Financial planning a way to life

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Financial planning a way to life

  1. 1. Financial planning away to life.A financial planning is not just about managing your money but itencompasses your entire life.
  2. 2. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com1Financialplanningawaytolife.|Why shouldWhy shouldWhy shouldWhy should one MUSTone MUSTone MUSTone MUST thinkthinkthinkthink about Fabout Fabout Fabout Financialinancialinancialinancial PPPPlanning?lanning?lanning?lanning?Following are the few challenges which you should think of:1. Because of the globalization many opportunities are opened up & thereis a sizeable increase in the take home pay.2. You have to work under pressure and most of the organizations there isstandard reporting time but no fixed time to leave office.3. The lifestyle expenses are increasing day by day.4. As India is at growth phase the inflation is at peaking.5. Indian social structure is changing; you are a representative of Nuclearfamily social system.6. The dreams are high but all of us have a limited income.7. The financial market is flooded with different options which arecomplex in nature.DoDoDoDoeseseses financial planning help mefinancial planning help mefinancial planning help mefinancial planning help me overcomeovercomeovercomeovercome above challenges?above challenges?above challenges?above challenges?Yes certainly; Financial planning has a process address the above challengeshowever let’s first understand what Financial Planning is.
  3. 3. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com2Financialplanningawaytolife.|What isWhat isWhat isWhat is FFFFinancialinancialinancialinancial PPPPlanninglanninglanninglanning????When we hear about Financial Planning, most often it is misunderstood as justinvestments, or it being about tax planning or taking an investment productetc.This is not a financial planning. It is about managing your overall financialneeds, requirements, liabilities and responsibilities.Financial planning is also about channelizing your today’s investment portfolioand future investible surplus to achieve your financial goals in life and makeyou financially successful.I know you would now ask what you mean by “financial goals”.FFFFinancial goalsinancial goalsinancial goalsinancial goalsThe milestones in your life which requires financial readiness to fulfill thoseare called as financial goals.Marriage, Child birth, Child’s school admission and fee expenses, Child’shigher education, Child’s marriage, Buying a home, Domestic tours,
  4. 4. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com3Financialplanningawaytolife.|International tours, buying a car, farm house, retirement are the fewexamples of milestones which require the monetary backup and thus called asfinancial goals.In the financial planning process, the cash flow of your entire life is projectedwhich will help you understand what will happen in your financial life infuture. This helps you to take proactive and informed financial decisions.The processThe processThe processThe process of financial planningof financial planningof financial planningof financial planning::::At ARB Financial consultants we follow 8 step process for financial planning-.1. DataDataDataData gathering:gathering:gathering:gathering: This will help to understand what the current status ofyour finances is. This will form a base for your financial planningexercise.2. GoalGoalGoalGoal setting:setting:setting:setting: What are you earning for? Confused? This step will helpyou to understand your objectives during the journey of life. Here wehelp our clients to determine financial goals. The goals then becomethe target and your cash flows can be streamlined towards same.3. Cash flowCash flowCash flowCash flow analysis:analysis:analysis:analysis: In this step the entire life cash flow is projected.Cash inflow is plotted against cash out-flow considering the returns onDatagatheringGoalsettingCash flowanalysisCash flowprotectionPreparation offinancial planInvestmentportfolio creationImplementationReview
  5. 5. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com4Financialplanningawaytolife.|investible surplus. This step help our clients to understand weather thefinancial goals are realistic.4. Cash flowCash flowCash flowCash flow protection:protection:protection:protection: Once the cash flow is created the financial risk inthe life is analyzed and a robust financial risk management (FRM)system is structured with the help of insurance. The suggestedinsurances are Term, life insurance, medi-claim, Accidental death &disability insurance etc.5. Preparation of the financialPreparation of the financialPreparation of the financialPreparation of the financial plan:plan:plan:plan: After adjusting the premium towardsthe new FRM system final cash flow plan is prepared.6. Investment portfolioInvestment portfolioInvestment portfolioInvestment portfolio creation:creation:creation:creation: Once the final cash flow is preparedinvestment decisions are taken in consideration with Income taxoptimization. The investment portfolio is created in consideration withfinancial goals which result in right asset allocation strategy for client.7. Implementation:Implementation:Implementation:Implementation: This step is very important because only planning isnot sufficient to realize financial goals but it has to be backed byexecution- The actual investments into suggested products.8. Review:Review:Review:Review: As the whole financial field is dynamic the review is veryimportant so we can track our path and count on our progress.
