A

MAJOR RESEARCH PROJECT REPORT

ON
A PROJECT ON STUDY OF FINANCIAL PLANING OF
A SALARIED EMPLOYEES
FOR
SAM COLLEGE OF MANAGEMENT AND TECHNOLOGY
BHOPAL
Submitted In Partial Fulfillment of The Requirement Of Master Of
Business Administration (M.B.A)
SUBMITTED TO

SAM COLLEGE OF MANAGEMENT AND TECHNOLOGY

BHOPAL

SUBMITTED BY
Nandani Bhargava D/O Rajendra Bhargava
MBA IVth Semester (HR/FINANCE)
SESSION: 2020-2022
Roll No. 206390062
 Acknowledgement

First of all, I would like to thank my Advisor Mr. BHARAT for

his untiring guidance, help, effort, and suggestion. Really I am
thankful to him. Without his direct guide this report couldn't be
possible. A very dynamic personality. Mr. BHARAT constantly
inspired us all the time to develop my career and share his
knowledge with us. I shall remain ever grateful for his
extraordinary gesture and relentless effort.

I would like to thank Prof. SATISH SINGH RAJPOOT, Project

Coordinator of us from SAM College of Management for their
valuable Instructions and Guidance during the Internship
program.

Sincerely,
Nandani Bhargava

MBA 4 SEMESTER

(HR FINANCE)
 DECLARATION

I am Nandani Bhargava student of the MBA 4 Semester

of SAM COLLEGE OF MANAGEMENT &
TECHNOLOGY,Bhopal hardy declare that the project report
entitled HR FINANCE, Is my own original hard work based on
every undertaken by me.
I also declare that this report not been submitted to any
university/Institute for the award of any degree of any
professional diploma.

DATE – ...../......./2022

Nandani Bhargava
MBA 4 SEM
BRANCH – HR FINANCE
 COMPANY CERTIFICATE

This is to certify that Institutional Training Report submitted by

Nandani Bhargava SAM COLLEGE OF MANAGEMENT
OF TECHNOLOGY BHOPAL, Barkatullah University, in
Partial Fulfillment of the requirements for the degree of
master of business administration is record of work carried out
by ber under my supervision the contact of this report in full or in
parts have not been submitted in any from to any other institute
ofuniversity for the award of any degree or diploma.

Guide :
5 Financial Planning Tips for Salaried Employees

Most of us have a planned or organized approach towards important events of our life. From career
to buying a new house, we all plan our finances in some way or another. Besides, we should always
remain ready for uncertainties that might take place at any point in life. If you are a salaried
professional, you must be familiar with the month-end financial crunch that haunts no matter how
lucrative the paycheck is. Most of us are left with the daunting thought that where has all the money
gone?

Therefore, many people believe in saving their money as soon as they receive their monthly salary.
That’s right, commonly known as a home’s monthly budget, it is a part of a broader term- financial
planning.
Five Effective Financial Planning Tips for Salaried Employees

Financial planning is a planned way to manage your finances as soon as you start earning.
Especially for salaried employees, it emerges as a powerful tool to make the best out of their hard-
earned money.
1. Monthly Budget

This is the first step to financial planning, where a person must start by saving some money from
their salary each month. Maintaining a written diary as recording the monthly budget can imbibe
the habit of spending wisely. Generally, expenses are categorized into three categories:

a) Needs
b) Wants
c) Savings
Needs consist of basic and unavoidable necessities, such as house rent, electricity, water, and
groceries. Wants include those commodities which do not affect your life if you don’t spend on
them, such as outings, food, and travel. Finally, savings are a specific proportion of your monthly
salary, which you save for future emergencies.

Most financial experts recommend applying the 50-20-30 rule, which means 50% of your monthly
income should go towards the needs, 20% must go to savings and investments, and you can spend
the rest 30% on wants.

2. Insurance for your Family

Investing your saved money into a life insurance plan is a wise step. Insurance is a type of protection
for you and your family that can be availed when in need. Although the banks offer several kinds of
insurances, the following are the major types that most people seek:
a) Term Insurance
b) Health Insurance
For example- Canara HSBC Oriental Bank of Commerce Life Insurance, also known as pure term
insurance, provides life cover for your family of up to 99 years. It guarantees the payment to the
beneficiaries in case the insured person dies during this term. In this way, the needs of the family
can cope up better during a financial shock.

All in all, an insurance plan can be a token for safeguarding you and your family.
3. Clearing Debts

Debt can be a real trap in one’s financial planning if not cleared on time. Yes, unless you close all
your debts, all the earnings and plannings can go in vain as you will be stuck in a vicious circle of
paying your monthly EMI’s.

