BMT6127

Financial Planning and Wealth Management

DIGITAL ASSIGNMENT 01

Submitted by

G PRITHIVIRAJ

19MBA0094
Question: What is debt management in Financial Planning? How managing debt and managing
credit card does improves wealth management. Report should be elaborate with relevant
information.

Debt management financial planning is the process of managing the existing debts by using
strategies by planning and budgeting the expenses. It is an agreement between debtor and creditor
in the terms of outstanding debt. Generally debt management helps in lowering the overall interest
rate, secure long repayment terms and overall reduction in the debt.

Debt management planning is made by an individual or agencies or some sort of

companies which helps in order to reduce the monthly payments interest rate on the debts.

Significance of Debt management financial planning:

- Helps in organizing with the bills and payments

- Creation of monthly budget financial goals

- The regular and timely payments improve the credit score.

- Offers credit card consolidation without loan

- Helps in order to reduce the monthly payments interest rate on the debts.

- Planning helps in scenarios like missing the monthly payments or repayment of debts,
may damage the credit score and damages the ability today's new loans in the future.

DEBT MANAGEMENT FINANCIAL PLAN

Includes Excludes
 Over Drafts  Council tax
 Personal Loans  Gas and Electricity bills

 Bank or Building society loans  Child Support and maintenance

 Money Borrowed from locals  Income tax, National insurance

 Credit Card or Payday loans  Hire Purchase Agreements

 Catalogue or home credit  Mortgage or Car loans

Steps for Debt management plan:
1) Create a spreadsheet and fetching the details
2) Determine a debt management strategy to pay off the debt
3) Negotiate lower interest rates
4) Limit expenses to overcome the debt
5) Track your progress and monitor your credit report

Strategies to pay off Debt:

 Debt Avalanche method

 Debt Snowball method

1) Debt Avalanche method:

The debt avalanche method involves making minimum payments on all debt, en using any
th
remaining money to pay off the debt with the highest interest rate. Using the debt avalanche to
pay off debt will save you the most money in interest payments.

 Helps in pay off less interest over the course of debt repayments
 Payments for high interest rates also can be paid simultaneously
 Main benefit is people end of saving more interest

2) Debt Snowball method:

The debt snowball method involves paying off the smallest debts first to get them out of the way
before moving on to bigger ones. The debt reduction strategy plans in pay off your smallest depth
first and then the big dept once the smaller dedt is paid the gain momentum gain towards paying
larger debt.
  Make a list of all debts and model them smallest to largest.
 Making minimum payments on all the debts except small ones
 Playing as much as possible on smaller debt
 Repeating until the debts are paid

Debt management plan Example:

In Tradition the plan takes 3-5 years on analysing the financial stability and budget. Mr.X
has credit card debt of Rs 1,20,000 needs to be paid in 5 years of tenure with monthly payments.
When the repayments are made with one card Mr.X has to pay more interest rates which
comparitively higher than repaying with use of three other cards with different time frames. The
five year goal can up easily by Mr.X. Here the interest payments gets decreased each month as the
balance gets smaller, rather the reduction of payments the interest payment decreased.

Improvement of wealth management by Managing credit card:

The Credit card is to borrow money for spending and able to reset limit. Most of the cases
credit cards have interest free paid up to certain days from the point of purchase

 Using a credit card responsible making payments on time will improve the credit score.
 The lenders get the indicator of the better repayments.
 More the maturity more they increase score high, the Credit card maturity will
improve credit score.
 The consequent minimum repayment or late payments will have a negative impact on
the credit score.

Benefits of Good credit score:

1) Low Interest rates on Credit cards and loans
2) Better chance of loan approvals
3) More Negotiating power
4) Avoid securities deposits on utilities
5) Higher Bargaining rights
Wealth Management credit card scheme by KOTAK:
Kotak Wealth Management Infinite Credit Card is a 'By-Invite' credit card program,
exclusively for Kotak Wealth management clients. Kotak Wealth Management Infinite Credit Card
offers best in class reward program, personalized card, golf privileges and access to prestigious
international events. This card has been designed especially for top of the pyramid customers,
considering their lifestyle and high spending power.

Kotak Wealth Management Infinite Credit Card comes with minimum credit limit of Rs. 10
Lac and an instant credit limit increase* offer to support your big purchases through an additional
spending limit.

Eligibility:
 Primary cardholder needs to have Kotak Wealth Management Banking Relationship
 Primary Credit Card holder should be in the age bracket of 21 years to 65 years. Add-
on Card holder should be 18 years and above
 Location - Ahmedabad, Bangalore, Chandigarh, Chennai, Delhi (including Gurgaon
and Noida), Hyderabad, Kolkata, Mumbai and Pune
 Should be a resident of India

Benefits:

Source: h ttps://www.kotak.com/en/personal-banking/cards/credit-cards/wealth-management-infinite-credit-card/features.html