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Personal Wealth Management of

Miss Deepti Sinha

Prepared By:Priyanka Shukla


Roll No.- 201109
PGDM (2011-13)

Submitted to :Prof Vinay Dutta


Faculty - Finance
FORE SCHOOL OF MANAGEMENT

Personal Wealth Management : Project

Declaration

I hereby declare that this project work titled Personal Wealth


Management of Ms. Deepti Sinha is a result of an original work done by
me under the guidance of Prof. Vinay Dutta.

(Priyanka Shukla)
Roll No.- 201109

PGDM (FMG 20)


FORE School of Management
New Delhi

ACKNOWLEDGEMENT

I would like to express my profound gratitude to all those who have been instrumental
in the preparation of my report on Personal Wealth Management.
To start with, I would like to thank Prof. Vinay Dutta, Faculty- Finance, FORE
School of Management, for providing me the chance to undertake this project & gain
insights about Personal Wealth Management which would prove out to be very
beneficial to me in my future assignments, my studies and my career ahead.
I express a profound sense of gratitude and veneration to you for your deep insights
and classroom teaching and insightful reading material which provided me with
valuable qualitative data that have formed the backbone of this study.

I would also like to thank my friend and client Miss Deepti Sinha for her continuous
co-operation.

(Priyanka Shukla)

Personal Wealth Management : Project

Contents

Literature Review ...................................................................... 6


Chapter-1 Profile of the Client ............................................... 11
Family background & details:- .................................................................................................11
PAY SLIP .....................................................................................Error! Bookmark not defined.
FINANCIAL FIGURES .............................................................................................................12
Balance Sheet ................................................................................................................................12
CASH FLOW STATEMENT ...................................................................................................13

Chapter-2 Goal Setting...........................................................14


Chapter-3 Budget Reallocation..............................................16
Analysis of current situation.............................................................................................16
Reviewed Cash Flow Statement........................................................................................17
Initial Advice to the Client.................................................................................................19

Chapter-4 Ratio Analysis........................................................20


Basic solvency ratio.............................................................................................................20
Liquidity ratio......................................................................................................................21
Savings ratio.........................................................................................................................22
Debt to Asset ratio...............................................................................................................22

Chapter-5 Suggestion..............................................................24
Chapter-6 How to Use funds to achieve the financial goals.25
Chapter-7 Investment..............................................................27
Portfolio Designing.............................................................................................................28
Equity.............................................................................................................................29
Fixed Income.................................................................................................................30
Mutual Funds................................................................................................................30
Gold Investing...............................................................................................................31

Chapter-8 Tax Planning.........................................................32

TABLE OF QUESTIONNAIRES
1.
2.
3.
4.
5.
6.
7.
8.

Questionnaire 1: Identification of Goals......................................................36


Questionnaire 2: Financial Values................................................................37
Questionnaire 3: Emergency Funds : Are you prepared?..........................38
Questionnaire 4: Are you in a DEBT TRAP?.............................................39
Questionnaire 5: Risk Taking Ability..........................................................40
Questionnaire 6: Test to measure Investment Risk Tolerance..................41
Questionnaire 7: Whats Your Money Attitude?........................................43
Questionnaire-8 :Measuring and Reviewing Insurance Coverage............44

Personal Wealth Management : Project

Literature Review
LIFE
L-Love others and they will love you back
I-Importance in workplace, from family and friends
F-Financial relaxation in mind
E- Empathy to others, since there is no use in living just for self.

If we can define life in this form, financial freedom and tension from all financial burden is a
very important aspect of life. And personal wealth management is the tool to achieve that
goal.

Definition
Personal Money Management involves a whole range of personal wealth
management issues including:
Planning for and reaching your retirement goals,
Securing your personal financial future,
Exploring new revenue/income sources, that are well within your risk threshold,
and
Providing a secure financial future for your family and your loved ones.
In order for you enjoy a comfortable retirement lifestyle, you need to not only protect
all your financial assets, but also to grow your wealth by making your hard-earned
cash work hard for you -before and after your retirement. Additionally, you would
also want to make sure you are doing everything you possibly can for providing for
your family, and for minimizing your taxes -while keeping all your investment
expenses to the minimum.

Considering the diverse range of investment opportunities available in today's highly


fluid and often challenging investment market, it is important that you have access to
an experienced personal wealth management advisor that works hard for you. Your
financial interest is best served by a personal wealth/investment advisor who is
prepared to spend time with you to fully understand not only your unique future

revenue goals and your retirement plans, but also your margin of risk tolerance.
Unlike the many broker-firm affiliated financial advisors whose primary interest is to
make more money for the broker firm (and thereby more commission for themselves),
you should look for an independent financial/wealth management advisor that guides
you in all matters related to reaching your financial goals, and does not charge
excessive fees for the same.