To avoid getting burdened by debts, go back to step-1 and analyze if you overspend your wants.
Here are some quick tips on living a debt-free life.

a) Repay your credit card bills as soon as you can.

b) Close all your loans on time.
c) If your home loan’s EMI is higher than the rent itself, then you have a decision to make. You can
also use an EMI calculator for such estimations.
d) Don’t get attracted by offers like 0% EMI, Easy EMI, etc.
The foremost is, avoid adding any further debts to your financial portfolio.

4. Goal-based Investments

Once you have started savings, you can invest them in getting a better return. Goals are the real fuel
of investments; thus, you must fix a goal for which you can sacrifice for some time. You can
contact your bank or any investment firm which provides you with the following options.

a) Fixed deposits
b) Bonds
c) Debt funds
d) Mutual Funds
e) Gold
f) Real Estate
g) Shares
It is unnecessary to always aim for high-yielding investments. Understand the balance of low and
high risk before investing.
5. Retirement Planning

This is the last step of financial planning which helps you in your retirement years. Most people
forget this part as half of their lives fade away in paying EMI’s and debts. Here are some essential
tips to secure your autumn years without relying only on your children.

a) Keep in mind to save a minimum of 15-20% of your monthly income as soon as you start
earning.
b) Invest a certain amount of your savings in an index fund for 20-30 years and add 10% extra each
year. At the time of your retirement, the cumulative amount will be more than enough to secure the
rest of your life.
Learn why it is necessary for retirement planning.
 Why do I Need to Have Financial Planning?

Financial planning is a step-by-step approach to managing one’s expenses and savings which
benefit the individuals in the long term. Here are some of the major reasons why one should have
financial planning.

a. Savings

This is the primary reason why financial planning is important in our lives. The money you save or
invest can help you and your family in unfortunate circumstances.

b. Analyze your financial position

It is a great tool to study your current financial situation. You can analyze your income, expenses,
and whether you can achieve your goals. This can help control unnecessary expenses and let you
spend your hard-earned money wisely.

c. Family planning

Financial planning can take into account all your family incomes, debts, health insurance. In this
way, you can achieve an effective family plan, such as planning your child’s education.
d. Dealing with an emergency

Creating an emergency fund through financial planning can help you deal with mishaps like natural
disasters, job loss, and other economic crises.

At first, financial planning may sound like a tricky task. But, a handful of tips can help ease the job
and let you save a lot of money.

Envisioning a secure future for themselves and their family is everyone’s right. Thankfully,
effective financial planning can help you utilize your hard-earned money to achieve a fruitful life
ahead. These strategies of financial planning are extremely useful for the salaried employee for an
economically stable life.
 Study on Financial Planning for Salaried Employees

ABSTRACT--- A financial plan is something that you create after considering your current
income, savings, expenses, future earnings, insurance if any, financial goals and a vision for
your future life. You then try to choose savings and investment options accordingly so that
you can meet your long-term and short-term financial goals at various stages in your lives.
Financial planning is important when it comes to saving taxes. It is imperative for an
individual as it helps in maintaining steady savings percentage even when the financial
markets are constantly being played between inflation and fluctuation.
Tax planning is an essential part of financial planning. Efficient tax planning enables us to
reduce our tax liability to the minimum. This is done by legitimately taking advantage of
all tax exemptions, deductions rebates and allowances while ensuring that your investments
are in line with their long-term goals.

The researcher had conducted a survey in order to find out the financial planning as well as
for tax saving of the salaried individuals. The survey was done within the region of Pune,
Maharashtra for the period of 2 months (1st June, 2020 to 31st July, 2020). The purpose of
the study is also to find out the most suitable and popular tax saving instrument used to
save tax and also to examine the amount saved by using that instrument.

Keywords: Financial planning, tax planning, tax saving instruments.

I. INTRODUCTION

Financial Planning is the process of meeting life goals through the proper management of
finances. Financial planning is a process that a person goes through to find out where they are
now (financially), determine where they want to be in the future, and what they are going to do to
get there. Financial Planning provides direction and meaning to persons financial decisions. It
allows understanding of how each financial decision a person makes affects other areas of their
finances. For example, buying a particular investment product might help to pay off mortgage
faster or it might delay the retirement significantly. By viewing each financial decision as part of
the whole, one can consider its short and long- term effects on their life goals. Person can also
adapt more easily to life changes and feel more secure that their goals are on track.
Today, in India financial planning means only investing money in the tax saving instruments.
Thanks to the plethora of tax exemptions and incentives available under various sections and
subsections of the Income Tax Act. This has led to a situation where people invest money
without really understanding the logic or the rationale behind the investments made. Further the
guiding force in investment seems to be the "rebate" they receive from the individual agents and
advisors. The more the rebate an agent gives, the self-satisfied person are in the belief that they
have made an intelligent decision of choosing the right agent who has offered them more rebate.
In the process what is not being realized is the fact that the financial future is getting
compromised.

