Financial Wellness Program Enhances Habits & Returns

Financial Wellness Enhancement
Program

Welcome to the Program
Pre-Workshop Questionnaire

Wellness
Wellness Habits Tests & Assessments
Physical Wellness 1. Eat Right
2. Exercise Regular
1. BMI
2. Diabetes
3. BP
4. ECG
Career Wellness Steven Covey’s 7 Habits
1. Be Proactive
2. Begin with an end in mind
3. Put first things First
4. Think win-win
5. Seek first to understand
then be understood
6. Synergize
7. Sharpen the saw
1. Performance Rating
2. Certifications & Awards
Social Wellness 1. Regular Communication 1. Size of the network
2. Invitation to attend gatherings and
functions
Emotional Wellness 1. Having High Self Esteem
2. Accepting Failures
1. Feedback from peers/subordinates
Spiritual Wellness 1. Meditation 1. Minutes spent in a week

How to define Financial
Wellness?

Unique 5 level Financial Wellness
Enhancement Approach
Level 5: Enough wealth accumulated for next generation. Investments are done for generating jobs for
society
Level 4: Savings are enough to take care Self + Spouse expenses till 80 years of age. Investments are
being done for benefit of next generation
Level 3: Savings have reached a stage one is saving more than Rs 2,00,000 + 10% of Monthly Income.
One is now saving & investing to meet aspirational needs like Home, Children’s College Education,
Marriage etc
Level 2: Makes full use of Sec 80 C savings and save Rs 2,00,000 in EPF, ELSS, NPS
Level 1: One is able to comfortably meet normal financial needs even if pay cheque is delayed up to 3
months.
Level 0: Even if salary is delayed by one day, one is put to a lot of stress, due to committed monthly cash
outflow like Insurance Premium, mortgage EMI, etc.

Expected benefits of Financial Wellness
Enhancement

Measuring Wellness and taking action to
enhance wellness
www.imoneyplant.com
Check your Financial Wellness

Wellness = Habits
But, How to habits form?

Knowledge
1. 3% Increase in Return
2. A=P (1+r)n
3. Stock Market and Gold
has always been higher
after 10th year
Skills
1. Buying Financial Products
online
2. Automating Investments
Attitude
1. Income – Savings =
Expenses
2. Investment Purpose is
more important than
product
3-Powerful Habits
1. Savings before spending
2. Automate and transact
Online
3. Invest with Purpose – Make
Retirement Savings the most
important purpose
Enhancing Financial Wellness

Foundation for successful habit formation for Financial
Wellness
•Knowledge
•A= P (1+r)n
•How Economy works
•Skills
•Ability to apply knowledge and take right decisions
•Automating Financial Transactions
•Attitude
•Income – Savings = Expenses
•Review Regularly and course correct

3 – Powerful habits for financial Wellness
enhancement
• Save Before Spending
• Save 30% of Income
• Pay 25% of Income as EMI for Home
• Indentify Priority and Invest with purpose
• Short term needs (mobile, gadgets, festivals, family functions, travel, other
discretionary spending)
• Retirement
• Aspirations (Home, Children’s higher education, Children’s marriage, Etc)
• Map Priority to Financial Product automate the Investments and forget
• Save only through ECS
• If you have bulk money invest only in Fixed Deposits or Govt Bonds

Finance Basics for
Successful Investing

If you have not filled up the pre-workshop
questionnaire
Pre-Workshop Questionnaire

Fixed Deposit doubles in 9 years –
What is the return?
•What is the formula for calculating
returns ?
• A = P(1+r)n
•There is no other formula in Money
Management

If money is doubling – Apply Rule of 72
72
---------------------- = r where n= No. of years taken to double money
n

Why Returns are important?
2015 100000
2023 200000
2031 400000
2039 800000
2015 100000
2021 200000
2027 400000
2033 800000
2039 1600000
Return on Investment – 9%
Years taken to double – 8 years
What happens to Rs.1 lakh investment
In 24 years
Return on Investment – 12%
Years taken to double – 6 years
What happens to Rs 1 lakh investment
In 24 years