An experienced personal wealth and retirement planning expert is usually wellpositioned to assist you in all facets of personal money management including:
investments options, ongoing investment portfolio management, and tax planning
before and after you reach your retirement.
Experts in personal wealth management perform an important role for clients who
wish to make the most of their financial assets. Beyond just overseeing investments,
handling individual monetary resources can reach past stocks, mutual funds, and
bonds and administer other issues as well. Retirement planning that starts early is a
much easier and more painless way to provide for future needs. Insurance needs and
tax concerns can be difficult to direct without professional help. Money set aside for
educational purposes can offer children the kinds of choices that can influence their
futures in positive ways. Vacation homes and family travel can become a reality
through the skilled administration of finances. All in all, personal wealth management
constitutes a lot more than just paying bills and investing in the stock market. Most
organizations will help clients by going over their individual income and assets and
create a plan of action that is uniquely tailored to them. Whether the need is for asset
protection or trust administration, inheritance issues or tax expertise, consulting
professionals in the field can make the difference between financial success and fiscal
disappointment.

When searching for an organization to handle personal wealth management, there are
a number of qualities to look for. Most agencies are interested in sticking with the
client over the course of their life, so finding a qualified organization is very
important. A potential client should seek professionals that are able to answer
complex questions and are willing to go the extra mile to make sure that a client's
individual needs are met. If an agency is not willing to dedicate a great deal of time to

Personal Wealth Management : Project

develop a plan of action that covers current and long range needs, a client might be
better off going elsewhere. As tax laws and markets change, professionals should be
able to demonstrate that they are taking pains to stay up to date with current
conditions. Is an agency willing to regularly review a client's personal wealth
management issues to make sure that everything is staying on target? As years pass,
families change. Does the agency seem willing to help the client adapt to these
changes and is there an understanding of what these changes can mean to the financial
health and future of the client?

Estate planning is an important part of PWM program. The future of a client's


potential heirs is a very important concern. Clients work a lifetime for assets that they
wish to see passed to the next generation. Careful estate planning can limit the bite
that taxes can take out of a client's holdings after death. Without careful management,
valuable assets can be frittered away. Skilled professionals can work to make sure that
the client's wishes are carried out and disputes over assets are held to a minimum. The
last thing that an individual wants to worry about is estate related issues that tear a
family apart. While no organization can completely prevent such things from taking
place, a well handled estate can diminish the threat of such disagreements. Many
clients also wish to leave a portion of their assets to charity. A skilled financial
professional can help make sure that this wish is carried out and can also work with
surviving members in a professional and courteous manner. The Bible talks about the
value of friendship. "A man that hath friends must shrew himself friendly: and there is
a friend that sticketh closer than a brother." (Proverbs 18:24)

Handling trusts can be another important concern in the area of personal wealth
management. Establishing a trust is an alternative means to ensure that valuable assets
are passed on to loved ones. A trust involves a transfer of assets to institutions or
individuals. A trustee is appointed to oversee these assets. This trustee does not
necessarily own the property, but is responsible for making sure that the wishes of the
client are carried out. The client will remain in control of these assets and could even
appoint themselves as trustee. Concerns over lawsuits and other liabilities often
motivate clients to establish trusts. Assets that have been transferred to a trust will
generally remain protected from risk and from any future claims of creditors. Of
course, knowledgeable expertise in this area is very important since every situation is
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different. Qualified personal wealth management personnel can work with a client to
handle these issues in a way that best suits the client's individual needs.

There are many benefits associated with personal wealth management. By turning
these complex issues over to experts in the financial field, a client is free to handle
other life priorities with reduced stress and less distraction. Seasoned professionals
can look at the life goals of the client and zero in on the best way to meet those goals.
Solid planning can address current as well as future issues. When assets need to be
liquidated, a professional in the field can help an individual do so in the most
advantageous and tax savvy way possible. Saving toward retirement while making
current ends meet can be a real challenge. Financial experts can help clients find
creative and practical ways to meet retirement goals. Since comprehensive company
retirement plans are becoming rarer, a consumer is often left to their devices to plan
for the future. If a company does offer some kind of retirement, the chances of it
actually generating enough cash to live on are slim. Making wise investments and
helping assets to grow is the role of a qualified financial planning agency.

Steps in Personal Wealth management:


There are 5 important steps in financial planning that will remain important
throughout the process.
1.