  6. 6. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com5Financialplanningawaytolife.|The first and most important advantage of financial planning is you arein better control of your finances and know what is precisely happeningwith your money, which majority of the people has no clue about.You will be in a better position to take all financial decisions in astructured and channelized way. This is what called as informed andthoughtful decision making.You could know what to expect from your investments.There is no need to worry about uncertainties because risk mitigationplan is in place to take care if any.You can utilize the financial resources in optimum way.You will be saved from the possible pitfalls in the financial market.Financial planning will keep you on target and will result inachievement of your financial goals.Most importantly it will help you in concentrating in your primary worki.e your job or business or profession.Thus it help you to have a peace of mindThus it help you to have a peace of mindThus it help you to have a peace of mindThus it help you to have a peace of mind,,,, gives better life qualitygives better life qualitygives better life qualitygives better life quality &&&& has ahas ahas ahas apower to cut down almost 80% to 90%power to cut down almost 80% to 90%power to cut down almost 80% to 90%power to cut down almost 80% to 90% financialfinancialfinancialfinancial problems in life.problems in life.problems in life.problems in life.TheTheTheThe advantages?advantages?advantages?advantages?
  7. 7. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com6Financialplanningawaytolife.|Qualities to become a Successful investorQualities to become a Successful investorQualities to become a Successful investorQualities to become a Successful investorThe main success in the process of wealth creation lies in investorcharacteristics-his/ her approach towards circumstances and ability to act inresponse to the situation.“The world belongs to optimists; the pessimists are only spectators.”“The world belongs to optimists; the pessimists are only spectators.”“The world belongs to optimists; the pessimists are only spectators.”“The world belongs to optimists; the pessimists are only spectators.” -François GuizotIf you want to become a successful investor, you should adopt the followingimportant qualities-DisciplineDisciplineDisciplineDiscipline:::: This is most important quality. Implementation of the plannedinvestments in religious manner requires a discipline. This is the ability towithstand the temptations and survive in a critical moment. Will-power is anecessary addition which will let you obey the discipline and move forwardregardless of all obstacles. In the process of wealth creation there isnecessity to execute things in much disciplined way and over a long period oftime, where the investor has to overcome emotions of Greed and fear.Patience:Patience:Patience:Patience: It is very equally important to understand the quality of theinvestment and the time period it needs to deliver results. Different types ofinvestments require different time periods to deliver returns and this has tobe understood even before one invests in it. So investor should have apatience to wait for that specific time to get results.Realistic expectations:Realistic expectations:Realistic expectations:Realistic expectations: Whenever you take a decision of investment you aretaking it on the basis of certain assumptions. These assumptions should berealistic; this stays true for the investment as well as your incomeexpectation and setting financial goals.Analytical skills:Analytical skills:Analytical skills:Analytical skills: The market is flooded with the information, investor shouldhave an ability to analyse the information and derive the benefits. These
  8. 8. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com7Financialplanningawaytolife.|skills are required to find out first what is required from the investment andthen finding out which investment suits to your requirement from the financialmarket. In absence of these they should trust (& also evaluate) their financialadvisor to provide right analysis to them.Systematic investing:Systematic investing:Systematic investing:Systematic investing: The advantages of systematic investing and the powerof compounding, which is also described as “Eighth wonder of the world “byAlbert Einstein, should be well understood. Starting early, investing regularlyand averaging the cost of purchase are the best way to wealth creation.Systematic way will help you in building wonder for your life brick by brickmeans small amounts you had invested will give you good wealth creation.Planning:Planning:Planning:Planning: One must have his goals clearly defined, and then there should be aplan to make those achievable, because without a plan of action, targetscannot be achieved. Planning is the first step to making your dream cometrue. This helps in handling the actual portfolio much better as there is nodoubt about the money staying invested.Independent decision making: The decisions which you are following shouldIndependent decision making: The decisions which you are following shouldIndependent decision making: The decisions which you are following shouldIndependent decision making: The decisions which you are following shouldnot be governed by mass effect the investor should have an indepnot be governed by mass effect the investor should have an indepnot be governed by mass effect the investor should have an indepnot be governed by mass effect the investor should have an independentendentendentendentthinking process while taking decisions.thinking process while taking decisions.thinking process while taking decisions.thinking process while taking decisions. A number of successful investorshave commented on the importance of independent and individual decision-making. As well have you should have courage to take responsibility ofdecisions.Ready to ask questions:Ready to ask questions:Ready to ask questions:Ready to ask questions: It is essential that you are able and willing to askquestions. If you think you know all the answers you probably don’t evenknow the questions. When any doubt comes in your mind about theinvestment decision you are taking you have to ask question to yourself andhave to find out the answer.Creativity:Creativity:Creativity:Creativity: Creativity is necessary to look at investments from differentangles, considering all the variables that could negatively or positively affectan investment. Also, creative mind will help in analysing the future and try toforecast the outcome of current business plans.Flexibility:Flexibility:Flexibility:Flexibility: It is important for investors to be flexible and not permanentlystay invested in a particular type of asset. This is important because thefinancial market is dynamic. Flexibility is also an important quality that keepsone from holding on to an asset out of loyalty – flexibility allows one tochange as times change and as new opportunities present themselves.
