Marketability / Liquidity – Average </li></ul><ul><li>Tax Treatment - Section 80C benefits and Section 10 (10)D benefits </li></ul><ul><li>Convenience - Low </li></ul>
  20. 20. Rent from house <ul><li>Current Yield – Low </li></ul><ul><li>Capital Appreciation – High </li></ul><ul><li>Typical Returns - 5% Maximum </li></ul><ul><li>Risk – Negligible </li></ul><ul><li>Marketability / Liquidity – Low </li></ul><ul><li>Tax Treatment - Expenses can be deducted before calculating tax </li></ul><ul><li>Convenience - Fair </li></ul>
  21. 21. Gold and Silver <ul><li>Current Yield – Nil </li></ul><ul><li>Capital Appreciation - Moderate </li></ul><ul><li>Typical Returns - Matching inflation </li></ul><ul><li>Risk – Average </li></ul><ul><li>Marketability / Liquidity – High </li></ul><ul><li>Tax Treatment - No tax benefits capital gains tax applicable </li></ul><ul><li>Convenience - High </li></ul>
  22. 22. ULIP's with minimum 5 times cover <ul><li>Current Yield – Nil </li></ul><ul><li>Capital Appreciation – High </li></ul><ul><li>Typical Returns - 28% Average over 3 yrs </li></ul><ul><li>Risk - Can be adjusted based on market conditions </li></ul><ul><li>Marketability / Liquidity - High (but after three years) </li></ul><ul><li>Tax Treatment - Section80C and Section 10(10)D benefits </li></ul><ul><li>Convenience - High </li></ul>
  23. 23. ULIP Pension plans <ul><li>Current Yield – Nil </li></ul><ul><li>Capital Appreciation – High </li></ul><ul><li>Typical Returns - 28% Average over 3 yrs </li></ul><ul><li>Risk - Can be adjusted based on market conditions </li></ul><ul><li>Marketability / Liquidity - High (but after three years) </li></ul><ul><li>Tax Treatment - Section 80C benefits & 1/3 tax free commutation on maturity amount. Pension received is taxable </li></ul><ul><li>Convenience - Average </li></ul>
  24. 24. Insurance Planner Income replacement method workbook page 8
  25. 25. Retirement & Milestone Planner workbook page 9
  26. 26. Budgeting to Create Surplus <ul><li>Budget – Myths And Reality </li></ul><ul><ul><li>What ever I plan does not work? So why plan? </li></ul></ul><ul><ul><ul><li>A plan does not ensure that the goal is achieved. </li></ul></ul></ul><ul><ul><ul><li>Plan is required to first set a goal and then to remind you to reach it </li></ul></ul></ul><ul><ul><ul><li>And alert you when there is a deviation </li></ul></ul></ul><ul><ul><ul><li>A company has become big because they have a budget… </li></ul></ul></ul>
  27. 27. Budget Myths & Reality <ul><ul><li>Anything on sale can be bought </li></ul></ul><ul><ul><ul><li>A sale is profit for the sales guy </li></ul></ul></ul><ul><ul><ul><li>Is the thing on sale what you want. </li></ul></ul></ul><ul><ul><ul><li>Buy anything based on a list of needs and excess cash. </li></ul></ul></ul><ul><ul><li>Budget is for countries and big companies . </li></ul></ul>
  28. 28. Budget – Myths and Reality <ul><ul><li>There is not enough money for everyone to be rich </li></ul></ul><ul><ul><ul><li>Money is not a limited quantity commodity (at least at our level) </li></ul></ul></ul><ul><ul><ul><li>The more value you create for your company and others, the more money you have. </li></ul></ul></ul>
  29. 29. Budgeting – Myths and Reality <ul><ul><li>That guy is filthy rich! He should have done some criminal activity some time in life. </li></ul></ul><ul><ul><ul><li>This is a statement out of guilt and envy </li></ul></ul></ul><ul><ul><ul><li>Sometimes used to protect our image in front of our children. </li></ul></ul></ul>
  30. 30. My Present Budget <ul><li>Fill in your Budget Worksheet </li></ul>budget worksheet
  31. 31. PAGE 14-15 WORKBOOK
  32. 32. Creating a Surplus for My Goals <ul><ul><li>Can you see where your goals are being SPENT????? </li></ul></ul><ul><ul><li>Identify expenses which can be reduced </li></ul></ul><ul><ul><li>Identify loans which need to be closed immediately </li></ul></ul><ul><ul><li>Identify investments that need to be started immediately </li></ul></ul>
  33. 33. Thank you

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