Organize your current financial condition. This means that you have to organize

everything related to your financial condition such as managing your earning, your
expense, living costs, amount of debts, mortgage and managing your assets. The
knowledge of your current financial condition will help a person to decide which
needs to choose according to its priority.
2.

Defining Your Financial Plan. This is the next crucial step where you must set a

goal of your financial planning activity. Write down your dream for example you
want to go on a vacation to Europe, or you want to buy a car. This is just example but
the most important thing is you must write down a goal that is realistic, specific, and
measurable so it will be clear when you can achieve it.
3.

Identifying alternative ways to reach your goal. There ways to do it such as

choosing a proper investment method.

Personal Wealth Management : Project

4.

Creating and implementing your financial plan. This act should be done after

you set your financial goals and an example of implementing your financial plan is
doing action such as saving money every month, buying gold and etc.
5.

Evaluating your financial plan. If there is something misleading in your

financial planning then you must revise it as soon as possible, for an example if you
do a wrong step in investing you have to change it as soon as possible.

10

Chapter-1 Profile of the Client


Profile of the client
Personal Details:Name:

Deepti Sinha

Age:

24 years

Education qualification:

B.Tech (IT)

Family background & details:Family Members

Occupation

Father

Business

Mother

Home Maker

Brother

Non- Dependent- Student(Expenses covered


by Father)

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FINANCIAL FIGURES
Personal Balance Sheet as on 31st October, 2012.
(Prior to the suggestion of financial planning)

Balance Sheet
Common Size
Assets

Amount (in `)

All in %

LIC

100000

17.95

PF

27000

4.85

Gratuity

10000

1.79

A/c

40000

7.18

Cash in Hand

15000

2.69

Scooty

40000

7.18

Car

140000

25.13

Stereo/Video

15000

2.69

Laptop

120000

21.54

Sundry

50000

8.99

Total

557000

100.00%

Personal Loan

120000

54.54

Credit Card

100000

45.46

Total (B)

Total

220000

100%

Net Worth (A-B)

Net Worth

337000

Liquid Assets
Cash In Saving

Personal
Possessions

Total (A)

Liabilities

12

CASH FLOW STATEMENT


( for the period of 1st Nov 2011
to 31st Oct 2012)
Inflation=10%
Common
Amount

Size

Inflow

2013
(Predicted)

Salary

642000

Bonus

150000

100%

706200
165000
0

Outflow

0
0

Discretionary

Cell Phone

12000

1.86

13200

Connection

12000

1.86

13200

Entertainment

60000

9.34

66000

Restaurants

50000

7.79

55000

health Clubs

10000

1.55

11000

Clothing

30000

4.67

33000

Gifts

50000

7.78

55000

Cosmetics

10000

1.55

11000

Family Trip

25000

3.89

27500

Total

259000

40.34

284900

0.00

Internet

Total (A)

Non
Discretionary

Toiletries

12000

1.87

13200

Home Repairs

6000

0.94

6600

Transportation

10000

1.55

11000

Living expenses

60000

9.34

66000

Electricity

5000

0.77

5500

Personal Wealth Management : Project

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Total (B)

Loan instalment

57600

9.90

Total

150600

23.45

102300

0.00
Total
(A+B)

Expenses
409600

48.19

592994

0.00
Surplus

14

232400

36.13

319000

Chapter-2 Goal Setting


Goal setting is done in accordance with the wish list of the client. Through the questionnaire
filled and the informal interviews I had with the clients, she had the following goals in mind.
1. Clear the debts on credit card as soon as possible.
2. Set up an corpus for monthly expenses during her tenure in MBA college.(joining in
year 2015)
3. Start building a corpus for down payment of a house, which she will buy at age 30.
4. Proper alignment of insurance needs.
5. Set up a retirement corpus.

We will look at these goals in SMART format.

1. Clear the debts on credit card in at most 6 months (Short term 0-2 years)
S-Specific :
M-Measurable :

Clear the debt of Rs 100000.


The debt is Rs 10000.

A- Attainable:

She has a yearly bonus due in March 2013 of Rs. 1.5 lac

R- Realistic :

Same as above

T-Time Bound:

Starting December 2011, she has set a date of 6 months.

2. Set up an corpus for monthly expenses during her tenure in MBA


college(executive MBA of 1 YEAR).(joining in year 2015)
S-Specific :
M-Measurable :

A corpus for footing her expense for 1 year during the course
She needs Rs 10000 per month at current date

A- Attainable:

She will have a surplus of Rs 3.5 lac per year.