Or
Every 3% decrease in Returns makes one poorer by half
Every 3% improvement in Return doubles wealth

Comparing Returns
SBH Deposits offering to double in 87 months with a yield of 13.84% or Other
deposit offering 10% compounding interest
Property bought in 2001 for 40 lakhs and value of Rs 1.6 Crore in 2015 or property
bought for Rs 10 Lakhs in 1997 and value of Rs 80 Lakhs in 2015
Investment Amount No of Years Maturity Amount Benefit
Rs 1 Lakh per year 10 Rs 20 Lakh Investment doubled
But, are they same?

Compare returns only by calculating
annual %
Investment
Amount
No of Years Maturity Amount Benefit Returns
Rs 1 Lakh per year 10 Rs 20 Lakh Investment doubled 14.69%
3% reduction in return makes us poor by half

Caveat Emptor
1. Fine Prints while buying Financial products
2. 0% EMI
3. Guaranteed Returns in short time
4. Promise of high returns in excess of 12%

What we do with money?
Earn Invest
Spend Borrow
If Earning - Spending > 0  Surplus  Invest
If Earning – Spending <0  Deficit  Borrow

How to increase Earnings?
Earn
1. Enhance Skills
2. Monetise Hobbies
3. Income from Investments
4. Save Tax
Invest
Spend Borrow

Save Tax or Increase Net Income
Tax
Bracket
Allowances 80 C (upto Rs
2,00,000)
80 D Interest on Loans
10% 1. HRA
2. LTA
3. Medical
4. Transport
1. EPF
2. ELSS
3. Rs 50,000
extra from
NPS
Rs 20000 for
Sr. Citizen
Parent
1. Education Loan
20% 1. HRA
2. LTA
3. Medical
4. Transport
1. EPF
2. ELSS
3. Principal
Repayment on
Home Loan
4. Rs 50,000
extra from
NPS
Rs 20000 for
Sr. Citizen
Parent
1. Unlimited interest paid
on rented property
30% 1. LTA
2. Medical
3. Transport
1. PF
2. PPF or ELSS
3. Principal
Repayment on
Home Loan
4. Rs 50,000
extra from
NPS
Rs 20000 for
Sr. Citizen
Parent
1. Upto Rs 2,00,000
interest on Self Occupied
House
2. Unlimited interest on
rented out property
3. Education Loan for
Children’s higher
Education

Create wealth by borrowing
Earn
1. Enhance Skills
2. Monetise Hobbies
4. Save Tax
Invest
Borrow
Home Loan
Education Loan

Today’s cost : Rs 60 Lakh
Expected appreciation : 12%
Invest Rs 10
Lakh own money
Invest Rs 50 Lakhs
By taking home loan @ 10%
Returns on Own investment Returns on Borrowed Investment
A = P (1+r)n
A = 1000000 (1+.12)n
?

Today’s cost : Rs 60 Lakh
Expected appreciation : 12%
Invest Rs 10
Lakh own money
Invest Rs 50 Lakhs
By taking home loan @ 10%
Returns on Own investment Returns on Borrowed Investment
A = P (1+r)n
A = 1000000 (1+.12)n
?
Principal = 0 (because not own money)
(1+r)n = A/P
Since P = 0 r = ∞
And not as we think Net Return = 12% - 10% = 2%

Note on Borrowing
• Borrowed money gives ∞ Returns
• And also ∞ Risk (if EMI not paid, entire asset
may be lost)
• So Limit EMI to 25% of Income
• Borrow only for Appreciating Asset
• If Borrowed for depreciating asset the returns
are -∞
• So, No car loan, Personal Loan, Credit card loan