  9. 9. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com8Financialplanningawaytolife.|Ready to pay for the advice:Ready to pay for the advice:Ready to pay for the advice:Ready to pay for the advice: If you lack in any one or more of the abovementioned qualities then you should have one quality-i.e. to accept yourlimitations and be ready to take the advice from expert or the professionalwho is having knowledge in the financial planning and having a capacity toguide you in unbiased way, preferably a CFPCM.If you are looking for the unbiased and expert advice then you should beready to pay the fees.“If you don’t use your muscles, they get weak. If you don’t use your mind, it“If you don’t use your muscles, they get weak. If you don’t use your mind, it“If you don’t use your muscles, they get weak. If you don’t use your mind, it“If you don’t use your muscles, they get weak. If you don’t use your mind, itbegins to fail.begins to fail.begins to fail.begins to fail.------------------------ Sir John TempletonSir John TempletonSir John TempletonSir John TempletonTTTTaking financial planning decision based on your risk profiler may beaking financial planning decision based on your risk profiler may beaking financial planning decision based on your risk profiler may beaking financial planning decision based on your risk profiler may bedangerous fordangerous fordangerous fordangerous for you?you?you?you?Risk profiler is mostly used in the field of investment management; it isconsidered that you should invest your money as per your risk profile. But asan investor is it a right decision to base your investments just on the basis ofrisk profile?Let’s understand first what is the risk profiler?Majority of the insurance or financial companies have an online or offlinequestionnaire to tell you about your risk appetite. Normally these are basedon some parameters that decide the types of risks, e.g.1. Your age.2. Your income.3. Your family size.4. Your loan liabilities.5. Your investments.6. What is your knowledge of financial products, markets etc.
  10. 10. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com9Financialplanningawaytolife.|7. What you feel about the financial market. Etc…….Depending on the answers individuals are categorised into: Aggressiveinvestor , Conservative investor , Protective investor, and the questions aswell as categorisation differs from company to company.Now based on this categorisation a pre-specified asset allocation issuggested viz.• Aggressive: 80% equity +20% Debt.• Conservative: 40 % equity + 60% Debt.• Protective: 20% equity + 80% Debt.And lastly the investments products are suggested.Does this questionnaire really reveal your risk profile?“My answer is NO.”“My answer is NO.”“My answer is NO.”“My answer is NO.”I am sure that most of the professionals working it the financial industry willnot agree.The answers of the individual who is opting for this questionnaire will keepon changing as per the situation on short term period as well, few of thoseare-1. When markets are down same individuals risk profile shows to be aProtective investor and when they markets are at high he may comeout to be Aggressive. So it is based on the financial market.2. The answers given are on the basis of awareness of individuals aboutthe different aspects of financial management. If he/she is educated onthose the answers change in spite of the factors being the same.3. The individual who comes out to be Protective may be very aggressiveabout risky asset class; the classic example is real estate investment.Individuals not comfortable with share market are very bullish on realestate investment☺.4. Only age and earnings may not give clear idea about individuals riskappetite, normally it is said that 100- your age = Equity exposure. Thiscannot be generalized as there are some other aspects also like someshort goals, financial dependency etc.5. The result of risk profiling majorly speaks about the allocation in twoasset classes Equity and Debt. , So what about other asset classes likeCash, Real estate and Commodity?6. This system does not consider the risk arising out of inflation.
