The document provides guidance on managing personal finances through savings and investment. It recommends starting early with regular contributions to take advantage of compound interest over time. The key principles are to first secure basic needs, build an emergency fund, pay down high-interest debt, and then save 10% or more of income with a diversified portfolio of stocks, bonds and mutual funds for long-term goals like retirement. Regular investing in shares through downturns can stabilize returns over decades according to historical data. Discipline and financial education are important to achieve financial success and security.
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How to manage your savings
1. HOW TO MANAGE YOUR SAVINGS
& FOLLOW A HEALTHY PERSONAL
FINANCIAL PLAN
DEYAN VASSILEV / Chairman, Finzoom
www.finzoom.ro
2. THIS PRESENTATION IS 15 % SOLUTION
• It says nothing new and original;
• It explains basic and simple principles of
finance
BUT…..
• Sometimes it requires a lot of patience, focus
and discipline to succeed;
• "85% of your financial success is due to your
personality and ability to communicate,
negotiate and lead. Shockingly, only 15% is
due to technical knowledge.” Carnegie
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3. ABOUT FINZOOM.RO
• FinZoom’s mission is to empower millions of
consumers to make well-informed decisions
about their personal finances.
• 10 years of information and education to
consumers of financial products and services in
Romania.
• FinZoom.ro compares all financial products in
Romania (loans, credit cards, deposits, accounts,
leasing, investment funds and pension RCA).
• Articles, Analyses, Consumer Advices
www.finzoom.ro
4. FINANCIAL PLANNING
A comprehensive evaluation of current and future
financial state by using known inputs to project future
cash-flows, asset values and withdrawal plans.
•Your Budgeting
•Your Net worth
•Setting of your financial goals (really, life goals)
•Adjustments to achieve your goals
•Measure your progress and update plan
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5. FINANCIAL GOALS
• Saving for retirement
• Saving for children’s education
• Buying and apartment (downpayment)
• Buying a car
• Saving for a vacation
• Having an emergency fund
Goals should be clear, compatible and
achievable / realistic.
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6. PERSONAL BUDGET
REVENUES EXPENSES
ACTIVE INCOME Food and clothing
• Salary from labor contract Home
• Free-lance contract Utility bills
• Bonuses Transportation
• Commissions Credits (loans, credit cards)
PASSIVE INCOME Health
• Rent Holidays and travel
• Interest Insurances (life, car, home)
• Capital gains / Dividend Education
• Royalties Hobbies / Sports / Vices /
• Pensions Charity / Other
7. NET WORTH STATEMENT
ASSETS LIABILITIES
Money and equivalents Personal loans
Cash, bank accounts, deposits,
money funds
Credit cards balances
Life insurance value Mortgages and personal loans
Financial instruments Leasing
Shares, bonds, ETFs, Funds Other payables and obligations
Retirement accounts
Personal Assets NET WORTH
Real estate – aparts, land Total Assets – Total Liabilities
Vehicles, Appliances, Gadget
Jewelry, Art, Precious metals
8. SOUND FINANCIAL PLAN STEPS
• Step 0: Track that each month you spend less than you earn;
• Step 1: Secure your basic needs: food, clothing, place to live.
• Step 2: Insure yourself against the basic risks – your home, health, car
• Step 3: Build your emergency, “rainy day” fund
• Step 4: Pay off the expensive consumer loans and credit cards ASAP
(excluding mortgage)
• Step 5: Increase your emergency fund to cover 6 to 10 months of
expenses
• Step 6: Start saving up to 10 % of your income for your retirement (see
calculator)
• Step 7: Save for your other financial goals (education of children,
downpayment for your home, repairs, new car, holiday fund, etc)
• Step 8: Pay off your mortgage loan early but not before the steps before
• Step 9: Keep saving and investing wisely, don’t expect miracles
• Step 10: Continue educating yourself, express your values with your
money
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9. 3 BASIC PRINCIPLES OF SAVING
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1) START EARLY! Use the power of compounding of
interest. The sooner you start the better!