Insurance is an Expense (most important)
Earn
1. Enhance Skills
2. Monetise Hobbies
4. Save Tax
Invest
Spend
1. Insurance Premium (Less than 5% of Net Income)
1. Life Insurance (6 times Net Income)
2. Accident Insurance (6 times Net Income)
3. Health Insurance (Upto Rs 5 Lakh)
4. Critical Insurance (Age > 35, 20 Lakhs)
5. Motor Insurance (depending on vehicle)
Borrow
Home Loan
Education Loan

What are the Investment Products ?
Earn
1. Enhance Skills
2. Monetise Hobbies
4. Save Tax
Invest
1. Banks (FD, RD)
2. Retirement (EPF, PPF, NPS)
3. Mutual Funds (Debt Funds, Index Funds, Equity
Funds, Gold Funds)
4. Real Estate (Flat, Land, Commercial Property)
5. Metals (Gold, Silver etc)
Spend
3. Health Insurance (Upto Rs 5 Lakh)
4. Critical Insurance (Age > 35, 20 Lakhs)
Borrow
Home Loan
Education Loan

Let’s Understand Investment Products
• Recurring Deposits
• Fixed Deposits
• PPF
• NPS
• Stock Market
• Stock
• ELSS (Equity Linked Savings Scheme)
• Gold
• Real Estate

Investment Fundamentals
• If higher returns promised  It will have higher risk
• Higher Return with Lower Risk  Not possible
• But at the same time – Taking higher risk does not automatically guarantee
higher return
• Investment Risk if ignored – Capital Loss
• Investment Risk if avoided - No Return
• Investment Risk if Managed – Positive Returns

Fixed Deposits and PPF
Fixed Deposits
Interest Rate 8.75%
Tax on Interest 30%
Tax Paid 2.63%
Inflation 6.3%
Real Return -0.18%
PPF
Interest Rate 8.7%
Tax on Interest 0%
Tax Paid 0%
Inflation 6.3%
Real Return +2.4%

Why PPF gives higher return?
• PPF has Higher Return  It must have Higher Risk
• Is it Riskier than FD ?
• If so, what are the Risks ?
• Blocked for 15 years
• Interest Rate not guaranteed during tenure
• Liquidity Risk, Interest Rate Risk
• Higher Return  Higher Risk (It is not possible to get higher return
without taking more risk)
• Higher Risk ≠ Higher Return

2007 2012 2013 2014 2012 2013 2014
Hyderabad 100 85 84 95 -3% -3% -1%
Faridabad 100 217 202 211 17% 12% 11%
Patna 100 140 147 154 7% 7% 6%
Ahmedabad 100 174 186 213 12% 11% 11%
Chennai 100 309 303 355 25% 20% 20%
Jaipur 100 78 110 102 -5% 2% 0%
Lucknow 100 171 187 193 11% 11% 10%
Pune 100 200 219 241 15% 14% 13%
Surat 100 145 142 161 8% 6% 7%
Kochi 100 73 86 86 -6% -2% -2%
Bhopal 100 207 227 221 16% 15% 12%
Kolkatta 100 196 189 211 14% 11% 11%
Mumbai 100 197 221 233 15% 14% 13%
Bengalore 100 100 108 108 0% 1% 1%
Delhi 100 172 199 193 11% 12% 10%
Bhuwaneshwar 100 164 195 196 10% 12% 10%
Guwahati 100 159 147 159 10% 7% 7%
Ludhina 100 171 157 147 11% 8% 6%
Vijayawada 100 186 174 163 13% 10% 7%
Indore 100 203 184 187 15% 11% 9%
Chandigargh 100 191 175 11% 8%
Coimbatore 100 178 176 10% 8%
Dheradun 100 184 187 11% 9%
Meerut 100 181 159 10% 7%
Nagpur 100 168 187 9% 9%
Raipur 100 155 166 8% 8%
CAGR from 2007
RESIDEX - Returns on Home Investments in India
Index