II. CONCEPT & SIGNIFICANCE OF THE STUDY

Financial Planning is an integral part of any individual life, especially in this modern world
where value of everything is expressed in terms of money. The active working span of human
life is short as compared to the life span. This means people will be spending approximately
the same number of years in after retirement what they have spent in their active working life.
Thus, it becomes important to save and invest while working so that person will continue to
earn a satisfying income and enjoy a comfortable life style.

III. SCOPE OF THE STUDY

The scope of study is getting familiar with various investment avenues available in market. To
study the life stages of an individual and to identify their risk tolerance, income flow, life
goals and current investment. Study should cover all areas of the individual’s financial needs
and should result in the achievement of each of the individual’s goals.

The scope of planning will include the following:

 Risk Management and Insurance Planning

 Investment Planning
 Retirement Planning
 Tax Planning

IV. OBJECTIVES OF THE STUDY Primary objective:

 To understand financial planning done by salaried employees
 To spread awareness about financial planning among the working-class people
 To understand the saving-investment behaviour ofthe salaried employees
 To understand the importance of tax planning
Secondary Objective:

 To gain knowledge about the various investment avenues keeping in mind the
significance of tax saving

 To understand how savings can be increased for the future using different instruments
 To find out the most suitable investment instrument for salaried investors
 To examine the amount saved by using that instrument

V. REVIEW OF LITERATURE

A large number of salaried tax payers in India start planning their tax saving investments very
late in the year when the time limit for submission of investment evidence is coming to an end
or at the end of the financial year. While it may help you in saving taxes, it might not be the best
decision that you have made.
Given below are the 3 reasons why planning in advance will help you:
 Choose the best option: When you plan ahead, you get time to choose an investment

scheme that will suit your needs and financial condition – how much risk you can take,
your cash requirements, for how long you can invest etc. It will help you arrive at the best
decision.
 Helps in avoiding last minute aggravations and blunders: When you are rushing

making investments, it may lead to unforeseen investment errors. You might not have
enough time to perform due diligence before making an investment decision.
 Plan the schedule for investment payments through the year: When you begin the

investment procedure early in the year, it gives you flexibility for planning payments
during the course of the year.
 Given below are some of the best tax saving investment opportunities in India:

Table 1. Tax Saving Instruments

Total Tax
Sr. no. Tax saving Instruments Tax Benefits Deductio n
Under Section
Section 80C
(Premium & Up to Rs.
1 Life Insurance Section 10(D) 1,50,000
(Death/Maturity)
Up to Rs.
2 Health Insurance Section 80D 55,000
Unit Linked Insurance Plan
Up to Rs.
3 (ULIPs) 80CCC 1,50,000
Up to Rs.
New Pension Scheme (NPS) 1,50,000
4 Section 80CCD Addition
al Rs.
50,000
5 Equity-linke Tax Saving Section 80C Up to Rs.
Scheme (ELSS) 1,50,000

6 Public Provident Fund (PPF) Section 80C Up to Rs.

1,50,000
National Saving Certificate Up to Rs.
7 (NCS) Section 80C 1,50,000

VI. RESEARCH DESIGN:

Type of research design : Descriptive research
Research equipment : Questionnaire
Sampling technique : Non-probability technique- convenience sampling method
Sample size : 190 samples
Sample design : Data has been presented with the help of bar graphs, pie- charts, etc.
Area of research : Pune, Maharashtra.
VI. SOURCES OF DATA:
Both the primary sources and secondary sources of data have been used to conduct the study.
Primary source:

The primary data for this study has been collected by approaching the salaried employees via
internet (digital survey method).

Secondary source:

The secondary data are collected from articles published on various websites (desk research).
VII. DATA ANALYSIS AND INTERPRETATIONS

1. Age of the respondents

Age No. of Percentage

respondents
20-30 126 60%
30-40 41 22%
40-50 15 8%
50-60 8 4%
Grand Total 190 100%

8. 1

The majority of respondents were from the age groups of 20- 30, i.e. 66.%, and 30-40, i.e.
22%. These are considered to be the most active age groups.

