The document provides an introduction to the financial planning process conducted by the Faculty of Management. It outlines the 6 key steps: 1) determining net worth, 2) knowing what you can afford to invest, 3) setting objectives, 4) practicing risk management, 5) establishing an asset allocation model, and 6) finding assistance if needed. It then discusses the key areas of financial planning in more detail, including cash management, investment planning, income tax planning, education planning, insurance planning, retirement planning, and estate planning. The document aims to provide an overview of the full financial planning process.

1. Financial Planning
An Introduction to the Financial Planning Process
Conducted by: Faculty Of Management
Dr. P. D. Madhale
Prof. U. V. Hiremath
Prof. A. S. Bhokare
Prof. S. G. Mane

2. What is Financial Management?
• “Financial management is the activity concerned with
planning, raising, controlling and administering of funds
used in the business.” – Guthman and Dougal
• “Financial management is that area of business
management devoted to a judicious use of capital and a
careful selection of the source of capital in order to enable
a spending unit to move in the direction of reaching the
goals.” – J.F. Brandley
• “Financial management is the operational activity of a
business that is responsible for obtaining and effectively
utilizing the funds necessary for efficient operations.”-
Massie

3. What is Financial Planning?
• Personal Financial planning is the organization of an
individuals financial and personal statistics for the
purpose of maximizing assets and effectively meeting
near and long term goals.
• Accomplished through Cash Flow maximization by
investment asset allocation

4. 6Steps of the Planning Process
• Assets – Liabilities = Net Worth
• Determine type of assets held
III. Set Objectives
IV. Practice Risk Management
V. Establish a model (Allocation)
II. Know what you can afford to invest
I. Learn what your net worth is:
VI. Find assistance if needed

5. I. Determining your Net Worth
• Need to determine your current status and where
you are by assessing what you own and what you
owe (Assets & Liabilities)
• Needs to be updated at least on a yearly basis
• Shows your position, a personal balance sheet

6. II. Know what you can afford to invest
• Establish a three month process
1st Month - Develop your spending pattern
2nd Month - Realign spending to match savings
& investment goals
3rd Month - Make sure revised spending habits are working
• Build cash reserve for emergencies of 3 to 6
months of after tax income
• Once cash reserve met, begin funding for
goals

7. III. Set your Objectives
• Determine investment goals both short and long
term:
 Child’s education, Purchase a new home, Retirement
• Goal should consist of:
 Timeframe in which to acquire fund
 Funds needed to accomplish goal
 What you want to accomplish
• Set savings plan to accomplish goal

8. IV. Practice Risk Management
“ Don’t risk more than you can afford to lose. But,
don’t pay to insure what you can afford to risk”
Professor Robert Mehr, Principles of Insurance
2. Increase deductibles for risk you can afford to self insure
1. Reduce or avoid obvious hazards- seatbelts, smoke detectors,
personal health etc.
3. Make sure you are insured for Health, Life, Disability, LTC, Auto,
Home and Excess Liability (Umbrella) Policies where needed
• Good Financial management protects from perils
that can drain your assets

9. V. Establish a model
(Asset Allocation)
• Allocation is a personal preference that is based on:
• Goals and time frame to accomplish them
• Risk vs. Reward Tolerance
• Age / Family situation
• Your present situation
• Allocation then allocated to items
determined by their risk

10. VI. Find Assistance
• Legal Assistance
• Accounting / Banking Assistance
• Financial Planning Assistance
• Broker Assistance
• If needed find an expert in the appropriate
area for assistance
• Get additional information through books,
seminars, or further education

11. Key Areas of Financial Planning
• Investment Planning
• Income Tax Planning
• Insurance Planning
• Retirement Planning
• Estate Planning
• Cash Management
• Education Planning

12. Cash Management
• The establishment of budgetary controls
over expenditures
• Scheduling of major cash commitments for
future years
• Elimination of negative monthly cash flow
& expansion of daily standard of living
• The evaluation of current debt levels

13. Investment Planning
• Types of Investment Vehicles
• Bonds
• Income Producing (REIT’s, Utilities, Pipelines)
• Mutual Funds
• Equities (Stocks)
•Asset Allocation
•Investment Strategies
•Taxation and Tax Efficient Investments
•Risk vs. Return

14. Income Tax Planning
• Tax Management Techniques
• Deductions
• Other Tax Info
• Tax Calculations for Individuals
• Income Tax on Trusts and Estates

15. Education Planning
• Projecting costs & methods of paying for
schooling
• Developing plan to accumulate the funds
needed
• Utilizing tax advantaged strategies
• Determine additional ways to make up any
shortfalls, student loans etc.

16. Insurance Planning
• A form of risk management
• Why risk Management?

17. • Liquidity Crisis – forced sale of assets at sacrificed prices
• Death - Loss of family earnings
• Disability – Loss or reduction of family earnings
• Sickness – Unlimited medical expense, Loss of earnings
• Property Loss (Theft, Fire, etc.) - loss of assets
• Personal Liability Case – Legal expense & possible
court judgments
For life’s unexpected events

18. Insurance Planning
• A form of risk management
• Types of Insurance
Auto
Home
Health
Long Term Care (LTC)
Life Insurance
Disability Insurance
• Why risk Management?

19. Retirement Planning
• Forecast income requirements during
retirement years
• Determine extent to which net worth can
support these requirements
• Learn benefits & limits of available
resources provided by social security
• Determine sources for preparing, IRA’s
qualified retirement plans, annuities, etc.

20. Estate Planning
• Business & Property Transfers
• Marital and Charitable deduction vehicles
• Federal Estate Tax liability calculation
• Documents of Transfer – Wills & Trusts
• Gifts and federal gift taxation

21. Sample Asset Allocation

22. Faculty of Management