Roadmap to Financial Planning

By
Ms. Muskan Sadhwani, Student – MBA, Sadhu Vaswani Institute of
Management Studies for Girls
Dr. B H Nanwani, Director, Sadhu Vaswani Institute of Management Studies for
Girls.

ABSTRACT
This study will set one's sights on how to gain cognizance about key factors that
influence investment behaviour and ways these factors affect investment risk
tolerance and decision-making process among men and women and among
different age groups. The individuals may be equal in all aspects, may even be
living next door, but their financial planning needs are hugely different. It is by
using different age groups along with Gender that synergism between
investors can be generated. In this context, demographics alone no longer
suffice as the basis of segmentation of individual investors. Hence keeping this
in mind, the present study is an attempt to find out Factors which affects
individual investment decision and differences in the belief of investors in the
decision of investing on basis of age and based on Gender. The study concludes
that investors’ age and gender decide the risk-taking ability of investors. As an
investor and in a financial plan what are the aspects which need to be
investigated and are to be ignored.

Key words:
Risk Coverage, Perceptual factors, Perception of Investors, Security, Opinion
Leadership, Awareness of Investment options, Time Duration.

Introduction:
Financial planning is the process of creating a roadmap to achieve your
financial goals. It involves analyzing your current financial situation,
identifying your financial goals, and developing a plan to help you achieve
those goals. Financial planning takes into account your income, expenses,
assets, liabilities, and investment strategies. The goal is to create a plan that
maximizes your financial resources while minimizing financial risk.
There are several components of financial planning, including budgeting,
investing, retirement planning, tax planning, and estate planning. Budgeting
involves analyzing your income and expenses to create a spending plan that
helps you achieve your financial goals. Investing involves selecting appropriate
investments based on your financial goals and risk tolerance. Retirement
planning involves estimating your retirement income needs and developing a
savings plan to achieve those needs. Tax planning involves identifying tax-
efficient strategies to reduce your tax liability. Estate planning involves creating
a plan to distribute your assets after your death and minimize estate taxes.
Overall, financial planning helps individuals and families achieve their financial
goals and attain financial security. A well-crafted financial plan can help you
save money, reduce financial stress, and provide peace of mind.

The following are the dos and don'ts in a financial plan

Do's:
1. Set clear financial aims and goals: Smartly and clearly defining your
short, medium and long-term financial goals. This may include saving
for retirement, buying a house, or paying off long-term or short-term
debts. Setting specific and measurable goals helps you stay focused
and motivated.
2. Creating a budget: Develop a comprehensive budget that outlines
your monthly income, expenses, and savings. Make sure to track your
spending regularly and adjust your budget as needed to ensure you are
living within your means and saving enough to meet your goals.
3. Building up of an emergency fund: Set up an emergency fund that
covers at least 3-6 months of living expenses. This supplies a financial
safety net in case of unexpected expenses, such as medical
emergencies or job loss.
4. Modify and mix your investments: Invest in a diversified portfolio
that includes a mix of stocks, bonds, and other asset classes.
Diversification helps spread risk and can potentially increase returns
over the long term.
5. Minimize credits and debt: Minimize high-interest debt, such as
credit card debt, as it can significantly affect your financial well-being.
Pay off debts with the highest interest rates first and avoid
accumulating unnecessary debt.
Don'ts:
1. Don't overspend: Avoid overspending and living beyond your means.
Stick to your budget and resist the temptation to splurge on unnecessary
purchases or lifestyle inflation. Overspending can lead to debt and hinder
your ability to achieve your financial goals.
2. Do not neglect retirement savings: Don't neglect saving for retirement.
Start saving as early as possible and contribute regularly to retirement
accounts such as 401(k) or IRA (Individual Retirement Account). Take
 advantage of employer-sponsored retirement plans and seek professional
advice to ensure you are on track for a comfortable retirement.
3. Prohibit ignorance of insurance needs: Don't ignore insurance needs,
such as health, life, disability, and property insurance. Adequate insurance
coverage protects you and your family from unexpected financial
setbacks and add peace of mind.
4. Avoid taking impulsive decisions of investments: Avoid making
impulsive investment decisions based on short-term market fluctuations
or hearsay. Develop a well-thought-out investment plan based on your
financial goals, risk tolerance, and time horizon. Seek professional advice
if needed.
5. Ban the thought that financial education is not important: Don't
neglect the importance of financial education. Stay informed about
personal finance concepts, investment strategies, and tax planning.
Educate yourself and make informed financial decisions to ensure your
financial plan is effective and aligned with your goals.

Literature Review:

Methodology:
Objective of Study:
1. To Study the Concept of Financial Planning
2. To study the investment pattern of an individual.

Case Study Method has been used to study the financial plan of an individual.