The age group of 20-30 is the most dynamic of all age groups. In this age group, an individual has
just begun to start/build a career. This age group is prone to spending lavishly and can be
targeted for investing and saving. On the other hand, the age group of 30-40 are stable and
careful as they have bigger responsibilities like family, home loans, car loans,etc. This is the
stage when they begin to think/plan for a secure future. Hence, they take tentative steps towards
investments.

2. Gender distribution of the respondents:

Gender No. of Percentage %

respondents
Female 74 39%
Male 116 61%
Total 190 100%
8. 2
From the above figure, we can interpret that, from all the respondents, 61% are males whereas
39% are females. Hence, we can say that, the females have started to work shoulder to shoulder
with the males in our developing society.

Annual Income No. of Percentage %

respondents
Up to Rs. 2 lakh 38 20%
Rs. 2-3 lakh 24 13%
Rs. 3-4 lakh 35 18%
Rs. 4-5 lakh 28 15%
Above Rs. 5 lakh 65 34%

Total 190 100%

3. Annual Income of the respondents:

The above figure shows that a major portion of respondents are in income slab of above Rs.5
lakh p.a.,i.e. 34%, this indicates that the person may be in the mature stage of career. On the
contrary, the second major group of respondents belong to the income slab of upto Rs.2 lakh, i.e.
20%, which indicates that he/she might be in the beginning phase of their career. With the rest of
the income slabs, the respondents show a stable phase of their career.

8. 3

4. Occupational status of the respondents:

Occupational status No. of respondents Percentage

%
Teachers/Lecturers 20 11%

Doctors /Engineers 76 40%

Officers 27 14%

Clerks /others 67 35%

Total 190 100%

 8. 4

Most of the respondents were doctors/engineers i.e. 40%, whereas 35% of respondents were
from the category of clerks/others. Respondents belonging to the category of teachers/lecturers
and officers were 11% and 14% respectively.

5. Annual savings of the respondents:

Annual savings No. of Percentage %

respondents
Less than Rs. 25,000 78 41%
Rs. 25,000-50,000 34 18%
Rs.50,000-75,000 19 10%
Rs.75,000-1,00,000 17 9%
More than Rs. 42 22%
1,00,000
Total 190 100%

8. 5
From the figure shown above, we can indicate that majority of the salaried employees have an
annual savings of less than Rs. 25,000, i.e. 41% of the total respondents; and on the contrary 22%
of the total respondents have an annual savings of more than Rs. 1,00,000. It can be said that the
reason behind low/decreasing annual savings can be increasing responsibilies of a middle class
worker, less income, more spending, debts/loans, lack of awareness regarding savings and
investment, and not to forget inflation.The respondents have also shown a slow and
steady/increasing saving pattern after they have completed their expenses, as we can see in the
figure.
6. The motivators of savings of the respondents:

Motivators of savings No. of Percentage

respondents %
To meet specific purpose 85 45%
To earn income 36 19%
To meet contingent 27 14%
expenses
To get tax benefits 3 2%
To be secured at old age 39 20%
Grand Total 190 100%
8. 6

The motivation behind saving cannot be known except for the individual himself. As shown in
the figure above, it can be said that the respondents’ main motivator is to

meet specific purpose, as 45% of respondents have selected this option. These specific purposes
for saving can be personal expenses like buying luxuirious goods, family’s expenses, saving for
children’s future, health expenses, vacations, wedding, etc. Whereas, there are only 2% of
respondents whose motivator for saving is to get tax benefits, which shows that most of them
are not aware about the benefits of tax saving investments.

7. Factors considered by the respondents for increasing the size of savings

No. of Percentage
Factors respondents %
Increase in salary 73 39%
Additional 67 35%
income/increments
Future needs 44 23%

Tax benefits 4 2%
Statutory requirements 2 1%

Total 190 100%

8. 7
The figure shown above indicates that, in order to increase the size of savings, an increase in
salary is expected, as 39% of the salaried respondents have chosen this option. Additional
income/increments also needs to be considered in order to increase savings.Future needs of an
individual can be considered as a factor which pushes an individual towards saving more of their
income as it may benefit at the time of need.Tax benefits and statutory requirements are the
least considered factors while increasing the savings.
 8. Investment preferences of the respondents:

No. of
Investment responses for Percentage %
Preference each respondent
Bank Deposits 71 37.4%
Mutual Funds 72 37.9%
Fixed deposits 66 34.7%
Insurance Policies 38 20%
Govt. Securities i.e., 82 43.2%
PF, GPF/PPF
Post Office deposits 17 8.9%
Equity Market 30 15.8%
Gold 96 50.5%
Total 100%

8. 8

It is observed that half of the respondents (i.e. 50.5%) mostly prefer to invest in gold. Due to
some influencing factors such as high liquidity and inflation-beating capacity, gold is one of the
most preferred investments in India. Gold investment can be done in many forms like
buying jewelry, coins, bars, gold exchange-traded funds, Gold funds, sovereign gold bond
scheme, etc.