Stock Market (NIFTY) Performance
1226 938 1009 1200 942 1183
1495
1100 1068 1100
15371537
2211
3150
4313
3896
4340
5251
5627
5278
5950
7637
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
94-04
95-05
96-06
97-07
98-08
99-09
00-10
01-11
02-12
03-13
04-14
NIFTY
Year

GOLD Performance
4598 4680 5160 4725 4045 4234 4400 4300 4990 5600 58505850
7000
8400
10800
12500
14500
18500
26400
31799
30221
28650
0
5000
10000
15000
20000
25000
30000
35000
94-04
95-05
96-06
97-07
98-08
99-09
00-10
01-11
02-12
03-13
04-14
GOLDPer10gms
Year

It does not matter when investment
was done, 10 years later Stock
Market and Gold Prices was always
higher

Investment in Stocks ≠ Investment in Stock Market
Buy Stock Market, not stocks

Best option to buy Stock Market
• EQUITY LINKED SAVINGS FUNDS (ELSS) – Mostly Index
stocks but proportion varies and hence higher risk –higher
return
• Why it is best ?
• Investments is considered for 80C deductions
• Easy to identify the scheme – Name “Tax” will be there
in the scheme

Making Stock market work
Year Stock
Market
Amount
Invested
Units Bought
1 10 10000 1000
2 8 10000 1250
3 5 10000 2000
4 2 10000 5000
5 1 10000 10000
6 2 10000 5000
7 5 10000 2000
8 8 10000 1250
9 10 10000 1000
10 12 10000 833
Total 1,00,000
(Total
Invested in
10 years)
29333 (Total Units
bought in 10 years)
Option 1 – Invest Rs 10000 every
year for 10 years
Value at the end of 10 years =
29333 * 12 = Rs 351996
Rs 100000 has become 3.5 times
Option 2 : Invest Rs 1 Lakh
lumpsum
Rs 1 Lakh will become Rs 1.2
Lakh
10 Year later stock
market will always
be higher

Always invest in small quantity, regularly –
Automate through SIP
Max Amount to be invested in Stock Market every
month – 20% of Monthly Net Income

10214897
2778056
0
2000000
4000000
6000000
8000000
10000000
12000000
1-Jan-00
1-Jan-01
1-Jan-02
1-Jan-03
1-Jan-04
1-Jan-05
1-Jan-06
1-Jan-07
1-Jan-08
1-Jan-09
1-Jan-10
1-Jan-11
1-Jan-12
1-Jan-13
1-Jan-14
Comparison of 80C Investment Options
ELSS
PPF
Endowment

ELSS – Rs 1 Cr
PPF – Rs 27 Lakh
Why ELSS gave 4 times ?
6% difference in return (8.75% vs 15%)

NPS
Central Gov
Scheme
State Gov
Scheme E (Tier 1) C (Tier 1) G (Tier 1) E (Tier II)
C
(Tier II)
G
(Tier II)
1-Jan-10 12.5618 10.4119 10.5564 10.7497 10.7716 10 10 10
1-Jan-15 19.788 16.9828 17.6984 18.5498 17.3051 16.3184 16.9971 16.5372
Returns 9.5% 10.3% 10.9% 11.5% 9.9% 10.3% 11.2% 10.6%
NAV’s mentioned are for SBI Scheme

NPS
Tier I
Returns 11%
Tax 80C Benefit
Additional Rs
50,000 benefit
Liquidity Can be withdrawn
only after 60 years
of age
Inflation 6.3%
Real Return 4.7%
Tier II
Returns 10%
Tax Less than 3 years –
Based on Tax
Bracket
More than 3 years
– Max 10%
Liquidity Unlimited
withdrawal
without
penalty
Inflation 6.3%
Real Return 0.7% (for 30%
Tax)

