Personal Finance Habits of

Salaried Professionals
in India

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 Table of Contents

Summary 4
1. Introduction 7
2. Research Methodology 8
3. Findings 9
3.1 Retirement Planning 10
3.2 Do you have enough savings to counter any
emergencies? 11
3.3 How frequently do you keep track of your expenses 13
3.4 How are the financial decisions made? 14
3.5 How much do you invest in section 80C 15
3.6 Major tax saving Investments 17
3.7 Most common goals 19
3.8 Personal Finance Readiness 21
3.9 View of Professionals and HR on Personal Finance 22
4. Reasons for current Financial State of the Salaried
Professionals 23
5. Conclusion 25

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 Table of Figures

Figure 1: Distribution of Professionals considered for the research

Figure 2: Retirement Planning Status of Entry Level Professionals
Figure 3: Retirement Planning Status of Mid – Level Professionals
Figure 4: Retirement Planning Status of Senior Level Professionals
Figure 5: Emergency Fund Status of Entry Level Professionals
Figure 6: Emergency Fund Status of Mid – Level Professionals
Figure 7: Emergency Fund Status of Senior Level Professionals
Figure 8: Budgeting Frequency of Professionals
Figure 9: Sources of financial advice for Professionals
Figure 10: Distribution of amount being invested in section 80C by
professionals with an annual income of INR 2 - 5 lakhs
Figure 11: Distribution of amount being invested in section 80C by
professionals with an annual income of INR 5 - 10 lakhs
Figure 12: Distribution of amount being invested in section 80C by
professionals with an annual income of above INR 10 lakhs
Figure 13: Distribution of different kinds of tax saving investments being
made by Professionals.
Figure 14: Most common goals of Entry Level Professionals
Figure 15: Most common goals of Mid – Level Professionals
Figure 16: Most common goals of Entry Level Professionals
Figure 17: Personal Finance readiness of the Professionals
Figure 18: Salaried Professionals view on Financial Education as work
place benefit
Figure 19: HR professionals view on Financial education on work place
benefit

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 Summary Personal Finance Habits

Summary :

The research aims to understand and analyze the personal finance habits of the middle
income professionals in India. Their financial decisions today would determine their future
financial strength. The study was conducted on over 2000 salaried professionals. The
professionals participated in the study were classified as:
· Entry – level Professionals : Less than 6 years of work experience
· Mid – level Professionals : 6 -10 years of work experience
· Senior – level Professionals : More than 10 years of work experience.
The research has been conducted on various aspects of personal finance. Summary of
each aspect is shown below.

Are you preparing yourself for retirement? :

Based on the current personal finance habits of the professionals, 91 % cannot afford to
retire at the age of 60. The probability of extending the retirement age is higher for such
professionals owing to lack of enough retirement corpuses.

Only a tenth of Entry Level Professionals have started investing in a retirement plan. Among
the Mid – Level Professionals, only 20% have an investment plan for their retirement. More
than half the Senior Level Professionals 71% haven't yet started investing for retirement.

Do you have enough savings to counter any emergencies? :

The practice of keeping away money dedicated only for emergencies does not exist in
large portion of the population. An emergency fund should account for 3-6 months of
expenses. In the segment of Entry Level professionals, 58% do not have a fund set aside for
emergencies where as 28% have savings equivalent to 1 – 2 months of their expenses.
Among the Mid – Level Professionals, 42.31% do not hold a emergency fund where as
19.23% hold savings which can fund their expenses for 1 – 2 months. One- third (33.33%) of
Senior Level professionals hold savings can fund their expenses for 1 – 2 months where as
37.50% do not have an emergency fund in place. This current state of the employees would
force them to liquidate their existing investments or assets in order to fund their
emergencies.

How frequently do you keep a track of your expenses? :

Most of the professionals generally do not keep a track of where they spend and how much
they spend.Only 26.26% of the professionals are maintaining a healthy track of all their
expenses. Nearly one – tenth (10.61 %) of them review their expenses frequently. Majority of
the professionals (42.93%) review their expenses only occasionally. A fifth of the
professionals (20.20%) review their financials rarely.

