personal finance workshop

FINERVA A G S

Personal Finance Workshop

A G S InfotechHotel Fariyas, Lonavla

24th June & 1st July 2008

FINERVA A G S

Agenda

Introductions

Tools to Create Wealth

Budgeting to Create Surplus

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Introduction

FinervaFinerva = Finance + Minerva (Roman

Goddess for Wisdom)India’s First Company (also only one till now)

dedicated to Personal Finance Education3 core values:

Simplifying Personal Finance Make Meaning Create Value

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…Introduction

Trainer – J.KarthikeyanPromoter Director of FinervaBE, MBA, AFP10 years experience in Manufacturing and

ServicesOver 3500 hours of training experienceVisiting Faculty in Anna University &

Bharathiar University for MBA students

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Tools to Create Wealth

a. Basics of Cash Flow Asset Vs Liability Chart

Mark the table in your workbook appropriately

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Asset - Liability

Cash Flows

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Applying Cash Flow to our lives

Exchange of phonesBike with high resale

valueHaving assets and

heavy loansHouse that we live inVehicle loansBorrowing for tax

saving investment

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Tools to Create Wealth…

Balancing Return & Risk

What is risk? Any deviation from expectation is risk Which has higher risk?

– When I expected 10 % I got 9%.

– I expected 35% I got 31.5%

– I expected 100% I got 90%

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Which decision is better?

An army general has 100,000 soldiers.

If he fights he will lose 20,000 persons.

If he retreats he will lose only 20% of his army.

Which decision will reduce the loss of lives?

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Risk…

Is there zero risk? No. That is why Countries are rated too. Sometimes the sovereign rating can be lesser than

some companies in the country.

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…Tools to Create Wealth

Tools to meet my requirement Comparision chart for

different investments

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Equity Shares

Current Yield – Low

Capital Appreciation – High

Typical Returns - 19.25% as per SENSEX returns since

1979

Risk – High

Marketability / Liquidity – High

Tax Treatment - No long term capital gains tax after 365

days. Dividends received are tax free

Convenience - High

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Debentures

Current Yield – Moderate

Capital Appreciation – Moderate

Typical Returns - 8% depending on company

Risk – Low

Marketability / Liquidity – Average

Tax Treatment - Interest received is taxable

Convenience - Average

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Mutual Fund - Equity

Current Yield – Low

Capital Appreciation – High

Typical Returns - 39% Average over 3yrs Highest return

- 69%

Risk – High

Marketability / Liquidity – High

Tax Treatment - Section 80C benefits for Equity Linked Savings

Schemes. No long term capital gains tax after 365 days. No tax on

dividends received.

Convenience - Very High

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Mutual Fund - Debt

Current Yield - Moderate

Capital Appreciation – Low

Typical Returns - 8% Average over 1yr

Risk – Low

Marketability / Liquidity – High

Tax Treatment - Dividends received are tax free

Convenience - Very High

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Bank Deposits

Current Yield – Moderate

Capital Appreciation – Nil

Typical Returns - 8% Average

Risk – Negligible

Marketability / Liquidity – High

Tax Treatment - Section 80C benefits for 5 year deposit.

All interests are taxable

Convenience - Very High

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Public Provident Fund

Current Yield - Moderate but locked till end of the term

Capital Appreciation – Nil

Typical Returns - 8%

Risk – Negligible

Marketability / Liquidity – Low

Tax Treatment - Section 80C benefits. Maturity tax free.

Can not be attached in case of insolvency

Convenience - Low

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Life Insurance Policies Endowment

Current Yield - Moderate but locked till end of the term

Capital Appreciation – Nil

Typical Returns - 5.5% Average

Risk - Moderate

Marketability / Liquidity – Average

Tax Treatment - Section 80C benefits and Section 10

(10)D benefits

Convenience - Low

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Rent from house

Current Yield – Low

Capital Appreciation – High

Typical Returns - 5% Maximum

Risk – Negligible

Marketability / Liquidity – Low

Tax Treatment - Expenses can be deducted before

calculating tax

Convenience - Fair

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Gold and Silver

Current Yield – Nil

Capital Appreciation - Moderate

Typical Returns - Matching inflation

Risk – Average

Marketability / Liquidity – High

Tax Treatment - No tax benefits capital gains tax

applicable

Convenience - High

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ULIP's with minimum 5 times cover

Current Yield – Nil

Capital Appreciation – High

Typical Returns - 28% Average over 3 yrs

Risk - Can be adjusted based on market conditions

Marketability / Liquidity - High (but after three years)

Tax Treatment - Section80C and Section 10(10)D

benefits

Convenience - High

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ULIP Pension plans

Current Yield – Nil

Capital Appreciation – High

Typical Returns - 28% Average over 3 yrs

Risk - Can be adjusted based on market conditions

Marketability / Liquidity - High (but after three years)

Tax Treatment - Section 80C benefits & 1/3 tax free

commutation on maturity amount. Pension received is

taxable

Convenience - Average

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Insurance Planner Income replacement method

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Retirement & Milestone Planner

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Budgeting to Create Surplus

Budget – Myths And Reality What ever I plan does not work? So why

plan? A plan does not ensure that the goal is achieved. Plan is required to first set a goal and then to

remind you to reach it And alert you when there is a deviation A company has become big because they have

a budget…

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Budget Myths & Reality

Anything on sale can be bought

A sale is profit for the sales guy Is the thing on sale what you want. Buy anything based on a list of needs and excess

cash.

Budget is for countries and big companies.

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Budget – Myths and Reality

There is not enough money for everyone to be rich

Money is not a limited quantity commodity (at least at our level)

The more value you create for your company and others, the more money you have.

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Budgeting – Myths and Reality

That guy is filthy rich! He should have

done some criminal activity some time in

life.

This is a statement out of guilt and envy

Sometimes used to protect our image in front of

our children.

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My Present Budget

Fill in your Budget Worksheet

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Creating a Surplus for My Goals

Can you see where your goals are being SPENT?????

Identify expenses which can be reduced

Identify loans which need to be closed immediately

Identify investments that need to be started immediately

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Thank you