Personal Financial Planning

LOVELY PROFESSIONALUNIVERSITY

ASSIGNMENT-1

PERSONAL FINANCIAL PLANNING

Submitted to: Submitted by:

Miss. Nitika Sehgal Name : Abhinav Singh

Roll No. : B38

Personal Financial Planning
Reg. No.: 10900963

Section: RS1902

Introduction
Financial planning is often thought of as a way to manage debt, but a good financial plan really
is a way to make certain that you have financial security throughout your life. Many small
business owners consider their business as their investment in their future, but that is a huge risk
to take.

The essential components of a good financial plan are investing, retirement planning, insurance,
borrowing and using credit, tax planning, having a will, and ensuring the right people receive
your assets. Financial planning is the process of meeting your life goals through the proper
management of your finances. Life goals can include buying a home, saving for your child's
education or planning for retirement.

Income and expenditure account: This is the account which is prepared for record the inflow’s
and outflow’s of the income and expenditure of the individual, firm, company, and any organization.

I am taking this tool of accounting for managing or recording the inflows and outflows of my family and
myself also. We have our family business running by my father and brother.

Income and Expenditure account for the year

Income Amount Expenditure Amount

Father 420000 Interest Paid 47500
Brother 240000 Electricity Bill 15000
    Kitchen(Food) 144000
    Vehicles(Servicing) 24000
    Insurance Premium 17000
    travelling Expenses 96000
    Clothes 96000
    Gas 4800
    Water 2400
    Telephone expenses 12000
    medical expenses 12000
    insurance auto 12000
    cable T.V. 4800
    House tax 1500
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    Road tax 1000
    fees Education 80000
Surplus(transfer to balance
    sheet) 90000
       
  660000   660000

Balance Sheet for the year

Liabilities Amount Assets Amount

Capital 1000000 House 4000000
Reserves and
surplus 90000 Vehicles  
Loan(education) 300000 Passion 30000
Creditors 250000 Pulsar 40000
Bank overdraft 50000 ALTO 275000
Auto Loan 100000 Laptop 35000
Outstanding
expenses 60000 Desktop 25000
Bank credit cards 150000 Machinery 100000
    Mobile Phones 19000
    Cash in Hand 50000
    Cash at Bank  
    SBI 150000
Syndicate
    Bank(my) 10000
    PNB 25000
    ICICI 66000
       
  2000000   4825000

List of Financial services organizations which are used by my Family

 State Bank of India(SBI)

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 Punjab National Bank (PNB)
 Syndicate Bank
 ICICI Bank
 Life insurance Corporation
 Bajaj Alliance
 Post office
 Co-operative Societies

Current Economic Factors:

Inflation:

JA FE Ma AP Ma Ju JU
Year N B r R y n L Aug Sep Oct Nov Dec
16.2 14.8 14.8 13.3 13.7  10.6
2010 2 6 6 3 3       7      
10.4 9.2 11.8 11.6 11.6 11.4 13.5 14.9
2009 5 9.63 8.03 8.7 8.63 9 9 4 4 9 1 7
7.6 10.4 10.4
2008 5.51 5.47 7.87 7.81 7.75 9 8.33 9.77 9.77 5 5 9.7
5.6
2007 6.72 7.56 6.72 6.67 6.61 9 6.45 6.4 6.4 5.51 5.51 5.51

18
16
14
12
10
8
6
4
2
0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Affect of inflation rate:

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The high rate of inflation affects negatively on the budget of my family. Normally
inflation rate increases the prices of the commodities which increase the budget
of house. My family is depending on the business therefore inflation plays a very
important role in our family.

GDP (Gross Domestic Product)

After almost 7% growth in 2008/09 fiscal year, in the first three months of 2010 India's economy
expanded 8.6% boosted by industrial production and services. But, is the third largest economy
in Asia able to keep its high rate of growth?

