Cts debt management

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Cts debt management

  1. 1. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Financial Wellness Cognizant Technology Solutions 22nd November 2010
  2. 2. www.finerva.com | support@finerva.com | +91-9787-11-11-66
  3. 3. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Topics for discussion Getting out of debt Investing for life goals Common mistakes in tax planning
  4. 4. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Financial Wellness Being financially well is to be in such a financial situation that your hopes, dreams, future endeavours for you and your family are realistically possible and attainable.
  5. 5. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Financial wellness components Plan for life goals FINANCIAL WELLNESS
  6. 6. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Getting out of debt Is like a penance….
  7. 7. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Why should you get out of debt? Debt is expensive Debt drains your wealth Debt can delay your goals Debt can cause stress
  8. 8. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Credit cards… If you borrowed Rs. 1 lac on your credit card that charges 2.99% per month and you pay the minimum balance every month, how long do you thing it will take to pay off your credit card in full….
  9. 9. www.finerva.com | support@finerva.com | +91-9787-11-11-66 200 months (or) 16 years and 8months with still about Rs.1200.00 outstanding
  10. 10. www.finerva.com | support@finerva.com | +91-9787-11-11-66 You would have paid an interest of Rs.136700.00 on this loan of Rs.100000.00
  11. 11. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Home loans… Home loan amount 2000000 Interest 9% Tenure (months) 240 EMI Rs. 17,994.52 Total repayments Rs. 43,18,684.59
  12. 12. www.finerva.com | support@finerva.com | +91-9787-11-11-66 If invested…. Regular savings Rs. 17,994.52 Returns 9% Tenure (months) 240 Total payment made Rs. 43,18,684.59 Value of investment Rs. 1,20,18,303.05
  13. 13. www.finerva.com | support@finerva.com | +91-9787-11-11-66 If ten years time saved…. Assume age at which loan taken 25 Investment starts age 35 Retirement age 60 Investment amount Rs. 17,994.52 No. of months 300 Rate 9% Retirement corpus Rs.2,01,74,050.13
  14. 14. www.finerva.com | support@finerva.com | +91-9787-11-11-66 If invested after full loan term.. Assume age at which loan taken 25 Investment starts age 45 Retirement age 60 Investment amount Rs. 17,994.52 No. of months 180 Rate 9% Retirement corpus ???????
  15. 15. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Rs. 68,09,229.84
  16. 16. www.finerva.com | support@finerva.com | +91-9787-11-11-66 The value of getting out of debt early is a whopping Rs. 1,33,64,820.29
  17. 17. www.finerva.com | support@finerva.com | +91-9787-11-11-66 How to get out of debt? Hari’s case
  18. 18. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Hari’s income and expenditure Income Amount Occurrence Salary - net take home 75000 per month Annual - bonus / incentives 300000 per year Total (Nett) Rs. 12,00,000 Per year Expenses Monthly provisions 8000 per month EB, telephone, mobile bill 4000 per month EMI 45853 per month Movies and eat outs 8000 per month Home - parents 5000 per month Fuel 5000 per month Flat maintenance charges 2000 per month Gym 20000 per year Car maintenance & insurance 35000 per year Total per year Rs. 9,89,236 per year
  19. 19. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Hari’s income and expenditure, looking harder… Monthly regular income Rs. 75,000 Monthly regular expenses Rs. 77,853
  20. 20. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Hari’s Loan statement Loans Amount of loan Period Interest Regular repayment Home 2500000 240 9% Rs. 22,493.15 Car 500000 48 11% Rs. 12,922.76 Personal loan 100000 48 18% Rs. 2,937.50 Credit card 1 75000 21 36% Rs. 5,000.00 Credit card 2 50000 31 36% Rs. 2,500.00 TOTAL Rs. 45,853.41
  21. 21. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Hari’s Loan – looking harder.. Loans Amount of loan Monthly repayment Total repayment Total interest paid Credit card 1 Rs. 75,000.00 Rs. 5,000.00 Rs. 1,05,000.00 Rs. 30,000.00 Credit card 2 Rs. 50,000.00 Rs. 2,500.00 Rs. 77,500.00 Rs. 27,500.00 Personal loan Rs. 1,00,000.00 Rs. 2,937.50 Rs. 1,41,000.00 Rs. 41,000.00 Car Rs. 5,00,000.00 Rs. 12,922.76 Rs. 6,20,292.54 Rs. 1,20,292.54 Home Rs. 25,00,000.00 Rs. 22,493.15 Rs. 53,98,355.74 Rs. 28,98,355.74 TOTAL Rs. 32,25,000.00 Rs. 45,853.41 Rs. 63,42,148.28 Rs. 31,17,148.28
  22. 22. www.finerva.com | support@finerva.com | +91-9787-11-11-66 NO TAKING ANY MORE LOANS • When you realise you have dug yourself into a hole, the first and best thing to do is STOP DIGGING Steps to “Zero Debt”
  23. 23. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Steps to “Zero Debt” • Budget expenses • Generate a surplus and commit it to the “Zero Debt” project • Snowball the debt repayment
  24. 24. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Hari’s loans – New look Loans Amount of loan New - total repayment New - interest Credit card 1 Rs. 75,000.00 Rs. 89,400.00 Rs. 14,345.00 Credit card 2 Rs. 50,000.00 Rs. 68,400.00 Rs. 18,375.00 Personal loan Rs. 1,00,000.00 Rs. 1,24,155.00 Rs. 24,111.07 Car Rs. 5,00,000.00 Rs. 5,99,562.00 Rs. 99,539.94 Home Rs. 25,00,000.00 Rs. 37,27,816.00 Rs. 12,27,683.40 TOTAL Rs. 32,25,000.00 Rs. 46,09,333.00 Rs. 13,84,054.41
  25. 25. www.finerva.com | support@finerva.com | +91-9787-11-11-66 The effects… Parameter Existing Revised Savings Total repayments Rs. 63,42,148.28 Rs. 46,09,333.00 Rs. 17,32,815.28 Total interest paid Rs. 31,17,148.28 Rs. 13,84,054.41 Rs. 17,33,093.86 Total tenure to "zero debt" 240 months 98 months 142 months Richer by about Rs.1.33 crores on retirement
  26. 26. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Building wealth
  27. 27. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Financial life cycle
  28. 28. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Steps in goal based investing… Name your goal
  29. 29. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Estimate when this goal is due
  30. 30. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Estimate the cost of the goal at today’s value
  31. 31. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Steps in goal based investing… Estimate the rate of inflation relevant to the goal Estimate the rate of returns on investments expected
  32. 32. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Steps in goal based investing… Assess current value of any investments already made towards that goal
  33. 33. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Investment needed for the goal You will require a regular annual investment of Rs. _________ to reach your goal assuming a certain rate of return on investments and rate of inflation
  34. 34. www.finerva.com | support@finerva.com | +91-9787-11-11-66 The “r” A = P(1+r)^n
  35. 35. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Common mistakes in tax planning
  36. 36. www.finerva.com | support@finerva.com | +91-9787-11-11-66 • Overdoing the tax planning under Sec 80C • Buying insurance to save tax • Borrowing and buying a house to save tax • Waiting till the last minute to invest in tax saving options • Not filing returns on time
  37. 37. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Thank god its over!!!! I am ready for Questions 
  38. 38. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Facilitators • Bhuvana Shreeram • +91-98840-70750 • bhuvana@finerva.com • Finerva Financial Solutions Private Limited • www.finerva.com

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