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 Summary Personal Finance Habits

Who is advising you in making your financial decisions? :

The poor financial decisions being made by majority of the professionals can be attributed
to the kind of financial advice they get. Friends and Colleagues act as financial advisors for
35.40% of the professionals. Family members are the prime source of financial advisory
30.97% of the professionals. 13.27% of the professionals make financial decisions based on
their self research. Friendly Neighborhood agents advise 15.93% of the professionals. Only
4.42% of the professionals seek advice from an expert financial advisor before making an
investment.

How well are the taxes being planned? :

Tax savings is the nirvana of financial planning for majority of the professionals. But many
bad decisions are being made even in the process of tax planning. At least 8% of the Entry
Level professionals are over doing the tax saving investments. Among the Mid – Level
professionals, 37% under utilize the tax benefits under section 80C and 17% of them are over
doing the tax saving investments. In the segment of Senior Level Professionals, 27% under
utilize the benefits of section 80C where as 53% over invest.

Are you choosing the right tax saving investment? :

Tax saving forms an integral part of investment planning strategies for most of the Indians.
But it is important such tax saving investments compliment one's ability to achieve life's
goals. For 77.46% of the professionals, Insurance is their primary choice as 80C investment
instrument. Among such professionals, 95.86% of them receive their financial advice from
family or neighborhood friends.

Only 6.86% of the professionals invest in Equity Linked Saving Schemes. PPF or EPF is the
primary choice of tax saving investment for 7.95% of the professionals. Among such
professionals, 76.85% of the employees who invest in PPF or EPF stated that they receive
their financial advice from their colleagues.

NSC is chosen by 3.45% of the professionals where as fixed deposit is the primary choice for
4.28%. 83.26% of employees who invest in NSC get their advice from Family.

The tax saving investment patterns recorded depicts the equity aversion of many of the
professionals.

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 Summary Personal Finance Habits

Personal Finance Readiness :

The personal finance readiness of a salaried professional defines the likelihood of one
meeting all his goals in life. It defines:
· How efficiently the cash flows are being tracked.
· How well the investments are being planned.
· How comfortable the retirement phase is going to be.
· How efficiently one can handle any unforeseen/unfortunate events in life.

Only 2.43% Entry Level professionals can be rated high on their personal finance readiness.
Only 7.19% of the Mid – Level professionals and 11.48% of the Senior - Level professionals can
be rated high on their personal finance readiness.

View of Employees and HR on Personal Finance :

Many studies have often stated that providing financial education at work place is directly
proportional to their financial well being. As per the research, the salaried professionals
prefer to get financial education as a workplace benefit. More than half (56.97%) the
professionals stated that providing financial education at work place is highly important
while 33.38% of the professionals rated financial education at workplace as important. One
– tenth (9.65%) of the professional felt that financial education at work place is not
important.

When the same question was posed to the HR professionals, 73.06% of them stated that
financial education at work place is not important. 18.99% of the HR professionals felt it is
important and 7.95% of the HR professionals felt that it is highly important.

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 Introduction Personal Finance Habits

Introduction :

Most professionals generally relate financial well being to either their income or the
accumulated assets. However, planning for the future financial needs is often ignored. The
financial life cycle of a salaried professional follows a specific pattern. At a young age, the
salaried professionals rely on loans and other forms of debt to fulfill their dreams of buying a
car, home etc. During the peak earnings phase they pay off their debts and start saving
towards retirement. Once retired, they draw the money from their savings to take care of
their everyday expenses.

Personal Finance remains one of the most ignored aspects of life. Ideally people would like
to see their hard earned money compliment the hard work they put behind in earning it. But
they often fail to take necessary actions to set their money on a growth path. Most
professionals assume that money management is necessary only when they have a lot of
surplus. But regardless of income level and age, anyone who has income needs to have a
well sketched plan to manage their finances better.