Discussion and Analysis:

Mr. Raj Malhotra and his wife Mrs. Simran Malhotra live in Virar, near Mumbai. He works as
Assistant Finance Manager with a leading manufacturing company, while Simran is Assistant
Manager (Administration) in a logistics firm. They have a twelve-year-old son, Arnav and a
nine-year daughter, Riya. Both have struggled in their careers, which prompted Raj to enroll
and complete the Executive MBA a few years before. This professional qualification helped
him to take up the managerial position. They don’t have any investments except the house
property that they acquired in the preceding year by availing home loan.

Mr. Raj Malhotra Mrs. Simran Malhotra

Age 40 years 38 years
Monthly Salary ₹ 1,50,000 ₹ 90,000
Life Insurance Yes Yes
Sum Assured – Sum Assured –
 ₹ 5,00,000 ₹ 2,00,000

Other details:
Average Monthly Household expenses ₹ 50,000
Monthly education expense of children ₹ 16,000
[including school fees, transport and activity fees]
Home Loan EMI ₹ 70,000
Annual Life Insurance premium ₹ 35,000
Home Loan ₹ 60,00,000

The couple is primarily concerned about repaying the huge home loan liability given the fact
that the loan tenure will end near their planned retirement age.
They want to know if they will be able to repay the loan comfortably and opt for prepayment
whenever they receive bonus/increments. Other concerns are planning for the higher
education of their children.

At present, the couple has the following resources at their disposal:

Self-occupied house ₹ 90,00,000
Employee Provident Fund ₹ 10,00,000
Fixed Deposit ₹ 4,00,000
Savings Account ₹ 1,00,000

In the recent times, it has been seen that both the parents in the household are
working. As they dream for giving their child an honourable, noble, moralistic
and good
The usual process which the new moms follow for the time being is that they
leave their child at the day care centres. And it is also analysed that the time
comparatively less and the stress and restlessness is predominantly faced by
both the working parents. Even though the new parents think of giving a good
standard of living. For which they both tend to work for getting good salary or
good amount of money in the household.
Measures for tax planning: -
1) Tax saving options under the Section 80 C of the Income Tax Act, 1961
2) Tax saving options under section 80 D of the Income Tax Act, 1961
3) Tax saving options under section 80 E of the Income Tax Act, 1961
4) Tax saving options form 15 ‘G’ and 15 ‘H’
5) Income Tax Deductions for Donations under section 80 ‘G’

Strategy that MR. & Mrs. Malhotra can take to meet their goals are :
1) ELSS Funds (Equity Linked Saving Scheme).

These funds are a class from the mutual funds which are eligible for deduction
of tax under the provisions of Section 80 C of the Income Tax Act, 1961. These
types of mutual funds are equity-oriented and 65%if their portfolios are
invested.
2) Investing Sukanya Samriddhi Yojana Account which is a government of India
backed saving scheme for girl child. This scheme inspires the parents to plan for
a better educational future for the female child. On 22nd January 2015, this
scheme was launched in collaboration with the Beti Bachao Beti Padhao
Campaign. With 7% interest this scheme also fosters tax benefits.
The account opening process can be done at any India Post Office or Branch of
the authorized commercial banks. For availing the benefits of this scheme, the
maximum age for a girl child must be 10 years. A year’s grace period is granted.
The account is said to be mature on completion of a period of 21 years from the
date when the account was opened.
A minimum deposit of Rs. 250 is to be deposited initially and the maximum
limit for the deposit is 1,50,000.

Can be used – just link it with the text.

Write as per the solution of case study of PFP (Personal Financial Planning) doc
shared with the class.

Conclusion:
This research paper aimed to study the challenges faced by the dual-employed
parents, how they balance work and family responsibilities. Through this
research it is easily seen that the duple-employed parents have created different
strategies for their childcare support. Few of them have office specific facilities.
Numerous of them have made their children busy with different extra-curricular
activities like swimming, educational tuition classes, etc. Dual-employed
parents face various challenges, ranging from managing work schedules to
finding reliable childcare providers. However, they use various strategies such
as flexible work arrangements, seeking help from family and friends, and
involving children in household chores to balance their work and family
responsibilities. By using these strategies, dual-employed parents can maintain
their jobs while also providing their children with adequate care and attention.

There are certain tax saving options in the Income tax Act,1961.
There are also certain schemes, ELSS fund, Sukanya Samridhi Yojana Account,
NPS (National Pension Scheme), Fixed Deposits, Gold ETF (Exchange-trade
fund)

The topic is financial planning for DEWKS – is the above in that relation.
Yes, ma’am I little information about that I have added

References

Randall K.Q. Akee, William E. Copeland, Gordon Keeler, Adrian Angold, and
Elizabeth J. Costello. (2010). AMERICAN ECONOMIC JOURNAL:
APPLIED ECONOMICS, Parents' Incomes and Children's Outcomes: A
Quasi-experiment, VOL. 2, NO. 1, JANUARY 2010 (pp. 86-115)

Chen Joyce. Migration and Imperfect Monitoring: Implications for Intra-

Household Allocation. American Economic Review: Papers and Proceedings.
2006