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
Rs. 1,000
Rate of return (per
year)
8%
No. of years
10
Wealth
accumulated
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
Rs. 1,000
Rs. 1,000
Rate of return (per
year)
8%
8%
No. of years
10
20
Wealth
accumulated
Rs. 14,487
Saving per year
Rs. 1,000
Rs. 1,000
Rate of return (per
year)
8%
8%
No. of years
10
20
Wealth
accumulated
Rs. 14,487
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!