NPS Tier II Vs Recurring Deposits

Investment Products
Return Vs Risk

Investment Products : Risk Vs Return
Product Return Tax After Tax Inflation After Inflation RISK
Bank FD-RD 9% 2.7% (30% of 9%) 6.3% 6.3% 0 Capital is protected upto
Rs 1 Lakh only
PPF 8.7% 0 8.7% 6.3% 2.4% Interest Rate Varies,
Money Blocked for 15
years
Index Funds
NIFTY on 3 Jan
2000 – 1592
NIFTY on 1 Jan
2015 - 8284
ELSS
11.6%
15%
0
0
11.6%
15%
6.3%
CII 2000-1 :406
CII 2014-15 :
1024
5.3%
8.7%
Variation in Returns Year
on Year, Block for 15
years, small variation in
capital in short term
Gold
2000 – 4400
2014 - 28500
13% Maximum 10%
1.3%
11.7% 6.3% 5.4% Variation in Prices, Block
for 10 years, Short term
fluctuations in capital
NPS Tier 1
NPS Tier 2
11%
10%
0 – if commuted
10-30%
11%
7%
6.3%
6.3%
4.7%
0.7%
Variation in prices
Real Estate 8-20% Minimum 10% Tax 7% -18% 7% 0-11% Location Risk
Legal Risk
Liquidity Risk
Rental Risk

Ideal Investment products
• NPS
• ELSS
• Real Estate

Invest with Purpose
Purpose is more important than
product. So, Start with Purpose

Invest with Purpose and end goal in mind
No 1 Priority – Short term expenses (Mobiles,
Appliances, Unexpected Travel, Medical, Impulse Buy)
No 2 Priority – Retirement Savings : No other Need is bigger
No 3 Priority Aspirations
Home, Education :
Vacations/Car/Celebrations

Short term needs
• Take “0” Risk  “0” Return is OK
• Protect the Capital
• “0” Risk Investment – NPS Tier II – C
category
• Invest 10% of income every month

Retirement Savings in 20th and 21st Century
•20th Century
•Managed by company
•12%-12%-12% 
Guaranteed pension for
life time
•21st Century
•Best Plan from company– 12%-12%-
8.5% (only 20% of companies offer)
•What 12% 8.5% means ?
•Employee has to double the contribution
-12% to 24%
•If company has no EPF Scheme – then
save 25% of Net Income on own every
month if EPF scheme available then 10%
of Net income every month

Year Annual Exp Year Annual Exp
2015 रु 360,000 2035 रु 1,393,086
2016 रु 385,200 2036 रु 1,490,602
2017 रु 412,164 2037 रु 1,594,945
2018 रु 441,015 2038 रु 1,706,591
2019 रु 471,887 2039 रु 1,826,052
2020 रु 504,919 2040 रु 1,953,876
2021 रु 540,263 2041 रु 2,090,647
2022 रु 578,081 2042 रु 2,236,992
2023 रु 618,547 2043 रु 2,393,582
2024 रु 661,845 2044 रु 2,561,133
2025 रु 708,174 2045 रु 2,740,412
2026 रु 757,747 2046 रु 2,932,241
2027 रु 810,789 2047 रु 3,137,497
2028 रु 867,544 2048 रु 3,357,122
2029 रु 928,272 2049 रु 3,592,121
2030 रु 993,251 2050 रु 3,843,569
2031 रु 1,062,779 2051 रु 4,112,619
2032 रु 1,137,173 2052 रु 4,400,503
2033 रु 1,216,776 2053 रु 4,708,538
2034 रु 1,301,950 2054 रु 5,038,135
Average Annual Expenses for Retired Couple Factors to be applied
Non Metro 0.75
Rented Home 1.3
Less than Rs. 5 Lakh
Health Insurance
1.1
Example:
Today ‘s age : 40, Retiring at 60
Expected life : 80 years
Year of Retirement : 2035
Annual Expenses : 13,93,086
Corpus required : 20 * 13,93,086
= Rs 2,78,61,720
Assumptions – After retirement : ROI
= Inflation, current inflation = 7%, and
assuming no pension