9. Respondents’ investment trend in the recent years:

Investment trend No. of Percentage %

respondents
Increasing 79 42%

Decreasing 31 16%

Remaining Constant 80 42%

Grand Total 190 100%

 8. 9

The figure shows that the investment trend of the respondents is either at an increasing stage or
is remaining constant through recent years of investment. We can interpret that, an increase in
investment can be influenced by the increase in income, savings, future needs, decrease in
interest rates, attractive returns on investment, proper knowledge/awareness about the benefits
of investment, etc. On the other hand, decrease in investments can be caused due to lack of
knowledge, disorganised investment, psychological behaviour of the investor, decrease in
income/savings, more spending/expenses, inflating rates, etc.

10. ime horizon of investments

No. of Percentage
Horizon of investments respondents %
Long-term (More than 10 44 23%
yrs.)
Medium-term (More than 5 yrs.) 48 25%

Short-term (More than 1 yr) 21 11%

Very short-term (Less than 1 7 4%
yr)

As per convenience 70 37%

Total 190 100%

8. 10

37% of the respondents prefer to invest as per their convenience. Investment objective to a
greater extend determine the investment tenure and the avenue. Different investment objectives
have different investment avenues to meet them. By determining the objective we can easily
determine the investment vehicle for individuals.
11. Whose advice do the respondents take while investing:

No. of
Investment responses for each Percentage %
Preference respondent

Spouse/family members 81 43%

Friends/ colleagues 24 13%

Company Agents 0 0

Financial advisors 20 10%

Self-decision 65 34%

Grand Total 190 100%

8. 11

Most of the investment decisions are influenced by taking the advise of spouse /family
members(43%) or can be self-made decisions (34%) as well.
Investing money requires a meticulous approach and acting on a piece of advice cells for adopting
an extra layer of caution. In today’s world, the investor, have a plethora of investment options at
their disposal. However, what’s essential is to be aware of the pitfalls and seek help from
seasoned professionals to maximize gains.
12. Where does the respondents get information for your investment:

No. of
Information Sources responses for each Percentage
%
option
T.V & Radio 44 23.2%
Organization Reports 46 24.2%
Family Members & 127 66.8%
Colleagues
Journals & Magazines 54 28.4%
Agents & Advisors 45 23.37%
Total 100%
8. 12
Most of the salaried employees, (i.e. 66.8%) get information from their family members and
colleagues about the benefits investment. We get information about investment at the grass- root
level, i.e. the People. Its only after the people invest their money, getting higher returns, that we
know for sure that, that particular investment will yield rich returns. Although financial
companies try their best in advertising their investment products through T.V., radio, journals,
magazines, etc

13. Initiatives recommended by the respondents to create awareness among salaried

employees about investment:

Recommendations to create No. of

awareness about investment responses Percentage
for each %
option
Training programmes 88 46.3%
Workshops & seminars 109 57.4%
Social welfare programmes 51 26.8%
Advertisements 57 30%
Investors’ meets 80 26.3%
Total 100%

8. 13

From the figure shown above, we can interpret that workshops and seminars as well as training
programmes are amongst the good initiatives for creating awareness about investments among
the salaried employees. As these options help to provide proper information and practical
knowledge to the audience. The traditional method i.e. advertisements are also commonly used
to create awareness but this option is not as much in the trend as the above two options.
 14. Respondents awareness of tax saving instruments :

Awareness of Incorr No Total

tax saving Fully Just Not ect Respo respon
instruments Aware Aware Aware respon nse dents
ses
Life 114 60 10 4 2 190
Insurance
Health 114 59 15 1 1 190
Insurance
ULIPs 34 37 113 2 4 190
NPS 62 74 50 1 3 190
ELSS 38 58 90 0 4 190
PPF 111 48 25 5 1 190

8. 14

Insurance policies like mostly life insurance and health insurance as well as PPF seems to be the
most popular, as most of the respondents are fully aware about these investment instruments.
Whereas, on the contrary, ULIPs, NPS, ELSS and NSC are the least popular tax-saving
investment options as there seems to be lack of awareness about these options amongst the
salaried employees.