Today, the salaried professionals are expected to make more financial decisions than ever
before. It is also important that the decisions being made are financially prudent as well.
They are being presented with a gamut of financial products for every aspect of their daily
life, be it bank account, credit card, loans, insurance or retirement. Choosing a best suited
product becomes a challenge for the professionals. So managing personal finances also
becomes more important than ever.

This research by ArthaYantra is intended to analyze the current personal finance habits of
the Salaried Professionals and the effect of such habits on their financial well being in the
future. More than 2000+ professionals across different industries with varied work
experiences are studied to capture their current financial habits. The survey captures the
sources of financial advice of these professionals. This is used to analyze the impact of
financial advice source on the individual financial decision making process. The research
captures tax planning habits of the individuals and the avenues of tax saving investments.

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 Research Methodology Personal Finance Habits

Research Methodology :

The study by ArthaYantra is aimed at understanding the current personal finance habits of
the salaried professionals. The data analyzed for the survey is collated from: :

· ArthaYantra's interactions with its current base of clientele.

· Survey conducted by ArthaYantra on salaried professionals across different salary
ranges and different industries.
· Survey conducted by ArthaYantra on 200+ Human Resource professionals across
different industries.

The questionnaire drafted for professional survey was designed to capture the general
personal finance practices. The survey questionnaire for professionals covers a wide range
of personal finance aspects including :

· Spending patterns
· Primary mode of payments.
· Saving routine.
· Frequency of analyzing the expenditures and available surplus
· Status of retirement plan.
· Tax planning strategies
· Common goals and aspirations.
· Sources of financial advice.
· Priority of employee benefits.

The findings are then analyzed to know the impact of their current financial habits on their
potential future well being.

The research segments the professionals as:

· Entry – level Professionals: Professionals with less than 6 years of work experience.
· Mid – level Professionals: Professionals with 6 -10 years of work experience.
· Senior – level Professionals: Professionals with more than 10 years of work experience.

The questionnaire designed for HR professionals tries to capture the common reasons
behind employee attrition patterns and the priority of employee benefits.

Figure 1: Distribution of Professionals considered for the research

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 Findings Personal Finance Habits

Findings :

Are you preparing yourself for retirement? :

“18.64% The changing socio economic structure of the country increases the
importance of the retirement Planning. Indians no longer have the social
Can net of joint families, nor do the majority of them work in government
organizations that provide pension post retirement. The new dynamics of
Afford nuclear family, lack of social security and inflation driven economy has
made funds for retirement important for the professionals and their
family. The adequacy of the retirement funds is dependent on:
to retire
at the · Design of the retirement Plan :
The complexity of designing a retirement plan lies in determining the
age of required retirement corpus, how much to save and where to invest.
· Tenure to achieve required corpus :
60” The design of the retirement plan and tenure are interdependent. The
time at which one starts planning for retirement, determines how long it
would take to achieve the required retirement corpus.

Early planning for retirement is important because it typically takes years

of systematic saving in order to accumulate the ideal amount of funds
for the post retirement phase. Additionally, power of compounding also
works in favor of the early starters. The interest accumulated over the
years also gives the flexibility of investing lesser amounts if started early.

As observed in Figure 2, only 9.29% Entry Level Professionals have started

investing in a retirement plan other than mandatory retirement related
options like PF provided by their organizations.

Figure 2: Retirement Planning Status of Entry Level Professionals

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 Retirement Planning Personal Finance Habits

The retirement planning status of Mid – level and Senior Level Professionals is represented by
Figure 3 and Figure 4 respectively. Only 19.23% of Mid – Level Professionals and 29.63% of
Senior Level Professionals started planning for their retirement.

Figure 3: Retirement Planning Status of Mid – Level Professionals

Neglecting retirement planning during early or mid phases of the career will result in
inadequate funds for retirement. This will force the professionals to either increase their
saving rates during the last few working years or work for longer periods. Based on the
retirement planning status of the professionals studied, only 18.64% can afford to retire at
the age of 60.

