Functional Project

“Comprehensive Study on Financial Planning of an Individual and its

Awareness: From Risk Assessment to Investment Strategies.”

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR

Master of Management Studies (University of Mumbai)

2022-2024 Batch

Name of the Student: Shrikrishna Aman Waradkar

Roll Number: C64

SUBMITTED TO:
DR. V. N. BEDEKAR INSTITUTE OF MANAGEMENT STUDIES,
THANE.
 DECLARATION BY THE CANDIDATE

This is to certify project report entitled “Comprehensive Study on Financial Planning of

an Individual and its awareness: From Risk Assessment to Investment Strategies.”
which is submitted by me in partial fulfillment of the requirement for the award of Master of
Management Studies,(University of Mumbai) Dr. V.N. Bedekar Institute of Management
Studies, comprises of my original work and due acknowledgment has been made in the text
to all other material used.

Wherever references have been made to intellectual properties of any individual /

Institution / Government / Private / Public Bodies / Universities, research paper, text books,
reference books, research monographs, archives of newspapers, corporate, individuals,
business / Government and any other source of intellectual properties viz., speeches,
quotations, conference proceedings, extracts from the website, working paper, seminal work
et al,they have been clearly indicated, duly acknowledged and included in the
Bibliography.

____________________________________
Date & Signature of Candidate
 CERTIFICATE BY THE GUIDE

This is to certify that project report entitled “Comprehensive Study on Financial Planning
of an Individual and its awareness: From Risk Assessment to Investment Strategies.”
which is submitted by Shrikrishna Aman Waradkar in partial fulfillment of the
requirement for the award of Master of Management Studies,(University of Mumbai) Dr.
V.N. Bedekar Institute of Management Studies, is a record of the candidate's own work
carried out by him under my guidance. The matter embodied in this report is original and due
acknowledgment has been made in the text to all other material used.

Guide's Name:

Authorized Signatory:

Date:
EXECUTIVE SUMMARY
Financial Planning for Individuals: Assessing the Risks of Investment
Strategies
Financial planning is an important part of personal financial management that guides people
to achieve their financial goals and secure their future. It covers a wide range of functions
from budgeting and saving to investing and risk management. The journey begins with
understanding your current financial situation, setting clear goals and assessing risks that may
affect your financial well-being.First, it is important to assess the income, expenses, assets
and liabilities.

This will help you create a budget that balances your needs and wants with room to save and
invest. A strong financial plan also includes an emergency fund to act as a safety net in the
event of unexpected events such as job loss or a medical emergency.Risk analysis is an
important part of financial planning. This includes identifying potential risks that could affect
financial stability, such as market volatility, inflation or even personal risks such as health
problems or job security.

By identifying these risks, you can take steps to reduce them, such as buying insurance,
diversifying your investments, or creating a will and estate plan.Investment strategies are
another important part of financial planning. Once you have a solid budget and assessed risks,
you can start exploring different investment options that match your goals and risk tolerance.
This can include stocks, bonds, mutual funds, real estate or retirement accounts. A balanced
investment portfolio tailored to your risk tolerance and time horizon can help you grow your
wealth over time while minimizing potential losses.

Awareness and education about financial planning is important for making informed
decisions. Understanding financial concepts such as compound interest, asset and risk
diversification can help you make better choices. It is also important to stay up to date with
economic developments and, if necessary, ask for advice from financial specialists.In short,
financial planning includes a holistic approach to managing personal finances, from risk
assessment to creating a balanced investment strategy.

This requires careful consideration of the current financial situation, setting realistic goals
and a proactive approach to risk management and investing. By being aware and
understanding these concepts, people can take control of their financial future and work
towards a secure and prosperous life.

CHAPTER 1

INTRODUCTION
Financial planning is important for everyone, whether it is a school-aged child or an elderly
person. The sooner you start managing your money, the better. Financial planning is a
dynamic process in which an individual's financial goals are mapped out. A financial plan is a
comprehensive assessment of an individual's current salary and future financial situation,
using currently known variables to predict future income, values and retirement plans.

