INTRODUCTION TO PERSONAL FINANCE

Your financial life can be a maze, and a personal financial plan is the map and compass that can
help guide you through that maze. Individuals use a variety of investment, risk management, and
tax planning strategies to meet their financial goals. While one cannot predict the future, one
should certainly be better prepared for it as all of us have our goals to be fulfilled at every stage
of life and these goals will only be achieved if one has done the financial planning. So, its better
to start planning now as prevention is always better than cure. Financial planning is a systematic
approach whereby the financial planner maximizes customer's existing financial resources by
using the appropriate financial planning tools and investment vehicles to best achieve his
financial goals and objectives In other words, financial planning is the process of meeting once
life goals through proper management of one's finances. Life goals can include buying a home,
saving for children's education, buying a car, protecting family against financial risks or planning
for retirement.

The need for financial planning services arises from the need of meeting the financial goals of
one's life & it is financial planning that helps us to take a comprehensive look towards one's
futures financial needs and goals including cash flow, debt management, education funding,
retirement planning, estate conservation and portfolio management. Financial planner gives you
the direction to make informed decisions about your investments so that you won't make any
mistakes and you can reap the benefits of your financial planning for the rest of your life.

Benefits of Financial Planning Financial Planning ensure that the right amount of money is
available in the right hands at the right point of time in future to achieve specific Financial Goals.
Virtually anyone with moderate wealth or a decent income can avail the benefits of financial
planning like: Financial Planning is based on individual risk profiling, and it provides a road map
to achieve financial goals Financial Planning helps you take a 'big picture' look at your financial
position and it guides you to examine your current financial status and determine objectives. It
helps in devising a strategy or plan for how you can meet your goals given your current situation
and future plans. It also identifies weaknesses and recommends improvements. It puts in place
the risk management system to meet uncertainties of life through efficient Retirement Planning,
Insurance Planning, Tax Planning and Estate planning. Financial planning is the process of
managing your money to achieve personal economic satisfaction. It allows you to control your
financial situation and provides a feeling of security and less stress. It is a disciplined approach
to managing your finances to reach life goals. It involves systematic & disciplined investment
mechanism, which helps in creating wealth over a period of time. It helps you to become more
responsible towards disciplined investing.

Personal financial planning can be done in the following 5 steps:

Assessment: The financial condition of an individual can be gauged by formulating balance

sheets and income statements. The personal balance sheet calculates the assets on the one hand
and liabilities on the other. Assets include car, house, stocks, and bank account. Personal
liabilities include credit card debt, bank loan, mortgage etc. Information regarding personal
income and expenses is listed under the personal cash flow statement.

Goal setting: After having done a proper assessment of the financial situation, an individual can
set up long term as well as short term goals.

Constructing a plan: Once the goals are set,appropriate strategies should be formulated in
order to fulfill the goals. This could be achieved by curtailing unnecessary expenditure or by
expanding the income level by investing in stocks, real estate or other interest earning assets.

Execution: For proper implementation of the financial plans individuals lack patience and
perseverance and hence seek professional help from financial planners, investment advisors and
lawyers. Monitoring and reassessment: The financial plan of an individual should be monitored
from time to time for reevaluation.

Goals and Specification of Parents regarding personal finance:

 Holiday
 University
 Children marriages
 Retirement Plans
 Deposit for Home
1. Holiday: Holidays are crucial; it’s time for you to relax. But it takes careful planning to
ensure you don’t break the bank, especially when your children rely on you bank-rolling
their so-called ‘independence’. This isn’t an environment ripe for savers and your money
is losing value as inflation outstrips the returns on savings accounts.
2. University: A whopping 73.5% of parents help fund their kids through university, which
means careful planning is needed to ensure you’re not left struggling at the end.  With a
ten-year plan, you can take on more risk in the hope that your investments will have
longer to recover if they do fall in value Don’t wait until you have a big lump-sum to
invest; by investing smaller amounts more regularly you can smooth out any fluctuations
in an asset price, maximizing your return.
3. Deposit for Home: Every individual has deposited money for buying home. Buying
home is not the easy task for any individual, it takes lots of money to buying a home.
For buying home every individual takes loans which create liabilities for them.
4. Children marriages: Every parent has big plans for their son and daughter marriages.
They have deposited money for the long-term for fulfill their need for this purposes.
5. Retirement plans: Every individual has some plans regarding retirement. Retirement
planning is the process of deciding what your retirement goals are and the actions and
decisions you need to undertake to bring these goals to fruition. It involves estimating
expenses and saving and identifying other sources of potential retirement income.

Minimization Of the cost of funds by parents

Every parents has different plans to reduce the cost of funds or in other words minimize the
cost for funds, for minimize the cost my parents has some plans which I discuss with my
father is a government employee and my mother is a house wife. There are four members in
our family rents regarding this assignment. There are various plans for minimization of cost
of funds
Goals of parents

1. GOVERNMENT PROVIDENT FUND :My father always use the put his saving in
government provident fund from 2001 till now as it is very safe and less risk involved. In
2004 the return on GPF IS 10% on compounded bases but now (2018) it is 7.2%. He uses
to put 32% on this salary in GFP and withdraw it as when he wants. GOAL:

The main goal to put saving in GPF is for me and my brothers higher education.
 Education as I am doing MBA. Long term goal is for doing the marriage of me.

2. LIFE INSURANCE POLICY: My parents got married in 1988 that time they both take
Life Insurance Policy.
GOAL:
To get income tax benefit.
 To get some amount in terms of contingencies.
 As it help financially in the case of any uncertainty.

3. BANK FIXED DEPOSIT: In 2010 my father made fixed deposit of 1000000 and which
will double in 2020. That time investing in bank fixed deposit is better as they get double
amount of money in 10 years only. Fixed deposits have no risk element 100% save
investment and a good have a good return for that time.
GOAL:
Main motive for investment in fixed deposit is to get some idle money growing

4. ESATE PROPERTY Money invested in land and building is known as estate

investment.
 To sell the land in long run to get good return
 Less risk and high return as the demand of the land is going to be high in nearest
future.

EVALUATION OF PARENTS FUND REQUIREMENT

1. Fund required for medical treatment in emergency

2. Fund required for buying new piece of land

3. Fund required to complete construction of new house

4. Fund required for buying new vehicle for our dream car.

WAYS TO REDUCE COST OF FUNDS TO MINIMUM

Medical insurance can be taken to bear cost of medical treatment

 Invest in expansion only after generating profit in business it is not like investing
from
 Savings as my father is thinking do. If he will take savings out there will be no risk
bankruptcy because my father investment & Savings are well calculated and their will
be no risk.
 New vehicle can also be bought from taking car loans.
 Construction of house can be done from savings which was specially made for house.

CONCLUSION

This study shows what are the investment planning has been done by my father and what
their financial goals are and how they are going to achieve that goal. Personal financial
planning should be core aspect of life because it totally deals in monetary terms which itself
is most important thing to survive in this world and if management of finance has not been
done properly will lead to bankruptcy.