Figure 4: Retirement Planning Status of Senior Level Professionals

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 Emergency Fund Personal Finance Habits

Do you have enough savings to counter any emergencies? :

Every individual on an average faces at least three emergencies during

their life time between the age of 30 and 45. These emergencies could “35.75%
range from a job loss to a health scare. It is important to make sure that
money is the last thing one has to worry about during such stressful times. of the
Building an emergency fund is the primary step to avoid any financial
disaster because of any unforeseen or unfortunate events in life. Professionals
Majority of Personal Finance experts advocate to maintain an
emergency fund which accounts for 3-6 months of expenses. are
Emergency fund should be held in assets which guarantee capital
preservation and can be converted to cash quickly. Having an prepared
emergency fund prevents professionals to spiral into financial distress
during difficult times. It also reduces dependency on loans or liquidation
of other assets.
for an
The emergency fund status of Entry Level Professionals is summarized in
emergency”
Figure 5. More than half the Entry Level Professionals (57.47%) do not
have enough savings to support their expenses for at least a month.
More than a quarter of Entry Level Professionals (28.30%) has savings
which account for only 1 – 2 months of their expenses.

Figure 5: Emergency Fund Status of Entry Level Professionals

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 Emergency Fund Personal Finance Habits

Among the Mid – Level Professionals, 42.31% do not hold a emergency fund where as
19.23% hold savings which can fund their expenses for only 1 – 2 months. The detailed stand
of Mid – Level Professionals with respect to their Emergency Fund is shown in Figure 6.

Figure 6: Emergency Fund Status of Mid – Level Professionals

The Emergency fund status of Senior Level professionals does not look promising either.
Majority of these professionals maintain unsatisfactory level of emergency funds. One - third
(33.33%) of them hold savings that can fund their expenses for 1 – 2 months whereas 37.50%
do not have any emergency fund in place. The details are summarized in Figure 7.

The results from the study conducted clearly show the fact the practice of keeping away
money dedicated only for emergencies does not exist in large portion of the salaried
professionals. This current state of the professionals would push them to liquidate their
existing investments or assets in order to fund their emergencies.

Figure 7: Emergency Fund Status of Senior Level Professionals

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 Budgeting Frequency Personal Finance Habits

How frequently do you keep track of your expenses :

One of the best practices of personal finance includes designing a house hold budget and
monitoring it regularly. The most simple and effective home budgeting technique is to list
down all expenses incurred. This helps in identifying the major expense heads where
spending can be minimized. This aids in building a healthy monthly surplus. The home
budgets are to be reviewed at regular intervals to make sure that the financials are on
track. Budgeting frequency can play an important role in identifying ad curbing
unnecessary spending that happens in the family. It would also result in efficient use of the
income received by the family.

Budgeting frequency habits of professionals is summarized in

Figure 8. One out of five Professionals (20.20%) review their “Only 26.26%
financials rarely where as Majority of them (42.93%) review
them occasionally. Only 26.26% of the Professionals are of the
maintaining a healthy frequent track of all their expenses. 10.61
% of the professionals review their expenses frequently. This
signifies the fact that most of us generally do not keep a track of
Professionals
where we spend and how much we spend.
are
maintaining a
healthy
frequent track
of all their
expenses.”

Figure 8: Budgeting Frequency of Professionals

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 How are the financial decisions made Personal Finance Habits

How are the financial decisions made?

The long – term financial impact of every financial decision can be

“Only 4.42% significant. Financial decision making process is often viewed in isolation,
rather than holistically. The benefits of a good financial decision can
of the continue for many years and similarly a bad decision can hurt both short
and long term financial prospects. There is always a wide impact of a
Professionals financial decision, which is often ignored. The ecosystem of that supports
the financial decision making of the professionals includes office, family
and friends. It is this ecosystem that most of the professionals rely upon for
said they any financial advice. Off late office colleagues has emerged as critical
resources of financial advice for the salaried professionals.
seek advice
Friends and Colleagues act as financial advisors for 35.40% of the
from an professionals. Family members are the prime source of financial advisory
for 30.97% of the professionals. 13.27% of the professionals make financial
decisions based on their self research. Friendly Neighborhood agents
expert before advise 15.93% of the professionals. Only 4.42% of the professionals seek
advice from an expert financial advisor before making a financial
making an decision. The composition of sources of financial advice for professionals
is shown in figure 9. Every major decision in life be it buying a home,
investment”. moving into a new city, education of the children, everything has a
financial implication associated with it. The financial implications of such
decisions should be discussed with a financial advisor. Lack of access to
quality advice is the prime reason behind individuals making some
financially bad decisions.

