1. Evangelical Baptist Convention Church, Delhi Young professionals Fellowship 19.3.2014 Finance Planning For the Young Professionals By Upa T. Kaithang

2. 2. Finance Planning 2. Finance Planning 1. Why Planning?  Having Vision  Goal Setting  Mission  Having control of one’s life 2. Finance & Money  Finance is long term, while Money is short term  Money is cash that is handled everyday, while Finance refers to numbers in budget, bank deposits and loans, interest…

3. 3. Finance Planning 3. Finance Planning Broadly involves 3.1 Prioritization in expenses Allocate your cash according to priorities you have set. (Exercise on Prioritisation- Put 1 to 6 in brackets against the following expenditure points with 1 as most important and 6 as least important) H ouse ( ) Life Risk Management( )Car ( ) Education( ) Retirement Planning ( )Health Care( ) 3.2 Investing for Short term Medium term Long term (Examples of short term, medium and long term) 3.3 Budgeting

4. 4. Finance Planning 4. Objective Finance Planning 4.1 Immediate Necessities ? Getting married & Settling Down 4.2 Planning for Children’s Education 4.3 Lifestyle Financing 4.4 Retirement Planning

5. 5. Finance Planning 4.2 Planning Children’s Education(1)  Why ? Rising Cost of Education –commercialisation, entry of foreign universities, mission to secular approach by providers. Examples: CoursePresent Cost (Rs./lakh) Projected Cost(2025) (Rs./lakh) Engineering4.5018.80 Management5.0021.00 Medicine6.0025.00 Law4.8020.10 Fashion Designing4.1017.10

6. 6. Finance Planning 6. Finance Planning 4.2 Planning Children’s Education 4.2.1.When to begin? Immediate! 4.2.2 What tools are important? Investments in MFs/PPF and Bank FDs on sytematic basis. Care to ensure that funds are invested in safe, secured MFs. Life Insurance to ensure protection Consult Insurance Advisers for more plans

7. 7. Finance Planning 4.3 Lifestyle Financing Please cross(x) below the columns in order of their importance/urgency against the Items on the first column. ImportantUrgentNot Important Not Urgent Gadgets Motor vehicles House Holidays & Leisure Insurance Health Care Spirituality Community Fashion Education

8. 8. Finance Planning 4.3 Lifestyle Financing (contd.) Some tips for financial decision a. Gadgets: List the gadgets and highlight the usefulness of each. Unless vey important, defer for future funding by interest, etc. b. Motor Vehicle: Assess how crucial it is for your profession before taking decision c. House: A very important asset, appreciates fast. d. Holidays & Leisure: Plan to have this periodically depending on affordability e. Insurance: Should be financial protection for dependants. Size depending on income. f. Healthcare: An absolute must since one illness can blow away savings in today’s high cost medical care. g. Spirituality: Need for recharging, need a budget line. h. Community: Whether to be in it or be a loner? i. Fashion: Very tempting, no easy solution(even Red Fort needs efforts) j. Education: Essential for both personal and career growth

9. 9. Finance Planning 4.4 Retirement Planning Concept of retirement is one of inactivity brought by cessation from work. This can change if you take the initiative. With good planning one can decide when and where to retire and pursue other passions. Let us begin this portion with exercises. 4.4.1 At what age do you want to retire from work? Your present ageExample: 35 Put down your age ______________ Your age on retirement60 ______________ How many more years to retirement?25________________

10. 10. Finance Planning 4.4 Retirement Planning 4.4.2 What is yearly current expenditure you need? Your average monthly expenses Example: Rs. 25,000.00 Write your number: Lumpsum expenditureRs. 50,000.00 Annual expensesRs. 350,000.00 (25,000*12+50,000) Estimated yearly requirement on retirement as shown above. Rs. 11,85,224.00 (where 350000*25 years*5% compounded annual inflation) Write your number 4.2.3 With your current style of living, how much will be your yearly expenses on retirement

11. 11. Finance Planning  4.4 Retirement Planning 4.4.4 To what extent would your expenses pattern undergo change? Lifestyle: On travels, healthcare, leisure & recreation? Example, up by 3% Write your number here ------------------------ No change0% 4.4.5 How many years more do you expect to live after retirement? 10 yearsYour Number? 15 years 20 years 25 years

12. 12. Finance Planning  4.4 Retirement Planning 4.4.6 Are you likely to continue repayment of loans before retirement? (Tick whichever is applicable). YES NO If your answer is YES, please respond to the following How many years? What is the EMI/yearly instalment? What is the amount outstanding on retirement?

13. 13. Finance Planning 13. Finance Planning  4.4 Retirement Planning 4.4.7 Are you likely to continue/have health insurance after retirement? (Tick whichever is applicable). YES NO If your answer is YES, please indicate the premium required and add that in your planning. If NO, you will have to add substantial amount towards healthcare cost in your yearly planning

14. 14. Finance Planning  4.4 Retirement Planning 4.4.8 Are you likely to have unfinished projects after retirement?(Tick whichever is applicable). YES NO If your answer is YES, please indicate how much money is required to complete the project(s). -------------------------------------------------------------- 4.4.9 Are you likely to have regular sources of income after retirement?(Tick whichever is applicable). YES NO If YES, please write down the sources with the amount: Pension: Rs. Rental : Interest/Divident:Others:

15. 15. Finance Planning  4.4 Retirement Planning o What next(after exercises)? a) Add together how much your requirements are b) Add together the estimated sources after retirement c) Match a) and b). Do they match? d) If b) (sources) is less, then we have serious work ahead....

16. 16. Finance Planning  4.4 Retirement Planning Investing for Future – Some suggestions a) Employees Provident Fund – make voluntary contributions. IT EEE b) Public Provident Fund Scheme – 15 years to mature. IT EEE c) Mutual Funds –be selective d) NPS – maturing at 60 years e) Life Instrument to secure family