  11. 11. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com10Financialplanningawaytolife.|WhatWhatWhatWhat is the major flawis the major flawis the major flawis the major flaw in generalizing risk profile system based on Riskin generalizing risk profile system based on Riskin generalizing risk profile system based on Riskin generalizing risk profile system based on Riskprofiler?profiler?profiler?profiler?It is observed that people having sizeable money and good regular income,tend to be aggressive. They keep on taking higher risk, whether or notrequired and if it fails may lose heavily.A person having less amount of money and less regular income , tends to beconservative or protective, so he/she do not take any risk ( That also heassumes but may end up in taking high risk of negative real rate of return ) ,may be needed or not and loses out on opportunities to earn higher income.Therefore,Therefore,Therefore,Therefore, I feelI feelI feelI feel it is only a marketing tool to sell the products.it is only a marketing tool to sell the products.it is only a marketing tool to sell the products.it is only a marketing tool to sell the products.What should people do then?Your investment decisions should be based on the financial goals which youwant to achieve in your life and not on the risk profile.A person having good amount of money and good regular income , having lessgoals and having enough money to fulfil financial goals as per the cash flows ,should protect his existing wealth and future income so that he/she canachieve financial goals, So the stance may be Conservative or Protectivedepending on the wealth, not necessarily Aggressive.In a same way a person having less amount of money and less regular income, with high financial goals, has to setup first realistic goals and then have totake some calculated risk to achieve those, even if risk profiler suggeststhem to be protective.Achieving your financial goals in life is a success of life,Planning for financial goals is like planning for a holiday. While planning ourholidays we first ascertain availability of time, plan the destination, andrequired finances. After analysing these parameters we decide on the locationand mode of transport and other logistics.
  12. 12. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com11Financialplanningawaytolife.|Similarly, based on your financial goal (Destination), Years to goals (Timeavailable) and investible funds (Affordability) we should choose the financialvehicle to reach the financial goal.Having a financial plan for self is thus of prime importance.Golden rules in Personal financial planning:Make a monthly budget of your expenses and track them.Invest with objective in mind.Invest in right asset class.Invest regularly.Stand by your decision even if the financial market scenario changes for atemporary period.Invest lump sum if the investment instrument is offering fixed income andinvest in parts if the returns on the investment instrument are volatile.Step up your investment as your income goes up.Create appreciating assets first and then go for additional liabilities.Hold the long term loans which are offering less rate of interest than theopportunity in the financial market for the same period.
  13. 13. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com12Financialplanningawaytolife.|Vision: Touching lives to make people financially successful and wealthy.Vision: Touching lives to make people financially successful and wealthy.Vision: Touching lives to make people financially successful and wealthy.Vision: Touching lives to make people financially successful and wealthy.ARB financial consultant is formed by Mr.Ashish Ramesh Bhave, who isCERTIFIED FINANCIAL PLANNERCMand having a rich experience of financialmarkets over a decade,Ashish is a well-known name in the Pune’s financial circle,He is a financialconsultant, Coach as well as trainier.We are Pune’s first “Fee only” and leading financial planning consultancy.ARB’sARB’sARB’sARB’s specialtiesspecialtiesspecialtiesspecialties::::Having a strong base of satisfied clients.Unbiased financial planners.Driven by business ethics.Customized approachCustomized approachCustomized approachCustomized approachFinancial planning is a fulltime profession for us.We are not in the business of selling financial products.We are interested in building long term relationship with clients.You can reach usYou can reach usYou can reach usYou can reach us atatatat ::::ARB Financial consultants .“ Snehashanti “, Navi Peth, Off shastri road.Pune.Website : www.arbfinancials.comE-Mail : info.arbfin@gmail.com: arbfinancials@gmail.comCell : +91- 87931-07044/ 88620-79292/ 88620-79291Landline : : 020-24530072
  14. 14. ARB financial consultants,Pune.ARB financial consultants, Pune. 020-24530072,8862079291/92 www.arbfinancials.com13Financialplanningawaytolife.|

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