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2
Ashok Kumar Panigrahi

M.Com., Ph.D., AICWA, MBA, MIMA, PGDBA, PGDCA.
Associate Professor in Finance
RITEE Business School, Raipur
Ask yourself«..

½ Does your wallet always carries a heavy

amount?
½ Do you have a credit card?

½ Do you like shopping?

½ Do you go to grocery shop without a list?

½ Don¶t you take lunch box to your office?

½ Don¶t you like bargaining?

½ Do you pay your bills after due date?

If the answer to any one of the above

questions is ³YES´ then, probably you are
spending more than required.
 ×
 is person
l fin
nci
l
pl
nning?
½ cersonal
financial
planning is the
process of
managing your
money to
achieve
personal
economic
satisfaction.
ewards of Financial clanning

½ Maintain and
improve our
s
nd
rd of
living ] the
necessities,
comforts and
luxuries that we
have or desire.
÷he ole of cersonal
Financial clanning
½ ÷o manage income and
expenses.
½ ÷o create an awareness of your
current financial status.
½ ÷o plan for the future by
developing goals and devising
ways to achieve those goals.
½ ÷o provide a system of
evaluation and revision for your
financial progress.
×hy Do You Need a cersonal
Financial clan?
÷



 
  


 

  
 
 



 


 


 




  



 








  

















½ For most people

it is easier to
spend than
save.
½ ÷o track your
expenses, so
you don¶t spend
more than you
think you¶re
spending.
½ ÷o retire
someday.
×hy Should You Develop a
cersonal Financial clan?
½ It helps you achieve your
financial goals.
½ It helps you achieve financial
independence.
½ It helps you understand where
all your money is spent.
½ It may even help you support
those that have supported you.
îenefits of Financial clanning
A financial plan helps people:
½ live within their income
½ identify financial priorities
½ allocate funds to meet expenses
½ meet financial emergencies and
reduce credit use
½ reduce uncertainty and conflict about
financial affairs
½ gain a sense of financial
independence and control
½ save and invest to reach financial
goals
×hat Can You Accomplish As
a esult of ÷his Course?
½ Manage the unplanned.
½ Accumulate wealth for special
expenses.
½ Save for retirement.
½ ³Cover your assets.´
½ Invest intelligently.
½ Minimize your unnecessary
payments.
÷he cersonal Financial
clanning crocess
½ Step 1: Evaluate Your Financial
Health
½ Step 2: Define Your Financial Goals
½ Step 3: Develop a clan of Action
Flexibility, Liquidity, crotection,
Minimization of ÷axes
Consider Your Goals
½ Step 4: Implement Your clan
½ Step 5: eview Your crogress,
eevaluate, and evise Your clan
Step 1: Evaluate Your Financial
Health
½ Evaluate your
current
situation:
income,
spending,
wealth
½ Assess your
whole
financial
picture
Step 2: Define Your Financial
Goals
½ Specifically define and write
down your financial goals to
reflect your financial and life
situation.
½ Attach a cost to each goal.
½ Set a date for when the money
is needed to accomplish the
goal.
×hat Are the ÷ime Horizons
for Financial Goals?
½ Short]term goals can be
Short]
accomplished within a 1]
1]year
period .
½ Intermediate]]term goals take 1]
Intermediate 1]
10 years to accomplish.
½ Long]]term goals take more than
Long
10 years to achieve.
Goals: ÷he Cornerstone of a
Financial clan
½ Goals keep the future in mind by
reminding you of the rewards.
½ Goals entice you to keep the plan in
effect.
½ Goals provide tangibility for the
question, ³×hy?´
½ Goals should be ³SMA÷´.
½ ÷hink of your goals as what you want
to be, do or have ± in other words
where you want to GO.
³SMA÷´ Goals

½ Specific ± ³I want an MîA

degree from I÷EE only not
from any other institute.´
½ Measurable ± I need s.50000
a semester for tuition. Not I
need some money for college.
½ Attainable ± I¶ll save s.10000 a
month to pay for tuition. Not I¶ll
save money for college cost.
³SMA÷´ Goals ± contd.