R- Realistic :

Same as above

T-Time Bound:

25 months

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3. Start building a corpus for down payment of a house, which she will buy at
age 30. ( MID TERM goal )

S-Specific :
M-Measurable :

A corpus for 10 lac in 7 years.


She needs to save around Rs 1300 per month at current date

A- Attainable:

She will have a surplus of Rs 3.5 lac per year.

R- Realistic :

Same as above

T-Time Bound:

25 months

4.Proper alignment of insurance needs


S-Specific :
M-Measurable :

A insurance for health and car


A yearly payment of around 15000.

A- Attainable:

She will have a surplus of Rs 3.5 lac per year.

R- Realistic :

Same as above

T-Time Bound:

Once a year.

5. Start setting up a retirement corpus for retirement.


S-Specific :

A investment in Public Provident fund for Rs 1 Lac.

M-Measurable :

Rs 1 Lac is an yearly deposit.

A- Attainable:

She will have a surplus of Rs 3.5 lac per year.

R- Realistic :

Same as above

T-Time Bound:

Till retirement

16

Chapter-3 Budget Reallocation

Analysis of current situation:

1. There seems to be an inherent flaw in the way Miss Deepti has been spending her income.
More than 40% of her income goes into discretionary expenses.
It is very high amount.
2. Also her surplus are very less considering that she is staying in accommodation provided
by her father and all other expenses are shared between her housemates(elder brother and
sister) .
3. Also her personnel loan(Rs 1 lac) was to meet her credit card expenses, which were
incurred while she was earning less in her previous job.
It seems to be wrong practice but she has been able to reduce the credit card debt of over Rs 2
lac to 1 lac after taking a personal loan of 1lac. She has not let the expenses pyramid on her
credit card in the last 6 months.
4. There is no income generating asset at this time in the portfolio.
Let us try to realign her expenses (discretionary):
Current

Cell Phone

1000

Internet Connection

1000

Entertainment

5000

Restaurants

4200

health Clubs

900

Clothing

2500

Gifts

4200

Cosmetics

900

Family Trip

2100
21800

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Proposed

Internet Connection

1000

Entertainment

1500

Restaurants

1500

health Clubs

1000

Clothing

1000

Gifts

1000

Cosmetics

900

Family Trip

2100
10,900

We are talking about saving in expenses of about Rs 10900 per month.

Reviewed Cash Flow Statement


Let us look at the new cash flow expense:

CASH FLOW STATEMENT

Common
Amount

Size

Salary

642000

100%

Bonus

150000

Cell Phone

12000

1.86

Internet Connection

12000

1.86

Entertainment

18000

2.81

Restaurants

18000

2.81

health Clubs

10000

1.55

Clothing

12000

1.86

Inflow

Outflow

Discretionary

18

Total (A)

Gifts

12000

1.86

Cosmetics

10000

1.55

Family Trip

25000

3.89

Total

129000

20.1

0.00
Non
Discretionary

Total (B)

Toiletries

12000

1.87

Home Repairs

6000

0.94

Transportation

10000

1.55

Living expenses

60000

9.34

Electricity

5000

0.77

Loan instalment

57600

9.90

Total

150600

23.45
0.00

Total

Expenses

(A+B)

279600

43.55
0.00

Surplus

362400

56.45

We can see that the surplus now becomes very huge, even though the lifestyle is maintained.
This can be explained as below:
1.
2.
3.
4.

Client is residing in a house for which there is no rent expense.


There is no dependent.
Initially her discretionary expenses were very high.
There is no planning involved for retirement or emergency.

Initial advice to the client:


This is the perfect time to save and start planning for the future since her disposable
income is very high and there are no dependents. Also she is not paying any house rent
since she is living in a house owned by her father. But this state is not going to continue
for long.

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Chapter-4 Ratio Analysis:


Personal financial ratios
There are six ratios which help you to do the analyses of your finances and determine
your financial health. They are:

Basic solvency ratio


Liquidity ratio
Savings ratio
Debt to asset ratio
Solvency ratio and
Net invested assets to net worth

Basic solvency ratio


This ratio indicates your ability to meet monthly expenses in case of any emergency
or catastrophe. It is calculated by dividing the near-term cash you have with your
monthly expenses.
Basic solvency ratio = Cash / Monthly expenses (this ratio is not mentioned in
percentage)
You can also call it as emergency or contingency planning ratio. This ratio helps you
prepare for unforeseen problems.
Near-term cash
The numerator of the basic solvency ratio formula, cash (near cash), would generally
comprise of the following heads:
Savings account
Bank fixed deposits
Liquid funds
Cash in hand
The above components are liquid assets which come handy at the first possible hint of
financial trouble. Liquid funds can be redeemed immediately. Same goes for fixed
deposits as they can be broken and liquidated immediately in case of an emergency.
Monthly expenses
Only the mandatory fixed and variable expenses are taken here for simplicity. Any
entertainment expenditure should not be taken as these expenses if need can be
avoided.
Mandatory fixed expenses include the money you pay for EPF/ PPF contribution, loan
EMIs, insurance premium, professional license fees and rent.