Figure 9: Sources of financial advice for Professionals

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 How much do you invest in section 80C Personal Finance Habits

How much do you invest in section 80C:

One of the major components of tax savings in India is investments that are part of section
80C of the income tax code. These investments bear the advantage of decreasing tax
liability of the individual. However, it is also important to make sure that the professionals do
not exhaust their available surplus in the pursuit of saving tax.

Among the professionals who fit in the salary bracket of 2 – 5 lakhs per annum, 67.96% make
investments worth INR 10,000 – INR 25,000, 18.45% make investments worth INR 25,000 –
50,000. Only 5.83% and 2.91% of them make investments worth INR 50,000 – 75,000 and INR
75,000 – 1, 00,000 respectively. 4.85% of them make investments worth more than INR 1 lakh.
At least 7.76% of these professionals are over doing the tax saving investments. Among such
professionals 98.85% get their financial advice from friendly neighborhood agents and
family and 87.75% of them said insurance is their primary tax saving instrument.

“Nearly
14.97% of the
Professionals
are investing
more than 1 Figure 10: Distribution of amount being invested in section 80C
by professionals with an annual income of INR 2 - 5 lakhs
lakh under In the segment of professionals whose compensation package lies
between 5 – 10 lakhs per annum, 37.18% make investments worth INR
section 80C.” 10,000 – INR 25,000. Nearly a fifth (17.95%) of the professionals makes
investments worth INR 25,000 – 50,000 where as 15.38% of them make
investments worth INR 50,000 – 75,000. Out of the remaining professionals,
12.82% make investments worth INR 75,000 – 1, 00,000 where as 16.67%
make investments worth more than INR 1 lakh. So, 37.18% of the
professionals are not utilizing tax benefits under section 80C and 16.67%
of them are over doing the tax saving investments.

Figure 11: Distribution of amount being invested in section 80C by professionals with an
annual income of INR 5 - 10 lakhs

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 How much do you invest in section 80C Personal Finance Habits

Among the professionals who earn more than INR 10 lakhs per annum, 13.33% make
investments worth INR 10,000 – INR 25,000. Another 13.33% of them make investments worth
INR 25,000 – 50,000. 6.67% of them make investments worth INR 50,000 – 75,000. 13.33% of
them make investments worth INR 75,000 – 1, 00,000 where as 53.33% of them make
investments worth more than INR 1 lakh. So, 26.66% of the professionals are not utilizing the
tax benefits under section 80C and 53.33% of them are over doing the tax saving
investments.

Figure 12: Distribution of amount being invested in section 80C by professionals with an
annual income of INR 2 - 5 lakhs

So among the 2000+ salary professionals studied, most of them either under utilize the
benefits of section 80C or over do the tax saving investments due to their habit of failing to
keep a track of their investments. Lack of financial awareness can be the prime reason
behind under utilization or over doing the tax investments. The second attribute for these
patterns can be the source of financial advice. Especially in the case of professionals who
over do the tax savings, their major source of financial advice is either friends and family or
some neighborhood friendly agent.

The other important aspect of making tax saving investments is the time during which the
investments are made. The best practice of planning taxes is to distribute the payments for
tax saving investments evenly across the year. It is advisable to avoid concentrating or
postponing all the tax saving investments towards end of the financial year. This piles up the
burden on the professionals during the end of financial year, especially if they start tax
saving investments post November. Tax Saving Investments by 28.85% of Entry Level
Professionals are made during January to March. October to December is the preferred
time for 18.27 % of the Entry – Level Professionals. Among the Mid – Level Professionals,
25.71% of Mid – Level Professionals start making tax saving investments during October to
December and 18.57% during January to March. Majority of Senior – Level professionals
start making tax saving investments in the second half of the financial year with 20.83%
starting during October to December and 29.17% during January to March.