It often includes a budget that organizes an individual's finances and sometimes includes
several steps or specific goals for spending and saving in the future. The plan allocates future
income to various expenses, such as rent or subsidies, and also reserves income for short and
long-term savings. A financial plan is sometimes called an investment plan, but in personal
finance, a financial plan can focus on other specific areas, such as risk management, real
estate, college, or retirement.

Financial planning is the process of mapping out a person's financial goals and long-term
goals and the ways and means to achieve those long-term goals and objectives. This includes
conservation, wealth creation, planning for contingencies and emergencies, and planning for
certain life milestones. One's financial plan must be revised so that it is in sync with the
different stages of one's life and the different requirements of a particular life stage.

A financial planner is a professional who prepares financial plans for people. These financial
plans often include cash flow management, retirement planning, investment planning,
financial risk management, insurance planning, tax planning and estate planning.This
financial planning project introduces college students to various aspects of financial planning.
Financial planning is very important for everyone. If people understand its importance at a
younger age, achieving future financial goals will be easier because you can invest in
different products that suit your needs.
2.1 Scope

Financialplanning should cover all aspects of a client's financial needs and lead to the
achievement of each client's goal as needed. The scope of planning would generally include:

• Risk management and insurance planning

managing monetary risks through sound risk management and underwriting techniques

• Investment and planning issues

Capital mobilization to generate future capital and cash flows. for reinvestment and
consumption, including risk-adjusted income management and inflation management

• Retirement planning

planning to ensure financial independence in retirement

• Tax Planning

Planning to reduce tax liabilities and free up cash flows for other purposes

• Estate Planning

Planning for the creation, accumulation, preservation and distribution of assets.

2.2 SMART Goals

A critical first step in financial management is setting SMART financial goals.Your goals
should be:

 S (Specific),
 M (Measurable, Motivating),
 A (Achievable, Achievable),
 R (Realistic, Resource Based), and
 T (Time Bound)).

Many people make the mistake of setting general goals that often fail to materialize.
Source: sebi.gov.in
CHAPTER 2
FINANCIAL PLANNING CONCEPTS

2.1 HOW TO ACHIEVE GOALS

Process

The personal financial planning process is described in ISO 22222:2005 and FPSB as
consisting of six steps.

Step 1: Establish and Define the Client-Personal Financial Planner Relationship

The first step in the financial planning process is to establish and define the advisor-client
relationship. It usually begins with the first meeting with the client, although it may begin
with telephone or other communication with the client prior to that meeting. The first client
meeting is a necessary condition for a successful advisor-client relationship. In this meeting,
you begin to build trust with the client and build a relationship with the client that (hopefully)
spans the entire financial life of the client.Building a counselor-client relationship when the
client is a couple is a more difficult challenge because you have to build trust and rapport
with both parties.

Step 2: Gather Client Information and Define Goals and Expectations

This step can begin in the first meeting or in a unique meeting later in the project process.
Sometimes you can collect customer information and discuss financial goals with the
customer remotely (via phone and Internet) or correspondence.Clients typically care about
many topics, including retirement income, education funding, early death, disability, taxes,
and qualified plan distributions. Clients may sometimes list specific priority goals, but are
more likely to provide a vague list of concerns that indicate anxiety and frustration rather
than direction. Your job is to help the client turn these feelings into goals

Step 3: Analyze and assess the client's financial situation

Analyze the information you receive to assess the client's current situation and decide what
you need to do to achieve your goals. In this process, the planner takes all the information
you provide and examines it to begin creating a plan for you.Depending on what services you
requested, your planner can analyze your assets, liabilities, cash flow, education financing,
insurance coverage, investments, tax strategies, retirement planning, estate planning and
anything else important. Most designers will appreciate and help you design as much or as
little as you want.

Step 4: Create and Submit a Financial Plan

Your next task is to create a realistic financial plan that will take the client from their current
financial situation to achieving their goals. Since no two clients are the same, an effective
financial plan must be tailored on an individual basis, and all recommended strategies are
tailored to each client's concerns, abilities and goals. The plan must meet your client's needs
and not be colored by your compensation model, product offering or bias.There are usually
several ways to achieve a client's financial goals. In this case, you should present alternative
strategies to the client to weigh and explain the advantages and disadvantages of each
strategy. Strategies that help achieve multiple goals should be emphasized.