20

Mandatory variable expenses, on the other hand, comprise of food, transportation,


clothing/ personal care, medical care, utilities, education expenses and miscellaneous
compulsory expenses (the above expenses can vary depending on individuals).
For Deepti,
Cash= 55000
Monthly expenses= 22000
Therefore Basic solvency ratio= 55000/22000
2.5 times
What sis adequate ratio= atleast 3 months.

How liquid are you?


Liquidity ratio = Liquid assets / Net worth
Where liquid assets comprises of:

Savings account
Bank fixed deposit
Liquid funds
Cash in hand
Equities (shares)
All open-ended mutual funds

And any other type of assets, which can be liquidated within three to four working
days!
What is this ratio for Deepti:
55000/337000
16.3 %.
Is it sufficient?
Yes it is good. Atleast 15% is the ideal ratio.

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Savings Ratio:
Savings ratio = Savings / Gross income, where
Savings include all your regular form of savings such as any systematic investment
plan (SIP) of mutual funds, recurring deposits of post office, or any banks or any
other form of regular savings.
Gross Income includes

Business/ professional income


Salary
Bonus
Employer's Provident fund contribution
Interest/ Dividend
Rent
Any other form of income

Since there is no savings, so this ratio is 0. A pretty bad situation.

Debt to asset ratio


It is the percentage of total assets of an individual that goes towards payment of debt.
This ratio is calculated by dividing your total liabilities by total assets
Debt to asset ratio = Total liabilities / Total assets
Where, total liabilities include:

Personal loan
Car loan
Home loan
Money taken from private moneylenders
Consumer durable loan
Credit card outstanding
Any other form of loan or liabilities you might have taken

And total assets include:

Cash/ Near cash assets like savings account, fixed deposit and liquid funds
Invested assets (market value) which includes your share investments, PPF,
bonds, real estate investments, mutual funds and any other investments
Personal assets include your house, jewellery, car/ scooter and others

22

What is the situation here?


Total liabilities= 200000
Total Asset=550000
Ratio= 36.36%

Is it good?
Yes. Anything below 50% is good enough.

Personal Wealth Management : Project

23

Chapter-5 Suggestions
After seeing the personnel financial ratio and the goals and needs of my client Miss
Deepti, following are my suggestion:

1. This is the perfect time to save and start planning for the future since her disposable income
is very high and there are no dependents. Also she is not paying any house rent since she is
living in a house owned by her father. But this state is not going to continue for long.
2. Saving has to be started from the coming month.
3. There is no good fixed asset like land or house. Investment has to be made in this direction.
4. Invest in PPF, which not only help in post retirement time but also helps in tax benefit.

24

Chapter-6 How to Use funds to achieve the financial goals:


There is a surplus of Rs 362000.
There is a yearly bonus of Rs 150000
So per year we have Rs 500000 for investment purpose.
Of this amount Rs 150000 will be available on year-on-year basis.
And Rs 30000 on per month basis.

1. To create emergency fund: Following the saving rule, 10% of gross income will go
into saving. That means Rs 7000 per month will go to savings.

2. To Invest in PPF: Rs 100000 from yearly bonus will go for this purpose.

3. To invest in mutual fund: Rs 8000 will go for this purpose.

4. Savings for education expenses: As a fund for monthly expenses, Rs 100000 is


required. Time is 25 months. Rs 4000 per month will go for this purpose.

5. Corpus for downpayment for house loan: A corpus of around Rs 1500000 is required.
Considering inflation and rate of return, per month Rs 17500 will go as a investment
for this purpose. Since this money is required after 7 years, investment in equity
(particularly growth shares) is advisable.

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25

Chapter-7 Investment
Investor profile:
We will now try to find a perfect portfolio for Miss Deepti considering her goals and her
profile.

Investor

Deepti Sinha

Age

24

Type Of Investor

Moderate

Occupation

Salaried Person

No. Of Dependents

None

Liability

Very Less

Risk Appetite

Medium

Return Required

Medium

Knowledge

Low

Absorbing Power

Medium

What is portfolio and portfolio management?