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 When do you make tax saving investments Personal Finance Habits

Major tax saving Investments :

The intention of government behind giving this dedcution of 1 lakh is to

promote the habit of savings among the professionals. Inclusion of PF, “Only 22.54%
PPF and EPF is to promote the idea of saving for retirement. Since it is a
mandatory practice for majority of the organisations to provide PF for of the
their employees, one can even opt of ELSS and give an exposure to
equity for their retirement funds also. So given these options it is
important to choose the investments which helps the professionals
Professionals
maximize the benefits of tax savings. The challenge however lies in
picking in suitable products. It is important that the professionals analyze invest in tax
their risk profile and pick the tax saving instruments suitable to them.
saving
The tax saving investments choices by professionals is summarized in
Figure 20. Among the professionals studied, 77.46% stated that Insurance
is their primary choice as 80C investement vehicle. This implies that most
instruments
of the professionals mix their investments with insurance which is not a
good personal finance practice. Amoing the professionals professionals other than
who prefer insurance as their tax saving investment, 95.86% receive their
financial advice from family or neighborhood friends. These are Insurance.”
esentially the agents who have a vested interest of filling their yearly
targets.

Figure 13: Distribution of different kinds of tax saving investments being made by Professionals.

Equity Linked Saving Schemes are preferred by 6.86% of the professionals. This depicts the
equity aversion of many of the professionals. Inclusion of equity in the retirement fund is an
option that is ignored more often than not in India.

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 When do you make tax saving investments Personal Finance Habits

PPF or EPF as a tax saver vehicle is preferred by 7.95% professionals. 76.85% of the
professionals who invest in PPF or EPF stated that they receive their financial advice from
their colleagues.

NSC is preferred by 3.45% of the professionals where as fixed deposits is preferred by 4.28%.
Majority (83.26%) of such professionals get their financial advice from Family.

It is tricky to determine the investment product suitable for the individual without assessing
their current financial situation and future goals. But as per the research results with the
professionals favoring insurance over other investments, it can be said that the strategy
behind their tax saving investments should be revisited and fine tuned.

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 Most common goals Personal Finance Habits

PERSONAL FINANCE OUTLOOK 2013

Most common goals :

When setting goals, every one holds a different set of expectations of

“Saving their life. Their likelihood of achieving the goals set by is directly
for proportional to their financial well being. The financial goals of an
individual can be classified under three segments: Short term goals like
retirement home,
buying a two wheeler buying a car, medium term goals like buying a
children's education and long term goals like retirement. Defining
is the last a goal and determining the amount needed and tenure will help in
setting a specific investment plan in order to achieve them.
priority
In the segment of Entry Level Professionals, the near term goals like
for the buying a two wheeler, buying a car, buying a home, getting married
Professionals.” retirement were rated less on the priority scale.
were on the high priority list. The goals like emergency fund and

Figure 14: Most common goals of Entry Level Professionals

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 Most common goals Personal Finance Habits

PERSONAL FINANCE OUTLOOK 2013

Among the Mid – Level Professionals, child care, children's education, buying a home and
buying a car were on the high priority list. The goals like emergency fund and retirement
plan were rated low on the priority scale even by Mid – Level professionals. The goals like
children's education, children's marriage, and retirement were rated as high priority by
Entry Level Professionals.

Figure 15: Most common goals of Mid – Level Professionals

Retirement is being recognized as an important goal only by Senior Level Professionals.

Failing to realize the long term goals and being concerned about near future may prove
costly for the Entry Level and Mid – Level Professionals.

