Financial planning - effect of cumulative & early saving
A Presentation to IRSE Probationers
GOVERNMENT IS POOR PAY MASTER
Why have we joined Government service
Why have we joined Railway
For National service
Facilities –Inspection carriage
All the above…….
Money is very important
-one need money for basic needs of life
-home, education , marriage & health care need money
Money required for Living comfortably
How much money to live comfrtably?
Things of comforts are very costly now a days in compare
to 30 yr back
Actualy it is need vs greed .need are limited . Greed is
SITUATION 30 YEAR BACK
Salary of class 1 Asst engineer was Rs 945 per
month & DEN about 1500 per month
Purchase of TV 6 month salary
Purchase of refrigerator 4 month salary
Purchase of scooter -1 yr salary
Purchase of car- 4 yr salary
Purchase of AC 2 to 3 yr salary
Purchase of house -30 yr salary
Today ADEN get Rs 4.2 lakh per year
-HOW MUCH MONEY ONE NEED IN LIFE
With Salary Rs 4.2 lakh per year
Car 1 yr ,AC ,TV.fridge.one to two month salary
-Children education need 3 to 4 yr salary
-Health care- major operation heart ,kidney, brain etc
need 1 to 2 yr salary
-Buying house need 10 yr salary
-to save such money , you need 32 yr of service & have
to save 40 to 50% of your salary annually
Not only you have to save ,you have to invest wisely
– investment advise is whole time carrier
STAGES OF EXPENDITURES
Normally single- for first three year of service
First child after 5 yr of service –( Sr scale 6-7 lakh pm)
2nd child after 8-9 yr of service (JA grade 10 lakh per yr)
Higher education of children after 18 yr of service and
will continue upto 24 yr of service – no saving is possible
during this time from current saving
Buying house-after 25 year of service ( SAG 18 lakh
Children marriage –around 30 yr of service (20 lakh
HOW MUCH ONE SHOULD SAVE
One has to save to meet short & long term
What is family one has to support on long term
As a thumb rule
A family means Husband , wife , 2 children &
parents ( 5 units)
One has to save to meet emergency-6th unit
SAVE & SPEND OR SPEND & SAVE
How much one should save?
Or How much one should spend?
Self , wife, 2 children ,parents & emergency
So six spending units are reasonable
The distribution of expenditure need to be in 6 units
One can decide distribution on his own .My
distribution is as under
Self -25% wife 25% children 30% parents 10%
HOW MUCH ONE SHOULD SAVE
Unmarried – saving 75% of your take home
Married – 50% of your salary
One child -35% of your salary
Two children 20% of your salary
If parent is dependant then 10% of salary
With time ,your salary increases & your initial
saving also start giving return , so you are well
prepared for future liability
INVESTING – CUMULATIVE IMPACT
Normally a person joins service in age group of 22-23 yr
& retires at 60 yr
Effective service is 37 yr
Initial salary as probationer – 4.2 lakh per year @Rs
Each one lakh saved & invested at start of service at a
rate of return of 12% by paying 30% income tax becomes
22 lakh at retirement .One lakh , in any case, one has to
save for income tax
First yr, if you save 3 lakh , it becomes 66 lakh at
retirement ( 37 year)
CUMULATIVE EFFECT OF SAVING
3 yr saving only of Rs 3 lakh per yr ,one get 1.5 cr
to 1.8 cr at the time of retirement depending n your
age of joining
If one continue save even at reduce rate at later
part of service , financial security for entire life is
So key to financial security is start saving early &
investing it wisely
POWER OF CUMULATIVE
HOW LONG YOU SHOULD SAVE
After initial 3 yr saving of Rs 3 lakh per yr, just save
what ever you can in subsequent yr
You may develop saving habit by that time
By 3rd year, you will be promoted and your salary
So you may be able to save more
Please remember – Initial years’ saving will be
lifetime saving & it will make you financially secure
SOME IMPORTANT ASPECTS ABOUT WEALTH
What happened to 8 wealthiest people in the
“In 1923, Eight of the wealthiest people in the
world met. Their combined wealth, estimated,
exceeded the wealth of the government of the
United States. These men knew how to make a
living and accumulate wealth.
what happened 25 years later.
MAKE LIFE RATHER THAN MAKE MONEY
1. President of the largest steel company, Charles Schwab, died bankrupt.
2. President of the largest gas company, Howard Hubson, went insane.
3. One of the greatest commodity traders, Arthur Cutton, died insolvent.
4. President of the New York Stock Exchange, Richard Whitney, was sent to
5. A member of the President’s Cabinet, Albert Fall, was pardoned from jail.
6. The greatest “bear” on Wall Street, Jessie Livermore, committed suicide.
7. President of the world’s greatest monopoly, Ivar Krueger, committed suicide.
8. President, Bank of International Settlement, Leon Fraser, committed suicide.
They forgot to make a life ! Just made
Money provides food for the hungry, medicine
for the sick, clothes for the needy, but is only a
medium of exchange.
we live in a time where earning is a necessity
but let not the earning enter our hearts, for what
was once a means of living will be become a
means of destruction.
The ship needs water, but if the water gets into
the ship, the ship will face problems and sink.
People are engrossed in their professional life
and neglect their family, health and social
Our kids are sleeping when we leave home.
They are sleeping when we come home.
Twenty years later, we’ll turn back, and they’ll
all be gone !!!!!.
One should know “how to make a living and
how to live.”
PLAN & BE CHEERFUL
extra money which is not spent in
your life time is nothing but a piece of
Why get worried for these piece of Papers
LIFE IS PRECIOUS...
LIVE IT AND NOT JUST SPEND IT.........