15. The type of investment plan does the respondents prefer in future:

Future investment plan No. of responses of

preference each Percentage %
respondent
Regular return plan 92 48.4%
Pension plan 74 38.9%
Medical plan 56 29.5%
Specific purpose plan 35 20%

Multiple option plan 74 38.9%

Total 100%
8. 15

From the above figure, we can conclude that most of the respondents prefer a regular return plan
for future investment, as their main motive for investing might be to get a good return on
investment as they continuously invest. Around 48% people show interest in this type of plan.
The second most investment plan preferred by the respondents are pension plan and multiple
option plan with 38.9% of the preference. Medical plan and specific purpose plan are amongst the
least preferred plans for investment, with 29.5% and 20% respectively.

VIII. FINDINGS

 The study reveals that majority (66%) of the respondents were from the age group of 20-30
years and most of them were from the male category (61%).
 From the annual income, it is found the middle-class as well as the upper middle-class
working employees were the target respondents. The respondents were mostly doctors/
engineers.
 Most of the respondents save less than Rs. 25,000 annually from their annual salaries.
 The motivators for saving for most of the respondents is to meet a specific purpose.
 According to the results, an increase in salary or additional income/increments will help an
individual to increase the size of their savings.
 Gold is found to be the most preferred choice for investment, whereas other investment
preferences include Govt. Securities i.e., PF, GPF/PPF, bank deposits, mutual funds and
fixed deposits.
 The investments trend amongst the respondents is either increasing or decreasing, on the
other hand a few respondents' investment is remaining constant.
 Majority of the salaried employees' do not have a specified time horizon behind their
investment decision as they prefer to invest as and when it is convenient for them. On the
other hand, most of them invest for medium term as well as long term.
 Most of the salaried employees take the advice of their spouse/family members, as they can
be said to be the most trusted individuals. The respondents have also taken their own
decisions for making their own decisions.

 Most of the salaried employees get information about investments from their family
members and colleagues, whereas a few get information from journals and magazines,
organizational reports, T.V and radio, etc.
 From the study, it is found that conducting workshops and seminars is a good initiative to
create awareness amongst salaried individuals about the importance of investments.
 The study has also revealed that most of the salaried employees are not aware about the
benefits of tax saving investments like ULIPs, NPS and NSC. Life insurance, health
insurance as well as PPF are the popular investment options.
 Most of the respondents prefer a regular return plan as a choice for their future. Other
preferences include pension plan, multiple option plan and medical plan.
 IX. LIMITATIONS

 Reluctances of the respondents to provide information can affect the validity of the
responses.
 The lack of knowledge of the respondents about the financial instruments can be a
major limitation.
 The information can be biased due to use ofquestionnaire.
 The study was conducted for 2 months i.e. from 1st June 2020 to 31st July 2020.
 The survey was conducted digitally, hence there was lack of physical presence from
both ends.
 The responses were anonymous.
 Question number 14 from the survey conducted was found to be a little difficult to
understand for a few respondents. Hence, 15 responses were either un- attempted or
answered incorrectly.

X. CONCLUSION

Tax-saving is only a smart part of a broad category called financial planning. There is more to
a financial plan than what meets the eye. For a financial plan to be successful, it should have a
proper investment plan that saves taxes.

Irrespective of the plan you choose, few things remain constant. They are:

 Having well-structured short-term and long-term financial goals at every stage of your
lives
 Starting to save as early as you can, so that it gives you a long window to stay invested
and reap good returns
 Cutting down unnecessary expenses and saving for a better future
 Putting aside at least 10 to 15% of savings every month towards financial or investment
plans, to be used at a time when it is needed the most
 Talking to a professional in case of any queries or ambiguity.
XI. RECOMMENDATIONS

After all this it can be stated that the fundamental corner stones of successful investing are:
 Save regularly
 Invest regularly
 Start Early
 Diversify
 Use tax shelter
 Keep a regular check on investment and modify plans as and when needed
All the documentations should be complete and need to be preserved. At time of maturity it is
necessary to produce the investment documents which act as a proof. But many times, investors
do not have proper documents which dishonours the claim at maturity. It is also recommended
that all the disclosure documents also be preserved as it would help in case of any dispute in
settlement. People need to be educated and informed about Financial Planning as well as tax
saving and this provides a greater opportunity to financial product distributer like ICICI
SECURITIES, TATA Mutual Fund and Reliance Money to educate people. Companies can
arrange for seminars and sessions through which they can provide information to people and in
return can get prospective clients from the audience. In this way both the audience and the
company can also be benefited. Investment through SIP should be encouraged. A little amount
regularly invested for long period can create a greater wealth. SIP helps in Rupee cost averaging,
develop habit of saving and it provides convenience of investment.