Portfolio management involves deciding what assets to include in the portfolio,
given the goals and risk tolerance of the portfolio owner. Selection involves deciding
which assets to acquire/divest, how many to acquire/divest, and when to
acquire/divest them. These decisions always involve some sort of performance
measurement,

most

typically

the expected

return on

the

portfolio,

and

the risk associated with this return (e.g., the expected standard deviation of the
expected return). However, due to the almost-complete uncertainty of future values,
26

this performance measurement is often done on a casual qualitative basis, rather than
a precise quantitative basis (which would give a false sense of precision). Typically
the expected return from portfolios of different asset bundles is compared.

Portfolio Designing
We recommend the following portfolio for Miss Deepti. This portfolio has been
designed keeping in mind the following factors:

Risk- Moderate risk taking ability.

Return Requirements- Moderate return requirements.

Liquidity- Low liquid funds.

Tax- Tax saving funds are Moderate

Time- Since she is yet to start a family many of her requirements are going to
change in future.

Transaction Costs- Investments that require high transaction costs are avoided
as it creates a liquidity issue and also affects the return on investment.

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27

Sales

30%
40%

Equity
Fixed Income
Gold
Mutual Fund

20%

10%

Now let us look at the type of investment option under each instrument:

1. EquityIn equity investment also there can be various kinds of strategy, like investing in
1.
2.
3.
4.

high growth shares


income
balanced
momentum

Again seeing the profile of investor, I will suggest a moderate risk strategy.

Sales
10
40
30

Growth
Income
Balanced
Momentum

20

2. Fixed Income:
28

This is the how investment in Fixed income will be done:

Sales
15

FD
15

NSC

50

Bonds
Savings Bank

20

3.Mutual Funds
Investment strategy for mutual funds:

Sales
10
40
30

Growth
Fixed Income
Balanced
Money Market related

20

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29

4. Gold Investing

Suggestion to invest in gold may seem an odd advice but at such times it is very good option.
Following are the benefits in investing in gold.
Benefits:

Portfolio
diversification

Inflation
hedge

Risk
management

30

Currency
hedge

Demand and
supply

Chapter-8 Tax Planning

Tax Planning in India is an application to reduce tax liability through the finest use of
all accessible allowances, exclusions, deductions, exemptions, etc, to trim down
income and/or capital profits.
Salaried individuals in India are not fully aware of the tax planning exercise which is
why they rush at the end of the tax-planning season and make investments to reduce
their tax liability. This has negative effect on tax payable by them and they eventually
end up paying more taxes than they are required to.
Tax-planning can be done by the following ways
1. Make full use of the entire Section 80C deduction - The maximum reduction
available in Section 80C is Rs 100,000 and salaried citizens whose gross salary is Rs
250,000 or more are entitled to use the full Rs 100,000 limit.
Individuals who make monetary infusions of over Rs 100,000 in Section 80C in
selected areas fail to understand that the advantages are limited. In spite of investing
Rs 70,000 and Rs 40,000 in Public Provident Fund and ELSS respectively, the
amount entitled by the investor is only Rs 100,000.
Following investments/contributions meet the criteria for Section 80C reduction:

Public Provident Fund

Accrued interest on National Saving Certificate

Life Insurance Premium

National Saving Certificate

Tuition fees paid for children's education (maximum 2 children)

Principal component of home loan repayment

5-Year fixed deposits with banks and Post Office

Equity Linked Savings Schemes (ELSS)

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31

2. Reduction of tax liability beyond Section 80C deductions - If your salary


surpasses Rs 250,000 pa and the reductions under Section 80C are not enough to
minimize the general tax liability consider the following:

Home loan: Interest payments of upto Rs 150,000 pa are entitled for reduction
under Section 24.

Medical insurance: A deduction of upto Rs 15,000 pa under section 80D is


applicable under this.

Donations: Tax advantages under Section 80G entitle the donations to


particular funds/institutions.

3. Assert tax advantages on house rent paid - If HRA is not included in the salary
structure then the salaried individuals can asset rent paid by them for residential
lodging. This reduction is accessible under Section 80GG and is smallest amount of
the following:

25% of the total earnings or,

Rs 2,000 every month or,

Surplus of housing charge paid over 10% of total salary

4. Reorganize the salary - Reorganizing the salary and incorporating certain


apparatus can help in the long run in minimizing the tax liability. In order to assert tax

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benefits salary reform is a more competent measure. The following can be included in
an individual's salary structure:

Food coupons can release up to Rs 60,000 per year from tax.

Medical expenses which are compensated by the employer spare up to Rs


15,000 per year.

