Financial Planning is the process of assessing the income, expenses, assets and liabilities to develop a comprehensive plan to meet current and future financial goals It works primarily through identification of major goals and putting in place an action plan to ensure adequate finances to meet those goals It is a holistic approach that considers current financial situation, evaluates the future needs and risks involved and develop a framework to fund those needs and review the progress Thank You For Watching Subscribe to DevTech Finance

1. DEVTECH FINANCE
WEALTH MANAGEMENT – PART 3
FINANCIAL
PLANNING

2. INTRODUCTION
• Financial Planning is the process of assessing the income, expenses,
assets and liabilities to develop a comprehensive plan to meet current
and future financial goals
• It works primarily through identification of major goals and putting in
place an action plan to ensure adequate finances to meet those goals
• It is a holistic approach that considers current financial situation,
evaluates the future needs and risks involved and develop a
framework to fund those needs and review the progress

3. Constant monitoring and Rebalancing
Asset allocation / Investment
Risk profiling
Assessing current financial situation
Identifying financial goals
FINANCIAL PLANNING PROCESS

4. IDENTIFYING FINANCIAL GOALS
• Financial goal describes the future needs of an individual that require funding.
Identifying financial goals help put in place a spending, saving and investing
plan so that current and future needs are met as and when required.
• Financial goals involving large sum of money may be –
a) Buying a home
b) Children’s education
c) Children’s marriage
d) Medical expenses
e) Vacation plans
f) Retirement goals

5. FUTURE VALUE OF GOAL
• Future value of goal would consider the below mentioned three factors -
1) Current value of the goal or expense
2) Time period after which the goal will be achieved
3) Rate of inflation at which the cost of the expense is expected to increase.
• The Future value of a goal = Current Value x (1+ Rate of Inflation) ^ Time
period
• For example – The future goal to save for child’s higher education.
 Current post –graduation cost = Rs. 8,00,000
 Time to join college = 10 yrs. Later
 Inflation rate assumed = 7%
 Future Value = 8,00,000 * (1+ 0.07) ^ 10 = 15,73,721 /-

6. ASSESSING CURRENT FINANCIAL SITUATION
INCOME EXPENSES
ASSETS LIABILITIES

7. ASSESSING CURRENT FINANCIAL SITUATION
• Assets – Liabilities = Net Worth
• Income – Expenses = Saving
• Prepare a budget periodically
• Keep a track of all Cashflows
• Work towards creating assets and generating more income sources
• Work towards paying off debts / liabilities and cutting down unnecessary
expenses

8. RISK PROFILING
• Risk profile is made up of two components- risk appetite and risk tolerance
• Risk appetite is amount of risk one is willing to take (individual capacity)
• Risk tolerance is the amount of risk one’s finances allows to handle
• A risk profile is an evaluation of an individual’s willingness and ability to take
risks
• Risk profiling is important to determine a proper investment portfolio

9. FACTORS AFFECTING RISK
PROFILE
NO. OF
DEPENDANT
NO. OF
EARNING
MEMBERS
ASSET
AND
LIABILITIES
INCOME
AND
EXPENSES
FINANCIAL
GOALS
RISK AND
RETURN

10. RISK PROFILING
Risk Profile Equity Asset (%) Debt Asset (%) Exp. Return (%)
Secure 0 100 6
Conservative 20 80 8
Moderate 50 50 10
Growth 80 20 12
Aggresive 100 0 15

11. ASSET CLASSES
EQUITY
DEBT
METALS
COMMODITY
REAL
ESTATE
ART
PRIVATE
EQUITY

12. ASSET ALLOCATION
Investment Objective Suitable Investment
Growth and Appreciation Equity shares, Equity mutual funds, Real Estate,
Small cap funds
Regular Income / Capital
Protection
Debt funds, Fixed deposits, Diversified equity,
Balanced funds, Bonds, G-secs, Gold
Liquidity Short-term funds, Money market instruments, current
& saving a/c deposits, cash
Tax Saving ELSS mutual fund, Provident funds, ULIP Insurance
Plans, National Pension Scheme

13. REVIEW AND REBALANCING
• The investments made for the goals will require to be reviewed periodically
• A periodic review will help identify problem areas and enable early
corrective action. For example, if an investment has not generated returns
as expected, the goal may not be reached
• Rebalancing the portfolio involves modifying the exposure to different asset
classes in an investor’s portfolio

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FINANCE