Mutual funds could provide better advice to their investors through the net and through the
traditional investment routes where there is an additional channel to deal with the brokers. Direct
dealing with the fund could help the investor with their financial planning. If an investor is
seeking help from advisor then he should collect enough information of product from different
sources. It will help to take proper investment decision and choose a right advisor. It is also
necessary that advisor should have enough experience. Thus, the ultimate responsibility is on the
investor when it comes to taking investment decision.

Goal should be properly divided into short term, medium term and long term. Proper allocation
should be done in various instruments according to the time period of goal. There are various
instruments available which can site different time period needs. If investment is giving regular
return or are going to get matured should be reinvested properly. Financial planning is not a
onetime activity, the initiative should be taken by financial planner to put this forward to their
client. Regular meetings should be conducted between the financial planner and client to review
the investment portfolio. This is one area where many planners are lacking today. Follow-up,
follow-up, follow-up is need of hour and it should be understood by financial service provider.
Financial Planning for Salaried Employee – Sample Plan for Family

Financial Planning for Salaried Employee

Let`s create a sample financial plan for an individual in India with the Simple
Example of a salaried person.

Ajay is a 35-year old, married and having a 7-year old son. He works in a
corporate and earns a decent salary. His wife is 3 years younger than him. Ajay’s
income and Provident Fund details are as follows:

Salary & PF Details

1. Accumulated Amount in PF – 8 Lakhs

2. Monthly Basic Salary – Rs. 60,000
3. Monthly PF Contribution –
1. Employee PF Contribution -Rs. 7200
2. Employer PF Contribution – (Rs. 7200 – Rs. 1250) = Rs. 5950
3. Total PF Contribution – Rs. 13,150
4. Annual Expected hike in basic pay – 5%
5. Eligible for Gratuity – Yes

Since Ajay has been working for the last 8-9 years, he has accumulated a few
assets. The details of which are as follows:

 PPF Account- the Accumulated amount of 7 Lakhs with an annual contribution of

1.5 Lakhs.
 Mutual funds investments of 3 Lakhs with a monthly SIP of 20,000 in direct plans.
 6 Lakhs in Savings Bank/FD/Liquid Funds account for an emergency.
At this particular point of time, these are the only assets that Ajay has in his
possession.

Since Ajay is living along with his parents, he will get the ownership of the house
as an inheritance. For this reason, he is not interested in buying a house.
Nonetheless, he is planning to purchase commercial property for investments.

Monthly Expenses

Here is the list of Ajay’s monthly expenses.

 Household expenses – 40000

 Personal Care Expenses – 10000
 Other Expenses – 10000

Surplus Available For Fresh Investments

The Monthly Surplus available for fresh investments is – 30000. This is in
addition to the ongoing SIPs of 20,000 and PPF of 12,500 per month.

Goals
Here is the list of Ajay’s goals (All figures are in accordance with today`s cost
trends.)

 Child Higher Education after 10 years – 20 lakhs

 Child Marriage after 20 years – 10 Lakhs
 Retirement Expenses – 50,000 per month
 Commercial Property after 10 years – 30 Lakhs
 Vacation every year – 50,000
 Vehicle – 5 Years – 6 Lakhs
Here are some of the possible assumptions regarding life expectancy, inflation,
returns during accumulation and withdrawal phase.

Assumptions
Retirement Age(Years) 60
Longevity: age(In Years) 85
Retirement Expenses per month 50,000
Higher Education(In Lakhs) 20
Marriage (in Lakhs) 10
Education Inflation 8%
General Inflation 6%
Return from Equity 12%
Return from Debt & Real Estate(Long Term) 6%
Return from Retirement Kitty 1% above inflation
Financial Planning for Family – Sample Plan

Insurance Requirements

Before calculating the total needed amount for various goals, let us cover up the
basics. This is so because in case of unfortunate event of death, medical
emergencies or disability, these goals are not impacted.
Life Insurance Amount

With monthly expenses of 50,000, the insurance requirement would be 250 Lakhs.
Considering a child’s higher education and marriage goals of 30 Lakhs, the total
requirement would be 280 Lakhs. Presently, He owns assets worth 24 Lakhs
(PF+PPF+Mutual funds+Emergency Fund). So, here the net requirement would be
256 Lakhs.

On this account, Ajay can go for a term insurance cover of 2.5 Crores.

Health Insurance Amount

Ajay can opt for a family floater health insurance cover of 30 Lakhs. This amount
can be divided into base policy cover of 5 Lakhs and a super top-up cover of 25
Lakhs. (With 5 Lakhs deductibles.)

Though Ajay has a cover of 5 Lakhs through his employer, this 30 Lakhs is to
ensure decent health cover for the post retirement days or any job change etc.

