Financial education for middle income investors
An initiative of SEBI & NISM
Agenda
Importance of learning about money What is financial planning SMART goals Understanding net worth Protecting wealth Concepts of budgeting & saving Investment Some dos and donts
Importance of learning about money
Enables us to take informed decisions about money
Money matters: What is wrong?
Investment, insurance or tax planning? Peer advice Emotion driven Greed and fear Overspending
WHAT IS FINANCIAL PLANNING?
The financial planning process
Gather financial data Identify goals and risk appetite Identify gaps Prepare a plan to bridge the gaps Implement the plan Review periodically
Sound financial plan
Financial freedom
Regular review
What is a Goal?
o
Goals are statements about where we want to end up They are what you want to achieve
Are all goals achieved
o
No, Most of our Goals are not achieved
What prevents you?
Are these goals clearly defined ? The goals seem to be vague They need to be clearly defined Convert them in to SMART goals
Let us restate /revise your goals
1. __________________ 2. __________________ 3. __________________ 4. __________________ 5. __________________
Steps to Achieve Goals
1. Understand Current Networth 2. Protect Current Networth 3. Manage Regular Expenses 4. Generate Surplus to Invest
Exercise: Mr. Dipak Shahs family
What is your current net worth ?
Networth = Assets - Liabilities Assets : All those you own Liabilities : All those you owe 1. List down all those things you own 2. List down all those things you owe
Calculating your net worth
Assets
Assets or possessions?
Liabilities
So, What is your net worth today ? Remember, your net worth can change every day, depending on the value of your assets
Remember once again:
Net worth is your wealth Net worth is the difference between your assets and liabilities
Change in net worth
Change in value of assets Change in liabilities Savings / spendings
Protecting your wealth
Personal risks Life Health Liability Property Home Vehicles
Liability
Quick Recap
Importance of Setting Goals Steps to Achieve Goals Understanding net worth Protecting the net worth to ensure that our net worth is not eroded
BUDGETING
Budget enables you to become aware of how money comes in and where it is spent
Importance of budgeting
Managing regular and irregular expenses
Generating surplus for investments / savings
MAKING A BUDGET
Mantras for success
Prepare the budget Stick to the budget
Check out of budget expenses
Ensure there is a surplus
If not, have a serious look at some of the expenses.
INVESTING THE MONEY
SURPLUS
INVESTMENT
Investment mantras
Understand the power of compounding Diversify your investments Do your own homework or hire wise experts Understand the fundamentals In case of doubt, ask. Do not sign the dotted line till you get satisfactory answer
Understand power of compounding
If you save Rs 1000 a year for 10 years at a bank which gives you interest at 8% per year, how much money you will have at the end of 10 years?
Saving per year Rate of return (per year) No. of years Wealth accumulated
Rs. 1,000 8% 10 Rs. 14,487
Understand power of compounding
If you save Rs 1000 a year for 10 years at a bank which gives you interest at 8% per year, how much money you will have at the end of 10 years? If you save similar amount for 20 Years how much it will be ?
Saving per year Rate of return (per year) No. of years Wealth accumulated
Rs. 1,000 8% 10 Rs. 14,487
Rs. 1,000 8% 20
Saving per year Rate of return (per year) No. of years Wealth accumulated
Rs. 1,000 8% 10 Rs. 14,487
Rs. 1,000 8% 20 Rs. 45,762
Understand power of compounding
What do we understand from this ? Why is the difference between 10 Year investment and 20 Year investment so much ?
Remember inflation
What is inflation? How does it impact us?
Steps to Wealth Creation
Have a goal Start today Invest regularly
Be Careful before investing
Do not believe if someone promises high returns. Do not get carried away by the commission agent promises Identify a trusted advisor Do reference check of the advisors Do your own research about the product before you buy, Learn Basics skills of Money Management Know the costs Only invest in regulated options through regulated intermediaries.
Creating wealth is not difficult. All you need is self discipline in your spending and investing habits
THANK YOU!