Step 5: Implementation of Financial Planning Recommendations

A financial plan is only useful to the client if the plan is implemented. Therefore, it is part of
your responsibility to ensure that the plan is implemented according to the schedule agreed
with the client.Implementation requires clear roles of advisor and client. Tasks vary
depending on the advisor's business model.

Step 6: Monitoring the relationship between the financial plan and the financial
planning

The audit process should include measuring the performance of implementation tools such as
investments and insurance contracts. Second, updates must be obtained when there have been
changes in the client's personal and financial circumstances. Third, changes in its economic,
fiscal or financial environment should be reviewed together with the client.The area of
control will likely require review of other areas of financial planning. As a client ages, their
needs change, and the most comprehensive and detailed financial plan will eventually require
changes. Any significant changes will result in making new recommendations and
communicating the recommendations to the client, using different communication techniques
from previous years if possible.

2.2 RISKS AND RETURNS

People have an inherent risk-taking capacity. Your risk-reward profile is your level of risk
tolerance. When you invest in a high-risk company, such as a startup, your risk is high.
Depending on your source of funds and the investments you choose, you can fall into three
types of risk-return profiles.

1. Being conservative means you take as little risk as possible to make sure your money is
safe. You prefer to invest in postal savings schemes, bank term deposits, government bonds

2. Moderate, ie. you are willing to take risks and prefer to invest in fund systems.

3. Aggressive, ie. you are ready to take big risks and prefer to invest in the stock market,
commodity market, and you can even speculate on the returns. It is an important investment
principle that the level of return depends on the level of risk you take. To stay invested, it's
important that you take the necessary steps to manage your risk. After investing in any asset
class, you should monitor your investments and keep yourself updated with various market
events to avoid pitfalls.

Always check for potential risks when quoted yields are unusually high.

2.3 SAVING V/S INVESTING

Many new investors do not understand that saving money and investing are completely
different things. They have different goals and different roles in your financial
strategy.Savings refers to money you keep in a deposit, such as a bank savings account.
Investing, on the other hand, means buying various financial instruments that will bring you
income at some point in the future. The difference between saving and investing is that
saving is just idle money, while investing helps grow your finances over a period of time.

We can meet short-term needs through savings, but we must make investments to achieve
long-term goals. Savings protect our capital while investments help us get returns from
investments.Investing involves a certain amount of risk, but also the desire to compound your
money over time. Investing properly is a carefully planned and prepared approach to
managing your money with the goal of accumulating the funds you need. And planning your
investment strategy is all about discipline and patience. The best investments are usually so-
called productive assets such as stocks, bonds, real estate, investment funds, etc.

When deciding where to put your money for a relatively short period of time, you need to
carefully consider several short-term investments. terms factors. - saving time. They will give
you a good idea of which savings option is best for you. The following things should be
considered: the amount of money you plan to put into your savings account; the time you
have before you need the money; and how important is the convenience of using money to
you.

2.4 LOANS VS INVESTMENTS.

People are always confused whether they should take a loan or invest to achieve their
financial goal. Both options are different and should be used correctly. The following points
are worth remembering:

• It just depends on your financial strength and other factors.

• Credit card debt and personal loans are very expensive

• If you have a low-interest, tax-advantaged loan, such as a mortgage, you should apply for a
loan. If you have an investment plan from which you can get good returns, you can choose a
long-term investment.

• You must be sure that the investment is not risky and will not affect your family if you lose
money.For example, you invest huge sums in the stock market instead of closing existing
debts, it is too big a risk.

Advantages of the loan

1. Credit cards offer a variety of gifts such as cash, vacation vouchers and other vouchers for
purchases made with the credit card.

2. Credit cards offer the advantage of traveling without cash.

3. Credit cards deliver cash upfront and are therefore easier to use.

Disadvantages
1. Credit cards have many additional costs such as interest, service charges, etc. against the
credit you provide. People forget to read these terms before buying a credit card.