Ideally, both the covers should be bought from the same insurer as it helps in easy
and convenient claim settlement.

Personal Accidental Policy.

Ajay can opt for a cover of 1 Crore with 20 lakhs total temporary disability cover.
It should only be bought from a general insurance company and not as a rider in
term insurance products.

Riders in life insurance companies usually do not cover Total Temporary

Disability and Permanent Partial Disability.
Critical Illness Policy

Since Ajay does not have a family history of any critical illness, there’s no need
for any critical illness policy. Instead, Ajay can increase his health insurance cover
in the coming future with a super top-up policy.

Now let’s take a look at the calculations related to the various goals of Ajay.

Child Education

Child Marriage after 20 years – 10 lakhs

Value of 20 Lakhs after 10 years at 8% inflation rate – 43 Lakhs

How much does Ajay need to invest in order to achieve the target amount of 43
Lakhs after 20 years?

If he invests in 100% equity mutual funds, the amount required would be 21,000
per month assuming 10% returns.

Since the duration of his goal is less than i.e. 10 years, it is not advise able to go
for 100% equity. Ajay can invest 50% in equity and the remaining 50% in debt
instruments. Assuming a total 9% returns of combined equity and debt, Ajay
would need to invest 23,000 per month. The amount would be invested in equity
and debt mutual funds in the ratio of 50:50.
Child Marriage

Child Marriage after 20 years – 10 lakhs

Value of 10 Lakhs after 20 years at 6% inflation rate – 32 Lakhs
How much does Ajay need to invest in order to achieve the target amount of 32
Lakhs after 20 years?
If he invests in 100% equity mutual funds, the amount required would be 5,000
per month assuming 10% returns.
Since the duration of his goal is 20 years, it would be more profitable to invest
100% in equity.
You can also ask as to why the 3 Lakhs in mutual funds have not been used here.
Yes, the amount of 3 Lakhs can be used in either child education or marriage.
Now, we know that the retirement duration is 25 years and Mutual Funds
investments are good for long-term. We will use the same in retirement planning.
Retirement Planning

The monthly amount to be provided in current value: 50,000, Retirement Age – 60

Value of 50,000 after 25 years on retirement @ 6% inflation: 2.15 Lakhs per
month.
This has to continue till Ajay’s wife turns 85, around 28 years. (Assuming
longevity of 85 for this calculation).
Assumed investment return post-retirement period is 1% above inflation.
The Corpus required for this would be somewhere around 6.30 Crores.
Ajay can plan the accumulation of this amount as follows:

1. Ajay will get around 185 Lakhs from his PF accumulation. This is based on the
assumption of 5% increment in PF account every year and 6% interest rate for 25
years.
2. If he invests 1.5 Lakhs every year in his PPF account, he’d get around 112 Lakhs at
age 60. (Assuming that he will invest the amount at the end of the year.)
3. As he already has 3 Lakhs in mutual funds, assuming 10% returns on this
investment, he’d get around 33 Lakhs.

The above-mentioned investments lead to a total of around 330 Lakhs. Out of

which, only 33 Lakhs is in equity i.e. 10% in equity and 90% in debt.

The remaining amount required for Ajay’s retirement is 300 Lakhs.

The monthly investment required to achieve 300 Lakhs in 25 years is 24,000

assuming 10% returns in the long-run. (Gratuity would be extra at the time of
retirement)

Do we need to invest anything in debt apart from the amount of 24,000?

Since the time to achieve the goal is 25 years, the answer to this question is no.
Plus, the debt part is close to 50%. Please take a look at the table.

It’s true that re-balancing would be required when the goal approaches nearer. But
at this point in time, we can increase the equity part.

Now, the total investment required for various goals is 61,500, in addition to PF.
Ajay has a surplus of 62,500 per month along with current SIPs and PPF.

What About The Other Goals?

 Commercial Property after 10 years – 30 Lakhs

 Vacation every year – 50,000
 Vehicle – 5 Years – 6 Lakhs

After investing for child education, marriage, and retirement goal, no surplus
would be left. The only option left is to invest the annual bonus or any other
remaining surplus for these goals. Otherwise, it is better to postpone the goals until
enough funds are accumulated.

For vehicle and vacation – Invest the surplus in debt funds/RD/FD.

Whereas the commercial property- investment can be done in a mix of equity and
debt funds.

For the above-mentioned investment:

Ajay can use a mix of the index fund, multi-cap fund and mid-cap fund for equity
mutual funds. Besides, 1 or 2 debt funds can be set aside solely for debt mutual
funds.

Having gone through this financial planning for a salaried employee, what is your
view? Please feel free to share your opinions with us.