Figure 16: Most common goals of Entry Level Professionals

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 Personal Finance Readiness Personal Finance Habits

PERSONAL FINANCE OUTLOOK 2013

Personal Finance Readiness :

The personal finance readiness of salaried professionals defines

the likelihood of meeting most of their goals in life. It defines: “Only
· How efficiently the cash flows are being tracked. 6.75% of the
· How well the investments are being planned.
· How comfortable the retirement phase is going to be. Professionals
How efficiently one can handle any
unforeseen/unfortunate events in life. are prepared
These factors form the pillars of a strong financial foundation for
salaried professionals from which they can reap long term
to face an
benefits.
emergency in
Among the Entry Level Professionals, only 2.43% can be rated
high on their personal finance readiness. life.”
These levels are alarming low especially conisdering the
advantages associated with starting saving for futre at an early
stage of career.

Only 7.19% of the Mid – Level professionals can be rated high on

their personal finance readiness. Generally the professionals in
this segment aspire getting a home and also have the burden
of child maintainance costs. The numbers also explain the over
dependence on debt among this segment.

Only 11.48% of the Senior Level professionals can be rated high

on their personal finance readiness. Especially with high child
education costs and other forms of debt like home loans in their
name, these professionals should start managing their financials
better.Unless the financial readiness increases from the current
low levels, adverse economic or personal condition can
negatively impact significant percentage of the professionals.

Figure 17: Personal Finance readiness of the Professionals

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 Personal Finance Habits

View of Professionals and HR on Personal Finance :

Many studies have often stated that the productivity of a

salaried professional is directly proportional to their financial
well being. Financially stressed salaried professionals carry
“56.97%
forward the same levels of mental stress to the work which of the
indirectly affects the productivity of the professionals. Since the
productivity of a professional is affected due to their bad
financial decisions and professionals spend most of their time at
Professionals
their respective working organizations, HR of the organization
does have a role to play in the financial well being of their feel that
professionals. Getting a financial education program in place is
the first step in order to make sure that the professionals are financial
financially literate. This helps professionals in making better
financial decisions and indirectly makes sure that the education
professional is not stressed due to various financial decisions
made or to be made in the future. at work place
The view of salaried professionals and HR professionals is is highly
depicted in Figure 21 and Figure 22 respectively. More than half
(56.97%) the professionals stated that providing financial
education at work place is highly important while 33.38% of the
important.”
professionals rated financial education at workplace as
important. One – tenth (9.65%) of the professional felt that
financial education at work place is not important. These
numbers do signify the fact that the salaried professionals prefer
to get financial education as a workplace benefit.

Figure 18: Salaried Professionals view on Financial Education as work place benefit

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 Personal Finance Habits

When the same question was posed to the HR professionals, 73.06% of them stated that
financial education at work place is not important. 18.99% of the HR professionals felt it is
important and 7.95% of the HR professionals felt that it is highly important. This clearly shows
that the view of employees is a lot different from the HR Professionals when it comes to
financial education at work place.

Figure 19: HR professionals view on Financial education on work place benefit

Reasons for current Financial State of the Salaried Professionals :

Financial literacy :

Financial literacy is defined as an understanding of basic economic concepts which deal

with the art of saving and investments. Lack of financial knowledge and source of financial
advice play a vital role in the sub optimal financial decisions being made by the
employees. The lack of financial literacy is also the driving factor behind the lesser saving
rate among the employees. The spending habits instead of saving habits are being directly
proportional with the increasing salaries of the employees. The various socio economic
factors that drive this factor of lack of financial literacy among the employees are :

· Personal finance is always given a low priority.

· Basics of personal finance are not part of educational curriculum except for some
students from finance background.
· Lack of financial knowledge among family members, especially they being the major
driving force behind financial decision making process.

All these factors play a pivotal role in the current financial state of the employees. Personal
finance is being perceived through the color of tax planning or investment planning. Lack
of knowledge on various personal finance aspects is affecting the financial decision
making process of the employees and their potential financial future. Especially in the
current world where one can find many options for every financial need, it is important they
know the basics of personal finance before making any financial decision.

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 Personal Finance Habits

Behavioral Bias :

Ranging from food habits, dressing style to social etiquette, all aspects of life are influenced
by the social interactions. People learn and implement all the ideas on the basis of their
interactions with colleagues, friends and family. Similarly the financial decisions being
made are essentially controlled by non – financial factors. Individual characteristics
combined with the impact of the society, colleagues, family and friends account for these
major non – financial factors.