2. Credit cards often entice people to spend more, even if they don't have the money today,
because they can pay it back later.

3. People tend to buy more credit cards to increase their income and then accumulate huge
debts.

Learning how to save and manage your money wisely is recommended. Always try to reduce
your expenses and think again before buying anything other than your basic needs. People
your age are very interested in electronics and want to spend on the latest things in town. But
what you don't realize is that these devices cost quite a lot in your pocket, putting such a
strain on your bank accounts that you won't be able to pay for your education.

If you already have debt to pay, why would you apply for more debt?

It won't help your financial situation. Instead, you should make investments that will help you
repay the loan and also support your future needs..

2.5 THE POWER OF MIXING

Time is an influencing factor when investing. Your suggestion depends on the time of entry
and exit. Connecting is a concept that has great benefits when followed with dedication.
However, it is more profitable if the savings are made in the long term. So compounding is a
tool that can help you grow your investments phenomenally over a period of time. So, the
more time you have, the more money you can make, which is why financial planning is so
important.

Recurring Deposits and SIPs can help you with this, the ease of paying that regular
investment amount through direct debit or a post-dated check can help you implement a
compounding strategy.In short, compounding means earning interest on previously earned
interest.

Source:sebi.gov.in

2.6 INVESTMENT VEHICLES

Apart from other structured products, the Indian market offers a number of financial
instruments such as equities, debt, mutual funds, currencies and commodities. However, their
choice should suit the investor according to his risk profile and other investment horizon.

Since the investment horizon is long, people in the younger age groups can invest in products
that offer capital appreciation or growth for investment. Before investing, you should always
check that you have money set aside for your basic needs.

Equity Products:

These are instruments backed by a company, such as stocks or shares of the company's
capital. These instruments provide the investor with the rights of a shareholder, where
investors can participate in the regular general meeting and have the right to vote. These
products generate income depending on the profitability of the company's operations. Income
can therefore vary depending on the profitability of the company's business. You can invest in
these instruments if they have a longer investment horizon.

Mutual Fund:

A mutual fund is usually a pool of money professionally managed by a group of investors.

These products can range from asset class-based portfolios or multiple groups of asset
classes. However, the choice of system or plan should depend on your investment objective.
Investing in mutual funds helps diversify your portfolio and thus reduces the risk in your
portfolio. These products are considered ideal for beginners who do not have the necessary
knowledge to manage their money.
Insurance products:

Insurance is more of a security than an investment option. We buy insurance to protect

ourselves against unexpected events such as death, accidents, theft of valuables, etc. In
insurance and financial planning, the term risk means the possibility of financial loss.

Real estate:

Real estate is property consisting of land and buildings on it and natural resources such as
crops, minerals or water; such real estate, (more often) buildings or residences in general.
Real estate business also includes buying, selling or renting land, buildings or apartments.

Bank Deposits:

Banks in India traditionally have four types of savings accounts: Current Accounts, Savings
Bank Accounts, Recurring Deposits and Time Deposits. However, from the point of view of
financial planning, bank deposits are short-term goals and risk-free, which do not help the
client to create wealth in the long term.

Gold:

Of all the precious metals, gold is the most popular investment. Investors typically buy gold
to spread risk, primarily through the use of futures contracts and derivatives. The gold market
is subject to speculation and volatility, just like other markets. Compared to other precious
metals used for investment, gold has the most effective security and protection properties in
many countries.
Source:surantarun.com
2.7 OTHER IMPORTANT CONCEPTS

• SYSTEMATIC INVESTMENT PLANS:

Starting early is the key to financial planning; nowadays you don't necessarily have to inherit
a family fortune to get rich. SIP or Systematic Investment Plans are a great way to invest
small and fixed sums of money at regular intervals.

• Rupee cost averaging

some investors like to speculate on the right time to invest. But predicting whether the market
will move up, down or sideways is difficult even for professionals. Rupee cost averaging
allows you to take the guesswork out of trying to buy low and sell high.