2) Try to set aside 10 % or more of your current
income to have a chance to meet your financial
goals;
3) Save / Invest in a diversified portfolio, at least
some portion should be in shares (the long-term
saving part) and depending on your attitude toward
risk/return
10. START EARLY - RETIREMENT
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Profile Woman
Man Msn3
Born 1984 1984 1970
Retiring 2047 2049 2035
Accumulated 4 000 RON 4 000 RON 4 000 RON
Gross Salary 2 400 2 400 2 400
Contribution 5.1% 122.40 122.40 122.40
Expected return 4 % 4 % 4 %
Total accumulated 101 455 112 867 49 198
Monthly pension 423 RON 470 RON 205 RON
• Obligatory Pensions Calculator:
http://www.finzoom.ro/Calculatoare/calculator-de-p
11. START EARLY - RETIREMENT
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“Power of compounding! The 8th
wonder of the
world! He who understands it – earns it, he who
doesn’t – pays it!” Albert Einstein
Person 1: Saves 100 RON per month for 10 years between 25 35 and
then letting the saved amount accumulate interest over 30 more years.
Person 2: Starts saving 100 RON at the age of 35 till retiring at 65.
(30y years saving plan)
RESULTS TOTAL
DEPOSITED
TOTAL
ACCUMULATED
COMPOUNDED
INTEREST
Person 1 12 000 99 197 87 197
Person 2 36 000 100 959 64 959
12. HOW TO SAVE FOR BETTER RETURNS
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How do Romanians
save now?
Source: Capgemini and RBC Wealth Management, 2013 World Wealth Report. Real Estate excludes primary residence.
13. TOTAL DEPOSITS OF ROMANIANS
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Year Total* Term
≤1 an
Term
> 1 an
2012 99 134 90 939 8 195
2013 104 194 93 708 10 485
2014 106 628 93 847 12 781
2015 106 873 91 520 15 353
Mar 16 106 174 90 351 15 822
*Million RON
Source: National Bank of Romania
15. MONEY IN INVESTMENT FUNDS
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*Million RON
Source: AAF (Asociatia Administratorilor de Fonduri din Romania)
Year Total funds* Domestic Foreign
2012 8 678 8 678 -
2013 10 313 10 230 83
2014 14 244 13 877 366
2015 16 222 15 708 514
Mar 16 16 306 15 833 473
16. DEPOSITS VS MUTUAL FUNDS
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*Million RON
Source: BNR and AAF
Year Total funds* Deposits
Mar 16 16 306 106 174
Share 13 % 87 %
17. (NORMAL) DISTRIBUTION OF WEALTH
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54.7
%
Shares and
alternative
investments
BONDS
CASH AND
DEPOSITS
REAL ESTATE
Source: Capgemini and RBC Wealth Management, 2013 World Wealth Report. Real Estate excludes primary residence.
18. HOW TO INVEST FOR BETTER RETURNS
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OK, Compounding is the 8th
wonder and we are
losing by not using it now…
BUT, HOW TO INVEST FOR HIGHER
RETURN?
The answer is simple:
•Use a reputable mutual fund (international or
local) with solid track record.
•Start with a monthly saving plan (i.e. 50 EUR /
month)
•Be ware of your attitude towards volatility and
periods of losses.
•Past performance does not guarantee future
returns
20. PRINCIPLE OF INVESTING IN SHARES
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Shares and mutual funds in shares are more
risky, i.e. higher returns, but higher volatility
Such investments should be for longer time
horizons – i.e. above 5 years
The regular investor cannot “time the market”,
so it is better to average the cost of buying both
highs and lows in a volatile market.
22. BENEFITS OF REGULAR INVESTING
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DateDate
Price
8
Price
7
Price
5
Price
12
Investment Unit price # Current value
2,500 10 250
Total 2 500 8 250 2,000
Investment Unit price # Cur Value
500 10 50
500 5 100
500 7 71.4
500 12 41.6
500 8 62.5
Общо 2 500 7.68 325.5 2,604
The difference is interesting
Price
10
More for a smaller price.
Ø price 7.68
This graph is only for illustrative purposes
23. EXPECTED RETURNS OVER 30 years
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5,8к
6,7к
7,2к
7,8к
5,4к
49к*
33,5к
22,9к
15,6к
10,7к
12,3к
6,2к
-4,5к
5к
5г 10г 15г 20г 25г 30г
28,1к
48,3к
77,6к
121к
183к
7,3к
The difference would be enough to pay a
pension of ~ 750 monthly for 20 years
+ 100
monthly
50/50 – shares/bons– 7,9%
Deposit – 1.5%
CAGR since 1926
With monthly instalment of 100 – 7,9%
Inflation – 3%
Historical data for S&P
and bonds since 1926г
24. RICHES VS. WEALTH
“The wealthy buy luxuries last, while the poor and middle-class
tend to buy luxuries first. Why? Emotional discipline.”
“The definition of wealth is the number of days you can survive
without physically working (or anyone in your household
physically working) and still maintain your standard of living.”
Robert Kiyosaki, “Rich Dad, Poor Dad”
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