½ ealistic ± I will work at the City

mall all summer to make money
for college tuition. Not I¶ll get a
job this summer.
½ ÷ime]]bound ± I plan to be a
÷ime
management graduate from
I÷EE within two years after of
my college graduation. Not I¶ll
plan to graduate from college.
Step 3: Develop a clan of Action
½ Flexibility ]] ÷he
ability for your ÷



 
  


 

  
 
 



 


 


 




  



 







 

   















plan to change
as your
situations or
goals change.
½ Liquidity ]] Your
ability to convert
noncash assets
into cash with
relative ease
and speed.
Step 3: Develop a clan (cont¶d)
½ crotection ]] Your ability to meet
the unexpected large expenses
without destroying your plan.
½ Minimization of ÷axes ]] Your
ability to pay as little as possible
towards taxes.
Step 3: Develop a clan (cont¶d)
½ Consider future needs:
Create a budget
Determine investment strategies
clan for big]
big]ticket purchases
clan for managing debt
clan for insurance
clan for the expense of children and
college
clan for retirement
clan for estate transfer
Step 4: Implement Your clan

½ Use common sense and

moderation; don¶t force yourself
to track every penny.
½ emain positive about your
plan; use it as a roadmap.
½ Stay on track after the detours;
rewards await you.
Step 5: evise Your clan
½ ceriodically review your
progress to see if any fine tuning
needs to be done.
½ Make sure that your plan still
matches your goals.
½ îe prepared to start over if your
plan no longer meets your
needs.
÷he Life Cycle of Financial
clanning

½ Stage 1: ÷he Early Years ]] A

÷ime of ×ealth Accumulation
½ Stage 2: Approaching
etirement ]] ÷he Golden Years
½ Stage 3: ÷he etirement Years
Stage 1: ÷he Early Years ]] A
÷ime of ×ealth Accumulation
½ Develop your
savings plan.
½ Set your initial
goals of all
lengths.
½ Establish your
long]]range
long
investment
strategy.
Stage 2: Approaching etirement
]] ÷he Golden Years
½ ealize
intermediate]]
intermediate
term goals that
were
established
during Stage 1.
½ e]]evaluate the
e
plan to match
current goals.
½ clan for
retirement.
Stage 3: ÷he etirement Years
½ educe
investment risk
½ Concentrate on
preservation
rather than
growth of assets
½ clan for the
transfer of your
estate
cr
cic
l Tips in
cerson
l Fin
nci
l
cl
nning
Mnow × ere Your Money
Goes
Mnowing ×here Your Money
Goes
½ Determine your expected
monthly income from all
sources, including:
½ Financial aid (paid directly to
you)
½ ×ages (after tax, take home
pay)
½ Family contributions
Establishing a spending plan

½ Determine your expected

monthly expenses:
½ Housing
½ Food
½ Loan/credit card payments
½ Savings
½ Utilities
½ ÷ransportation
½ Other
Mnow where your money goes

½ Meep a daily spending diary.

½ Use a monthly payment
calendar to be sure you are able
to cover your expenses as they
are due.
½ Use a computer program to help
you track income and expenses
Getting organized

½ Organize your financial records and keep

copies of important documents, e.g.
½ eceipts
½ îank account records
½ Certificates and transcripts
½ cay stubs
½ Insurance forms
½ Investment logs
½ Loan documents
½ ÷ax returns
½ Legal decrees
Distinguishing between
Needs and ×ants
Veeds ×
ns
½ Food ½ Eating out
½ Housing ½ Cable ÷
½ Utilities ½ Mc3 player
½ ÷uition ½ acation
½ îooks ½ Movies/music
½ Clothes ½ ideo games
½ Child care ½ ×ireless
½ ÷ransportation Internet
×ays to reduce expenses

½ Carry only small amounts of cash in your

wallet so you won¶t spend it.
½ Use direct deposit. You will be less likely
to spend money if it goes straight into
your account.
½ Control your use of credit cards.
cards.
½ Don¶t go shopping just for fun.
½ ÷ake your written savings goals with
your as a reminder.
½ îuy only what you need, don't buy
things just because they are on sale.
×ays to reduce expenses

½ Use coupons to save money.

½ Use a grocery]
grocery]shopping list to
prevent impulse buying.
½ ÷ake your lunch to work.
½ Shop around to get the best deal for
big]]ticket items like cars and
big
appliances.
½ cay your bills on time to avoid late
fees, extra finance charges.
Minimize your Deb

T e only re
son 
 none of us own
n

elep
n bec
use we
ve never been
offered
n elep
n on credi
nd e
sy
mon ly p
ymens.´
×hen should you buy on
credit?
×hat goods and services can you pay
for while you use them?
homes
automobiles (depending on lifespan)
education

Some assets even generate income or

further service even after you finish
paying for them«these can enhance
your net worth!!!
Jpend less 
n you e
rn.
Begin
regul
r s
vings
progr
m now.
JAVE MOVEY««..