House Rent Allowance (HRA) should be incorporated in the salaries of


individuals who stay in rented houses

Transport allowance discharge upto Rs 800 per month.

Personal Wealth Management : Project

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References:

http://www.mint.com/blog/goals/12-steps-to-financial-fitness/

HSBC personal wealth management website

http://www.christianet.com/debt/personalwealthmanagement.htm
"The Handbook of Personal Wealth Management"- Jonathan Reuvid

Hinden, Stan, How To Retire Happy: Everything You Need to Know About the 12
Most Important Decisions You Must Make Before You Retire, McGraw-Hill
Professional Publishing, 2000.

Private Wealth Management: The Complete Reference for the Personal Financial
Planner G. Victor Hallman, Jerry S. Rosenbloom McGraw-Hill Professional

Economic Times Website- Retirement Calculator


http://economictimes.indiatimes.com/personal-finance/calculators/retirement-savingscalculator-/right-sum-to-retire-with/calculator_show/6706882.cms

Economic Times- Tax Calculator


http://economictimes.indiatimes.com/taxcalculators.cms

34

Money control .com

Myiris.com

World Wealth Report 2008-Merrill Lynch, Capgemini


http://soundpersonalfinance.coms
Wealth Management July 06 Pvt banking poll-r8 report
The Economist Intelligence Unit, January 2008

Questionnaires
Questionnaire-1
Identification of Goals
1=most important
9= least important
Financial Concerns
6

To minimize income taxes.

To be able to retire comfortably.

To have adequate funds to cover both routine living expenses

& foreseeable future needs.


9

To increase the assets going to my heirs by using various estate

planning
3

techniques.

To accumulate sufficient assets to enable me to increase my

standard of

living, acquire a business, purchase a vacation home

etc.
4

To have sufficient funds & insurance coverage in the event of

serious
5

illness.
To develop an investment program that will provide hedge

against inflation
2

To be able to finance my higher studies.

To enable my family maintain their standard of living in the

event of my

death.

Personal Wealth Management : Project

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Questionnaire-2.
Financial Values
Read the pair of words below, then circle one item in the pair that would be your first choice
in answering the question If you had an extra Rs. 1 Lac, on which of the two items would
you spend your money? You must make one choice in each pair.
Housing (Dream Home)
Investments/ Retirement Savings
Education: Self/Others
Vacation/Travel
Retirement Savings/ Investments
Hobbies/Sports
Social Activities/ Eating Out
Car
Education: Self/Others
Housing (Dream Home)
Personal Appearance/Grooming/ Clothes
Car
Retirement Savings/ Investments
Hobbies/Sports
Hobbies/Sports
Car
Housing (Dream Home)
Vacation/Travel
Vacation/Travel
Charitable Giving/Religious Activities

Hobbies/Sports
Charitable Giving/Religious Activities
Vacation/Travel
Personal Appearance/Grooming/ Clothes
Charitable Giving/Religious Activities
Social Activities/ Eating Out
Housing (Dream Home)
Retirement Savings/ Investments
Hobbies/Sports
Housing (Dream Home)
Charitable Giving/Religious Activities
Social Activities/ Eating Out
Personal Appearance/Grooming/ Clothes
Vacation/Travel
Retirement Savings/ Investments
Social Activities/ Eating Out
Education: Self/Others
Car
Personal Appearance/Grooming/ Clothes
Education: Self/Others

Total the number of times you circled each item in the pair activity
Rank your values
Car

Charitable Giving

Education

Hobbies/Sports

Housing

Personal Care

Social

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Questionnaire 3:Emergency Funds: Are you prepared?


Is your job stable?

Not at all

More

or Completely

less
How dependent are you on interest, dividends and Totally

Slightly

Not at all

capital gains on your investments to cover your


regular expenses?
Do you have life, health, auto and disability Little/No

Some risks All

insurance?

Covered

cover

As a multiple of your regular monthly expenses 15 days

risk

Covered

Two months Three

(including loan repayments and insurance premiums),

months

how much of your investments are in liquid options


like savings account, savings cum deposit accounts
and liquid funds?
What is the percentage of regular income generating 0-5
assets to your net worth?

6-15 percent Over


percent

percent

Do you have access to comparatively cheap credit like No access

Limited

Ample

overdraft facilities against assets like shares and

access

access

home?

Personal Wealth Management : Project

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15

Questionnaire 4:Are you in a DEBT TRAP?

You have more than three credit cards.

Yes

No

You are using your savings to pay current Yes

No

expenses.
If you or your spouse lost your job, you have less Yes

No

than three months take-home pay in a liquid


instrument.
You usually only make the minimum payment Yes

No

on your credit cards.


