Financial planing - Life cycle series - 1

Financial planing for : Young unmarried without responsibilities.
It is a starting point of career and may exist still you feel established. Most of the times it happens that as there is no responsibility the major portion of income goes as an expenses. There is a fascination about Gadgets, towards costlier life style.
As there is no any responsibility no body feels a need for savings. Parents are also not giving any guidance about the savings or making them responsible about taking right kind of decision of career and financial management.
Majority of people whom I met who falls in this category are full of confusion about their future career and financial well being. Actually this is this is the stage in life where you can really build solid foundation of financial future.
Following are the things which are important in this stage :

1. Take care of your self : You have to take Medical insurance and Accidental & disability insurance. which will protect your from possible loss in wealth in emergency as well as protect your financial well being in unfortunate events. life insurance is not needed as there is no financial responsibility.

2. Build cash reserves : You have to have at least 6 months expenses in your cash reserves as the job is not secure now a days.

3. Plan for long term goals : The biggest strength which you have is time is on your side if you plan your investments in right way then you can be wealthy. Here you have little money to invest but as time is there the compounding effect will help you.

4.One more thing you have to keep care that your investment should grow at the rate of salary growth.

If you are at 21 and started investing for your retirement at age 55. and starting with Rs. 5000/- per month in an investment which gives you 12% returns and if your salary rise is 8% then you will accumulate aprox.Rs. 5.52 Cr. , if the rate of interest is 13% you will make 6.62 Cr.


It is important for all you have to build assets first and take care that you take appreciating assets not depreciating one.


Any views ???






About the author : Ashish Ramesh Bhave is a CERTIFIED FINANCIAL PLANNER, focused and specialized in financial planing for individuals and families.

Financial planning - A series -Life cycle.

Financial planing approach is keeps on changing as per the needs and requirements of an individual or a family.
The needs and the requirement of an individual change as per their changes in life cycle and change in family structure.

There are normal situations in the life cycle which keeps on changing the needs and requirements.
These normal situations are as follows :
1. Young unmarried without responsibilities.
2. Young married couple with one working member.
3. Young married couple with both working.
4. Couple with newly born child.
5. Couple with growing children and loan.
6. Couple with working children.
7. Couple nearing retirement.
8. Retired.

But there are some situations which requires special approach.
1. Young unmarried with financial responsibilities.
2. Married with one member disabled.
3. Critically ill married couple. ( now a days such marriages are happening ).
4. Couple with physically challenged child.
5. Couple with critically ill child.
6. Couple without children.
7. Widow / widower with children responsibilities.
8. Divorcee with / without responsibilities.


So as the situation changes there is a change in approach for financial planning. In this series of articles we will be discussing about these different cases  one by one.

So keep reading this approaches may be useful for you.

About the author : Ashish Ramesh Bhave is a CERTIFIED FINANCIAL PLANNER, focused and specialized in financial planing for individuals and families.

Financial plan- basic rule -12

Now you are prepared with the financial plan and monitoring well now what is the next step.
Next step in financial planing is to review financial plan !

Why to review financial plan : 

There is no need to review the financial plan if your life is following your one time prepared financial plan But fortunately or unfortunately it is not true.
Fortunately : If there is a positive unexpected change in cash flow, eg. higher increase in salary than expected, unexpected cash inflow may be in the form of bonus or gift, or spouse starts working who was not working earlier etc.....
Unfortunately : Job loss, major accident resultant in to disability or death of breadwinner, unexpected nonnegotiable expenses etc......
So 99.99% of the times there is a dynamic change in the cash flow , it may be the portfolio had not given the return as per expectation or given more that expectation.
As well as there may be a change in the goals which we have planned earlier.
Review is the process of doing an entire financial planning once again.

What should be the periodicity of review ? : 


As we believe there is no any slandered periodicity for review it should be at least once in a year.
But if there is a major change in the cash flow or goals or in the financial market the call of review should be taken.
The review can be initiated by client or can be by financial planner.