Retirement Purpose
• Take maximum Advantage of Tax saving and
employment benefits schemes
1. 12% + 12 % EPF (or opt for NPS if option is there)
2. Rs 50,000 additional in NPS
3. If any gap in Rs 1,50,000 of 80c – ELSS

Purpose 3 - Aspirations
• Children’s education
• Home
• Car
• Children’s Marriage or Family Function
• Wealth for Next generation

Other Aspirations
Children’s Marriage
•Liquidity is important
• SIP in Index works best
• 10% of Salary in Index
Funds
• If Time to marriage is less
than 5 years – Avoid Index
Funds and invest in NPS Tier
II – C category
• If Time to marriage less than
2 years Choose - FD
Wealth for next generation
• Choose investment you like
•Real Estate
• Equity Funds

Simplified Money Management
Earn More
1. Enhance Skills
2. Monetise Hobbies
4. Save Tax
Invest Monthly
1. Short term Aspirations (Mobile, Gadgets,
Festivals, India Travel) -10% of Net Income in NPS
– Tier II
2. Retirement (Long Term) –Rs 2,00,000 for Tax
Saving – EPF, ELSS, NPS
3. Aspirations (Medium Term) 10 % of Net Income in
Investment which you like
1. Down payment for home
2. Car, Vacation Abroad, Big Family Functions
Spend Less
3. Health Insurance (Upto Rs 5 Lakh Sum
Assured)
4. Critical Insurance (Age > 35, 20 Lakhs, Sum
Assured)
2. EMI or Rent
3. Food & Clothing
4. Bills
5. Unplanned Expenses
Borrow Rightly (EMI to be Max 25% of Net Income)
1. Home
2. Education

Unique 5 level Financial Wellness
Enhancement Approach
Level 5: Enough wealth accumulated for next generation. Investments are done for generating jobs for
society
Level 4: Savings are enough to take care Self + Spouse expenses till 80 years of age. Investments are
being done for benefit of next generation
Level 3: Savings have reached a stage one is saving more than Rs 2,00,000 + 10% of Monthly Income.
One is now saving & investing to meet aspirational needs like Home, Children’s College Education,
Marriage etc
Level 2: Makes full use of Sec 80 C savings and saves Rs 2,00,000 in EPF, ELSS, NPS
Level 1: One is able to comfortably meet normal financial needs even if pay cheque is delayed up to 3
months.
Level 0: Even if salary is delayed by one day, one is put to a lot of stress, due to committed monthly cash
outflow like Insurance Premium, mortgage EMI, etc.

What Next?
1. Make your own plan by visiting www.imoneyplant.com
Financial Wellness Assessment Sheet
1. Automate Today (Participants either did on the same day
or never did)
2. If you find it difficult to go as per the plan write to us at
admin@imoneyplant.com or call 022 2529 8454 (same is
mentioned in the book)
3. Fill up the feedback Form to receive 1 year subscription to
our magazine ‘Financial Wellness” at your residence

•Disclaimer
The information provided here is intended to provide
helpful and informative material on the subject matter
covered. It is given with the understanding that
owner/author/publishers of this material are not
engaged in rendering professional services through this
material. If the reader requires personal assistance or
advice a competent professional should be consulted.
The owners/authors/publishers specifically disclaim any
responsibility for any Loss, Liability, or Risk, personal or
otherwise, which is incurred as a consequence, directly
or indirectly, of the use and application of any of the
contents. The contents are general information that is
intended, but not guaranteed, to be correct or updated.
The information is not presented as a source of
Investment, Tax, Insurance or Legal Advice. You should
not rely on statements or representations made here or
by any externally referenced sources. If you need
investment or tax advice upon which you intend to rely
in the course of your financial or business affairs,
consult a competent, independent financial adviser. The
contents should not be taken as financial advice or as
an offer to buy or sell securities/insurance/fund or any
financial product. It should not be taken as endorsement
or recommendation of any particular company or
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presented is not to be considered as investment advice.
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•Contact
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