With rupee

cost averaging, you invest a certain dollar amount at certain time intervals, regardless of the
unit (unit) price of the investment. By investing regularly, you can take advantage of market
downturns without worrying about when they will happen. Your money buys more shares
when the price is low and less when the price is high, which can mean a lower average share
price over time.

The most important element of rupee cost averaging is commitment. Rupee cost averaging
aims to take the guesswork out of investing by giving you a lower average share price over
the long term.Rupee cost averaging is popular among people investing in variable funds. If
the share price of the fund fluctuates a lot, rupee cost averaging can help your investment
reduce your average share price over time and increase your profits by systematically
withdrawing money.

• Holding Period Return (HPR)

Holding Period Return is the total profit from holding a financial asset. It is calculated as
income plus the increase in price over a period divided by investment costs.

When we look at the return on our investments, one of the first measures we look at is the
holding period. This return includes income from all sources such as dividends, interest,
periodic income and changes in stock prices

.Holding period return is also known as absolute return (or) total return (or historical return).

HPR = (dividend +(selling price - buying price)) / buying price

Example:

Mr. Sinha invested 1,00,000 rupees in the stock market. After two months, he received a
dividend of 2000 rubles. He sold the shares after 8 months and got Rs.1,12,000/-. In this case,
what is the return of expectation?

HPR = (2000 + (1,12,000-1,00,000)) / 1,00,000

HPR = 14%

• Real Return

Real Return is the percentage of return earned on an investment in a year, which is adjusted
for price changes due to inflation or other external influences. This method expresses a
nominal return in real terms that holds the purchasing power of a given capital level constant
over time. By adjusting the nominal return to compensate for factors such as inflation, you
can determine how much of your nominal return is the actual real return.

Let's say your bank pays you 5% interest per year on the funds in your savings account.

If inflation is currently 3% per year, your real return on savings is 2%. In other words, even if
the nominal return on your savings is 5%, the real return is only 2%, meaning that the real
value of your savings will only grow by 2% in one year. time period

• After-tax statements

There are different taxes for different financial instruments. When calculating ROI, it's
important to consider taxes. It is used to calculate the actual return on an investment after
applicable taxes.Income after tax = Income before income tax * {(100 tax rate) / 100}

Example:

Continuing with the above example, Mr. Shah had to pay 15% short-term capital gains tax.
So what is the real return (in percent) after taxes?

Return after tax = 14 * { (100-15) / 100 } After - tax return = 11.9%

• Compound Annual Growth Rate (CAGR)

CAGR is the annual growth rate of an investment. over a period of time. This is known as
annual income. Mainly used to compare performance of mutual funds, stocks, etc.

CAGR = [{ ( 1+ r)^ 1/n} – 1] * 100(r = holding period or total return and n = Time)
Example:

Mr Shah invested Rs. 1,00,000 in a mutual fund scheme. After four years, he sold the shares
in the fund and received Rs. 1,35,000.Calculate the holding period return and CAGR?

HPR = (135000 -100000) / 100000HPR = 35%

CAGR = [{(1+. 35)^1/4} -1] *100CAGR = 7.79%

Return on ownership is 35% over 4 years. The annual growth rate is not 35/4 = 8.75%. But
this is less than the figure which increased by 7.79 percent.

If the holding period is 1 year, the CAGR and HPR are the same. If the holding period is
more than 1 year, the CAGR is lower than the HPR

• Time value of money

TVM Time value of money (TVM) is the idea that money available now is worth more than
the same amount in the future because of its potential earning power. This basic principle of
finance states that if money can earn interest, any sum of money is more valuable the sooner
it is received. Basic Time Value of Money Formula and Example The TVM formula may
change slightly depending on the situation. For example, for annuities or fixed payments, the
general formula has more or fewer factors. But in general, the most basic TVM formula takes
into account the following variables:

FV = future value of money

PV = present value of money

i = interestn = number of interest periods per year

t = number of years

Based on this those variables, the TVM formula is :

FV = PV x (1 + (i / n)) ^ (n x t)

For example, suppose the amount is Rs.10,000. per year with 10% interest. The future value
of money is:
FV = 10,000 rupees x (1 + (10% / 1) ^ (1 x 1) = 11,000 rupees