 Saving is necessary to accumulate the

capital needed to produce wealth.

 ÷his is just as true for individuals as for

nations.

 ÷he most effective way to begin saving

is by identifying and eliminating some
discreion
ry spending.
spending.
ainy Days & the eal ×orld

½ Life is full of surprises, and they¶re

usually expensive!

½ ÷he surprise is only in the timing«So it

ÀJ possible to plan for these surprises!

½ curchase ³peace of mind´ by building a

cushion«Make this a regular and
mandatory expense!
 Don¶ ×
i
½ If you don¶t exert the willpower to save
now, it is unlikely that you will do so later.
½ If you wait to save until your income goes
up, it is extremely costly in terms of the
amount of money you will end up with at
retirement.
½ Savings is deducted from your taxable
income, thereby reducing your taxable
income.

cay yourself first! Make saving a regular
expense.

³Just do it!´
Don¶ fin
nce
ny ing for
longer 
n is useful life.
Financing Consumption

½ ×hy continue to pay for

something]] a car, a vacation, a
something
television]] that you are no
television
longer able to use and enjoy?

½ curchase on credit only when

buying a long]
long]lasting asset
with short]
short]lasting financing.
Avoid credi c
rd deb
nd
consider purc
sing used
iems.
Credit Card Convenience

½ caying with a credit card is NO÷

spending your own money, but
borrowing someone else¶s.
½ Interest charged on credit cards
outstrips returns that could be earned
on investments!!!
½ ÷hink of your credit card as an
extension of your checking
account«Use your credit card only to
access those funds.
 It cays to îuy Used!
½ Can a used item satisfy you as
well as a new item?
½ îalance the time it takes to
search for these items with the
value of your time.
½ ÷here are savings to be had
without having to sacrifice
consumer satisfaction!
Ànves  Ànves  Ànves 
îefore investing««.
You Have ÷o Decide ×here ÷o Save Or
Invest Your Money ÷o each Your Goals
and Needs.
½ How Much isk Are You ×illing ÷o ÷ake?
½ How Much Are You ×illing ÷o See Your
Investments Fluctuate?
½ How Much ÷ime Do You Have îefore You
×ill Need ÷hat Money ÷o curchase Your
Goal?
×e Must Choose An Investment ÷hat Has
An Interest ate Equal ÷o Or More ÷han
÷he Inflation ate
Investment % ate => Inflation ate
 ÷ips for Avoiding Investment
Fraud
1. If it looks too good to be true, it probably
is.
2. Deal only with parties that have a
reputation to protect.
3. Never purchase an investment solicited
by telephone or email.
4. Do not allow yourself to be forced into a
quick decision.
5. Do not allow friendship to influence an
investment decision.
6. If high]
high]pressure marketing is involved,
grab your checkbook and run!!!
Te
c your c ildren ow o
e
rn money
nd spend i
wisely.
÷each Your Children ×ell
½ ÷each children money is ‘
‘ «It
doesn¶t grow on trees!

½ Money both helps us get what we want,

AVD helps others get what they want.

½ Success in general is realized by setting

goals and working hard to achieve
them«Financial success is no different!
Summary
½ îuild your financial future
around this text and a financial
plan:
Manage the unplanned ]] financial
planning withstands minor
setbacks
Accumulate wealth ]] financial
planning maps out strategies for
meeting your goals
Save for retirement ]] financial
planning helps you determine the
costs of retirement
Summary (cont¶d)
³Cover your assets´ ]] financial
planning includes protecting your
assets with insurance
Invest intelligently ]] financial
planning helps you understand the
principles of investing
Minimize taxes ]] financial
planning helps you keep your
assets where they should be, in
your own pocket
Summary (cont¶d)
½ Develop a personal financial plan
Evaluate ]] know where you are
today
Define ]] know where you want to
go
Develop a plan ]] draw the map
Implement ]] follow the plan with
action
eview progress]]
progress]] check the map
to ensure you are on course
Summary (cont¶d)

½ Don¶t overlook the financial life

cycle
÷he Early Years
Approaching etirement
÷he etirement Years

 






  
ceople Don¶t clan ÷o Fail,
÷hey Fail ÷o clan!
÷