Benefits of review : 

you are sure that you are on the right track again.
If major change is it gets absorbed and strategy is made to nullify the effect of this on the goals or if it is positive then to revamp the goals.
gives you to take immediate corrective actions to absorb the change effect.

Follow the steps given in the Financial planning - Basic rule series posts ,
i am sure it will help you in living your life in financially planned manner.

 " All the best Enjoy the Life. "

Financial planing : Basic rule : 11

Implementation of financial plan : 

If you have followed all the basic rules your plan and the strategy is ready.but only planning will not help you if  it is not backed by implementation of the plan.
Implementation is an important aspect of success of any plan.
Here you have to plan a strategy for the implementation of financial plan. How it will go weather you are going to implement it one shot or staggered manner.
You have to priorities  implementation. first priority should be given to Protection then investment reserves and then investment portfolio implementation.
In volatile asset class it is recommended that you should in staggered manner.
You have to build the proper asset class mix and have to follow it.

Monitoring of financial plan : 

You have to keep a periodic check on how the plan is progressing, how the investment portfolio is performing , weather the goals we have planned for are same or changed , do any changes are there in cash flow ................
This will help you in touch with what you have planned and hook you to it.
Monitoring will help you to rectify any deviations from the plan and correct it in right time.
If there is major change you have to build in in your financial plan and if needed have to plan again.

How to use savings A/C

For saving a/c holder it is a good news that RBI regulated interest rate on savings a/c and now banks are free to offer different rate of interest on savings a/c.
Immediate effect of this is already seen by us that some of the banks started with high interest rate up to 6% from 4% earlier. Do this is a time to cheer about ?
Are you really keeping high amount in the savings a/c ?
if answer is yes then you are making big mistake, you are not utilizing the potential of this money .

How much money you should have in savings a/c ?
In angle of  financial planing you should have your three months expenses ( household + EMI's + committed expenses ) in savings a/c but this a/c should have auto sweep or FFD ( Flexi fixed deposit ) option. if you are keeping more amount than this it is not good for your financial health weather you are from middle class category or HNI. This will automatically help you to earn more interest from your savings a/c.
Don't run to other bank only because of the higher interest rate on savings a/c , keep in mind that as they can increase the rate of interest they can reduce it also once their target is complete.

Be smart and channelize your money towards achieving financial goals  not to earn only interest.

Financial planning basic rule - 10

Taking investment decisions : 

In our last post we had seen how we can plan a strategy to take investment decision and how we can get direction for our decision making in investments.
once the following things are clear then we have to classify these goals in time wise classes.
Majorly you can classify it in three classes like


1. Short term : less than 3 years.
2. Mid term : between 3 years to 5 years.
3. Long term : more than 5 years.


Make a point that the asset classes are different for different time horizon.
majorly there are 4 different asset class in investments viz.
Equity,
Debt.,
Real estate,
Gold. 
These asset classes have their inherent time horizon for giving performance. their risk and return parameters also varies with time. so we have to marry right kind of asset class to right kind of time horizon goals. 
To make it more simple as per my knowledge 
Debt. is a good asset class for short term goals where the more importance is on protecting the existing asset with little bit returns.
Equity and real estate is an asset class for long term goals where you can take some risk to get a little bit higher returns.
Gold is an asset class which will provide stability to your portfolio, it is well known asset class to get inflation adjusted returns.


some people are seen putting their money in equity for short term which is a wrong thing as per as the investor strategy is concerned then in such a case you are not an investor but a speculator.
Some put their money for long term in Debt. instrument which is also wrong because in such a decision you are missing an opportunity.
Real estate is a favorate asset class of Indians they just love it and refuse to believe that there are chances that the prices can reverse. this is a asset class which gives you a true sense of ownership.
you have to make a mixture of different asset classes as per the goals you have which will help you to build diversification in your portfolio.
We will see it in more details.......................