The investment decisions are the ones that are affected most due to this behavioral bias of
following the people around us. The positive signal about the investment is being conveyed
by the friend or colleague but not by the market governing factors of the investment. This is
similar to buying a house in a locality because someone advised that the area is going to
flourish in the coming days. So essentially, the utility curve of financial instruments is skewed
because it is not the individual need or demand that is driving the utility curve but the wild
goose chase of the individuals is driving it.

Emotional quotient :

Most of the financial decisions made by the individuals are driven by emotions rather than
objectives. There has always been the social pressure on the middle class to be an owner of
a house rather than a renter. Buying a home is considered, a ticket to a superior standing in
the social circles. Our physiological behavior patterns give us a sense of security, when we
own a home. Similarly the emotional quotient attached with a owning a car surpasses the
pleasure of investing in a retirement fund.

The other underlying emotional factor that can be drawn from the research is instant
gratification. Most of the employees at starting stage of their careers delay the process of
planning and do no concentrate on their finances. The results from the study also show that
most of Entry Level Professionals neither have a retirement plan nor an emergency fund.
Majority of such professionals live from pay check to pay check and rely on credit card for
their bill payments.

The investments being made by the professionals studied also reflect the lack of objectivity
behind their decisions. Professionals often make investments and think they have saved
enough and are happy about it. Assigning a goal to the investments/savings being made is
as important as making savings and investments. Detaching emotions and assigning a goal
to investments will make sure that money is channelized in a more efficient manner.

Lack of Quality Advice :

The indirect factor which is affecting the financial decision making process of the
professionals is the current market structure. The transactional nature of the market played
its part in supporting the myth among professionals that financial advice is costly and
money management is only required for the wealthy. This is the major factor behind the
professionals banking on the advice from their family, friends and colleagues. But majority
of this group of advisors themselves lack the financial knowledge. A group of these advisors
also have a vested interest of selling products and gaining commissions through such
transactions. Providing quality financial advice for vastly diversified salaried professionals is
a concern.

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 Conclusion Personal Finance Habits

New innovations which can leapfrog the existing system and provide the professionals the
much needed quality advice is the need of the hour. Offering personal finance solutions
through online technology can prove beneficial for the professionals. It gives them
convenience to plan their finances at their convenient time. The online personal finance
management techniques provide access to quality financial advice which is also cost
effective.

Conclusion :

Over the past few years the Indian socio economic conditions are changing at a fast pace.
In the social front, most of the Indians no longer have the joint family net to rely on.
Increasing costs in all walks of life have been affecting the standard of living of salaried
professionals. Child care and education costs have become costly. Medical Inflation rate
remained high during the last few years. Private sector has become major employment
provider. We no longer have the pensions to ensure that we have a continuous income
stream even during post retirement phase. So the professionals need to manage their
income between consumption and savings efficiently.

The findings of the study show that most of current professionals are living from pay check to
pay check basis. The financial decisions are being made in isolation and lack a holistic
approach. It is important that they look beyond the short term goals and start preparing
themselves for the long term objectives. The result of current personal finance habits of the
salaried professionals could be catastrophic. It is important to start giving attention to
personal finance when time is on their side.

The employee and employer relation goes beyond the pay check. Professionals spend
majority of their active hours of the day at the workplace. The prosperity of the employer is
directly proportional to productivity of its salaried professionals. Financial distress off late has
proved to be one such factors which is negatively effecting the productivity of the salaried
professionals. The concern of professionals regarding their financials is evident. They have
realized that work place financial education can prove beneficial for them for making
financially well informed decisions. Though realization of importance of personal finance by
professionals is a positive take away from the research, failure to act still remains a concern.
Lack of financial knowledge and access to quality advice are the underlying issues that are
to be addressed in order to make sure that the current salaried professionals are future
ready financially.

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 ArthaYantra A CFO FOR EVERYONE

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