You are over the limit on your credit cards.

Yes

No

You dont know how much you owe.

Yes

No

You make late payment a habit.

Yes

No

You charge more on your cards each month than Yes

No

you make in payments.


Has a collection agency called recently about an Yes

No

overdue bill?
Are you threatened with repossession of your Yes
car, cancellation of your credit cards, or other
legal action?

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No

Questionnaire 5
RISK TAKING ABILITY
1. How do you think of risk in a money context?
a. Danger

b. Uncertainty

c. Opportunity

2. How easily do you adapt when things go wrong financially?


a. Not easily

b. Some resistance

c. Very easily

3. In a new job, you want


a. Security and pension

b. Salary and security

c. High salary

4. Your portfolio has


a. Only PF and FDs

b. PF, FDs and funds

c. Mostly funds and

stocks

5. How much fall in your investment makes you panic?


a. Any fall

b.

10%

c.

20%

6. If a bluechip crashes, will you buy more?


a. Definitely not

b. Not sure

c. Definitely

7. A PSU bank making an IPO is offering a soft loan to subscribe. Will you take it?
a. No.

b.

Maybe

c. Yes

8. Hows your investment knowledge?


a. Bad

b. Average

c. Good

9. How important is it to make your money inflation-proof?


a. Not important

b. Not sure

Personal Wealth Management : Project

c. Very important

39

Questionnaire 6Test to Measure Investment Risk Tolerance

1. You are winner of a TV game show. Which price would you choose?

Rs 30,000 in cash ( 1 point)

A 50 percent chance to win Rs 60,000 (3 points)

A 20 percent chance to win Rs 150,000 ( 5 points)

A 2 percent chance to win Rs 1,500,000 ( 10 points)

2. You are down Rs 15,000 in a game. How much you would be willing to put up to
win Rs 15,000 back?

More than Rs 15,000 ( 8 points)

Rs 15,000 ( 6 points)

Rs 7,500 (4 points)

Rs 3,000 ( 2 points)

3. A month after you invest in a share, it suddenly goes up 15 percent. With no


further information, what would you do?

Hold it, hoping for further gains (3 points)

Sell it and take your gains (1 point)

Buy more-it will probably go higher (4 points)

4. Your investment suddenly goes down 15 percent one month after you invest. Its
fundamentals still look good. What would you do?

Buy more. If it looked good at the original price, it looks even better now
(4 points)

40

Hold on and wait for it to come back (3 points)

Sell it to avoid losing even more (1 point)

5. Youre a key employee in a start-up company. You can choose one of two ways to
take your year-end bonus. Which would you pick?

Rs 60,000 in cash (1 point)

Company stock options that could bring you Rs 300,000 next year if the
company succeeds, but will be worthless if it fails ( 5 points)

Personal Wealth Management : Project

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Questionnaire 7- Whats Your Money Attitude

Answer all the questions given below, circling yes or no, depending in how you feel
about the statements

I need more money than I can use.

Yes

No

It bothers me when I discover I could have gotten the Yes

No

same thing for less somewhere less.


I behave as if money were the ultimate symbol of success.

Yes

No

I show signs of nervousness when I do not have enough Yes

No

money.
I dream I will one day be fabously rich.

Yes

No

I find it difficult to part with money for any reason.

Yes

No

I worry that I will not have enough money to live Yes

No

comfortably when I retire.


Money controls the things that I do or dont do in my life.

Yes

No

When I was a child, money seemed to be the most Yes

No

important thing in my life.


I argue or complain about the cost of things.

Yes

No

Count the number of yes answers to find out the degree to which money controls
your life.
4

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Questionnaire-8
Measuring and Reviewing Insurance Coverage

1. Do you understand the individual coverages, protection types, and amount of


each

insurance policy you have?

No

2. Does your current insurance protection make sense given your current
financial situation (as opposed to your situation when you bought the
policies)?
No
3. If you wouldnt be able make it financially without your income, do you have
adequate long-term disability insurance coverage?
No
4. If you have family members who are dependent on your continued income, do
you have adequate life insurance coverage to replace your income should you
die?
Yes

5. Do you buy insurance though agents, fee-for-service financial advisors, and


companies that sells directly to the public, bypassing agents?
No
6. Do you carry enough liability insurance on your home, car and business to
protect your assets?
No

7. Have you recently (in the last year or two) shopped around for the best price
on your insurance policies?
No
8. Do you know whether your insurance company has good track records when it
comes to paying claims and keeping customers satisfied?
Yes

Personal Wealth Management : Project

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