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Introduction to

Presented by:
Vinod Krishna M. U. – R15PMS15
As part of

Ph.D Course Work – 3
Financial Planning & Financial Services Marketing

REVA University, Bengaluru

What is Financial Planning?
Financial Planning
is the PROCESS
of meeting one’s
life goals through
management of his
finances with the
help of a Financial

Why Financial Planning ?

Kid 2’s


Kid 1’s



Kid 2’s
Kid 1’s

Kid 1
Kid 2


Savings / Investing

Birth and



Working Life


Retired Life

75 +

How to do Financial Planning .

Areas of Financial Planning      Risk Management & Insurance Planning Investment Planning Retirement Planning Tax Planning Estate Planning .

Some future needs… .

Investment Planning .

Equation of Life Income – Expenditure = Savings Income – Savings = Expenditure INVESTMENTS INVEST TO MAKE YOUR MONEY WORK FOR YOU .

" You can become financially secure by winning the lottery. invest it and .It can work for you. or against you. Let it compound! . The surer way is to save money. "The most powerful force in the universe is compound interest..1955) called it the 8th Wonder .Equation to become RICH FV = PV (1 + r) n Albert Einstein (1879 .. When you invest it works for you. When you borrow it works against you! He is quoted as saying.

makes a difference The more you EARN.Enhancing Future Value The more you SAVE. makes a difference FV = PV (1 + r) FV – Future Value of your investments PV – Present Value of your investments r – Rate of Return n – Period of Investment The SOONER you start. makes a difference n .

and Cash. .Asset Allocation Asset allocation is an investment portfolio technique that aims to balance risk and create diversification by dividing assets among major categories such as Gold. Real Estate. Bonds. Stocks.

What drives Portfolio performance? Time Spent Investment Decisions Impact on Returns* 10% Asset Allocation 92% KEY !! 60-70% Security Selection < 5% 20-30% Market Timing < 2% * Study by Brinson. Singer & Beebower. 1986 .

Diversification Don’t put all Eggs in One basket .

Where to Invest? .

Options for investing in Equity • Direct Equity Investments • IPOs (Primary Market) • Buying/Selling Shares/Derivatives/Commodities (Secondary Market) • Portfolio Management Services • Mutual Funds • Lump sum Investment (NFOs & On-going) • Regular Investment – Systematic Investment Plan (SIP) • Unit Linked Insurance Plans • Provides Risk Cover along with Wealth Creation .

Insurance Planning .

Insurance only compensates economic losses suffered by the dependents in case of eventuality. We all are faced with three types of risks.Why Insurance? Insurance is a Risk Management Tool. It tries to reduce the impact of the risk on the owner of the asset and those who depend on that asset. • Risk to Life • Risk to Health • Risk to Assets Concept of Insurance is to protect the economic value of Assets. . It does not prevent its loss. Insurance does not protect the asset.

LTL Income Dying Too Soon .DTS Risk Management House Car Kid 2’s College Kid 1’s College Kid 1 Kid 2 Marriage 0 Birth and Education 25 Age Working Life 60 Retired Life 75 + .Retirement Emergencies???? Kid 2’s Marriage Kid 1’s Marriage ???? Living Too Long .

Life Insurance .

Personal Loan.Imagine what happens to your family’s future needs in your absence because of Uncertainties of Life… Child’s Higher Education Child’s Marriage Family compromising on the current Life Style What about Liabilities like Housing Loan. Vehicle Loan. Credit Card Balance etc… .


Estimate individual’s average lifetime earnings 2. Deduct the self maintenance expenses. insurance premium 3. HLV = Present Value of a person’s future earnings Steps to Calculate HLV 1. taxes.Human Life Value Human Life Value method is used to calculate the amount that is needed by dependents in the case of unfortunate demise of the breadwinner of the family. Determine the balance span of earning life 4. Determine the present value of balance earning for the family .

Simpler Method Use a simple underwriting guideline. Age Multiple of Annual Income 25 25 35 20 45 15 55 10 . frequently used by life insurance companies to suggest proper amounts of coverage.

Pension / Annuities: Post – Retirement Expenses Cover .Life Insurance Plans   Term Insurance: Pure Risk Cover insurance Mortgage Protection Policy: To Cover Long term liabilities like Housing Loan   Endowment: Risk Cover + Savings Money Back Policies: Risk Cover + Saving + Liquidity at regular interval  Unit Linked Plans: preferences + Liquidity   Risk Cover + Returns based on your Child Plans – Secure future needs of your child. marriage etc. for higher education.

Health Insurance .

Health Check up .Waiver for pre-existing diseases 3.2.Pre & Post Hospitalization 5.Income tax benefit 6. Cashless Facility 8.Ambulance Charges 7.Family discounts 1.Cumulative Bonus Health Insurance 4.

Asset Insurance Householder’s Policy .

RETIREMENT PLANNING Risk of Living Too Long .

Living Standard After Retirement Imagine a life without car Dream Home Regular Health Check-ups Routine House Hold Expenses .

Living costs will increase dramatically over the next 20 years Plan for your Long Vacation from TODAY .When do you spend more money… “While at work “ or at “Vacation”?? So what do you think is “Retirement” for you? Shouldn’t you have enough provisions to take care of the increasing costs during your LONG VACATION .“ Retirement” ?? Average Life Expectancy would increase from 75 years to 85 years in the next two decades.

.Different Investment & Protection Plans • Tax Saving Mutual Fund (ELSS) – for 3 Yrs + goals. • Life Insurance • Term Insurance – to cover Liabilities. • Unit Linked Insurance Plans for various needs like • Children’s Higher Education and Marriage • Retirement Benefits • Asset Creation over long term • Health Insurance • House Holder’s policy to take care of your hard earned assets.