Years 2004 2005 2006 2007 2008 2009 2010

Growth
Rate 8.30% 6.20% 8.40% 9.20% 9.00% 7.40% 8.60%

10.00%
9.20% 9.00%
9.00% 8.40% 8.60%
8.30%
8.00% 7.40%
7.00%
6.20%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2004 2005 2006 2007 2008 2009 2010

8.30% 6.20% 8.40% 9.20% 9% 7.40% 8.60%

Interest Rate:
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Following are the current interest rates for the different accounts:

Account Type Interest Rate

Saving Account 3.5 %
Fixed Deposit Account 6 to 12%

Personal financial goals

The most important and tough goal in an individual’s life is setting up long term goals to
help him/her financially. It can be anything from savings to house building to children’s
education or marriage to retirement plan. These are the basic dreams when a person
enters into a job.
When a person achieves these goals he/she feels successful and also sometimes elated in
the society. If setting up a goal is a big task then the toughest task is to achieve them and
plan how to achieve them. There are some definite triggers that a person can use to
achieve his/her goals. An urge to do something, certain important events in one’s life etc
are the biggest clue to accomplish it.
Following are my personal financial goals:-
Short term goals:
 Getting a good job.
 Purchase another multimedia mobile phone expensive then my current mobile.
 Save money from my monthly budget for going to “Vaishno Devi Temple” in holidays.
 Maintain reserves for shopping in next month.
 Complete my last year of MBA with minimum money.

Long term goals:

Savings:

It includes cutting down discretionary expenses and being economical. A corpus of

substantial amount which can then be used to buy plans for regular monthly income is
an effective use of the savings. I want to save money for my future needs and also for the
marriage of my younger sister. It also helps me to fulfill the immediate expenses and future
uncertainty.

Education:
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The most costly thing now-a-days is children’s education. We definitely want our
children to get the best education by sending them to the best universities. Some of the
banks are giving loans at a very reasonable interest rate. We can afford to get these loans
and provide them with best universities education without losing our minimal expenses.
Most of the banks are giving options for investment into child’s future plans from the
moment a child is born. These investments cost less and they take a yearly amount and
these investments also go for a short period giving us long term returns. We need to take
our valuable time to study these company portfolios and details of the investments so that
our money is invested in the right plans.
House:
Building a house is the dream of every person; and also according to his/her tastes and
convenience. Most of the banks are giving loans with a reasonable interest rate for the
construction of the house. But for obtaining this we need to study carefully to what
amount we can take loan so that we are not financially down and we meet our family’s
and also our daily or monthly expenses. Any unnecessary expenditure is to be cut down
like dining out every weekend or unnecessary shopping.
Medical Insurance:
Of all the long term investments the most important one is medical investment. What if
we have everything but health? Different countries have different format to support
medical costs. You need to evaluate what work best for you in term of emergencies or
during the fag years of life and then opt for it.
Others:
 Purchase a brand new car from my money.
 Go on the tours with my family on my expenses.
 Maintain the funds for the immediate expenses.
 Make reserves and surplus to meet the future uncertainty.
 Increase the standard of living in the society.
 Invest the money in the future plans.

Process of Personal financial planning

The personal financial planning process is as follows:

 Setting goals with the client This step is meant to identify where the client wants to go
in terms of his finances and life.

 Gathering relevant information on the client This would include the qualitative and
quantitative aspects of the client's financial and relevant non-financial situation.
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 Analyzing the information the information gathered is analyzed so that the client's
situation is properly understood. This includes determining whether there are sufficient
resources to reach the client's goals and what those resources are.

 Constructing a financial plan Based on the understanding of what the client wants in
the future and his current financial status, a roadmap to the client goals is drawn to
facilitate the achievements of those goals.

 Implementing the strategies in the plan Guided by the financial plan, the strategies
outlined in the plan are implemented using the resources allocated for the purpose.

 Monitoring implementation and reviewing the plan The implementation process is

closely monitored to ensure it stays in alignment to the client's goals. Periodic reviews are
undertaken to check for misalignment and changes in the client's situation. If there is any
significant change to the client's situation, the strategies and goals in the financial plan
are revised accordingly.