The formula can also be rearranged to find the future amount in today's dollars For example,
of Rs.5000 from today at 7% interest is:

PV = Rs 5000 / (1 + (7% / 1) ^ (1). x 1) = Rs 4673

• Investment v/s Speculation

On the other hand, speculative risks are those that people face when they buy some
income.The term "speculative risk" is perhaps unfortunate because both investing and
speculating involve speculative risks, meaning that speculative risk is all about speculation.
The investment is based on a reasonable consideration of the expected return and the risk
associated with the return. Speculation occurs when a person buys an asset in the hope of
getting some kind of return, without considering or knowing the expected return or risk. It
can also be a purchase of an item where the buyer expects to lose some or all of the purchase
price, but can make a huge profit. An example of speculation is buying so-called penny
stocks.

These are common stocks that trade for pennies. Often these are shares of worthless
companies. On rare occasions, something favorable happens to one of these companies and it
becomes quite valuable. Like the lottery, most buyers of penny stocks lose some, if not all, of
their purchase price. Even if some buyers get lucky and hit it big, that's speculation, not
investment.
CHAPTER 3
INSURANCE PLANNING AND RISK MANAGEMENT
Risks can be divided into two categories: pure risk and speculative risk. Insurance is a
technique that mainly deals with pure risks, which can be classified as personal, property and
liability risks. It then explains how the financial planning process is similar to risk
management and needs analysis, and discusses how the financial planning process can help
individuals and families cope with financial losses due to risk alone.

3.1 THE IMPORTANCE OF PROTECTIVE GOALS

Financial planning is an integrated approach to developing and implementing plans to

achieve individual or family financial goals. While financial goals may vary based on specific
circumstances, goals, attitudes and needs, all integrated plans should include analysis and
recommendations that meet the client's protection goals.

While planning to accumulate wealth can be more exciting, protecting the accumulated
wealth cannot be neglected. Most people work to acquire assets (wealth) such as homes, cars,
savings and investments, but the enjoyment of that wealth is sometimes interrupted by the
chilling thought that some event beyond their control could damage or destroy their assets.
Protecting assets and protecting the wealth they represent from loss is a challenge that almost
all people face.

Risk is the main problem that insurance deals with. We must fully understand what the risk is
in order to effectively deal with it using insurance and/or other risk management techniques.
In insurance and financial planning, the term risk means the possibility of financial loss.
When using this definition of risk, note that financial loss can occur in two ways.

The most common cause of loss is a loss of value that a person already owns - for example,
the value of a family home may decrease in the event of a fire, or the ability to earn an
income due to death or disability.

Risk defined in this way is divided into two categories:

• Pure risk - includes only the possibility of financial loss

• Speculative risk - includes the possibility of both financial loss and financial gain
Both pure and speculative risks involve the possibility of financial loss mercy opportunity
opportunity. In the case of pure risk, however, the possibility of profit is essentially absent,
leaving only the possibility of loss or no loss (no change). The difference between pure and
speculative risk can be illustrated by the situation of a client who owns an apartment. Damage
or destruction of a home caused by fire is pure risk. What are the possible outcomes? Either
fire occurs and causes damage resulting in damage, or fire does not occur and there is no
change or loss. On the other hand, the risk that the market value of the apartment may rise or
fall is a speculative risk. In this case, the customer can receive either a profit or a loss from
the sale of the apartment. With few exceptions, insurance is a method of dealing with pure,
not speculative, risk.

Two more points are important to understanding risk:

• Risk and uncertainty are not the same thing.

• Risk is not the probability of loss.

Although risk can create uncertainty, risk is not the same as uncertainty. Unlike uncertainty,
which is a characteristic state of mind of doubt, risk surrounds us everywhere as a condition
of the world.

3.2 TYPES OF PURE RISKS

As mentioned earlier, insurance is a technique that deals primarily with pure risks—risks that
involve the possibility of loss or no loss. Pure risks can be classified into personal risks,
property risks and liability risks. These three types of pure risk can be briefly described as
follows:

Personal risks - the possibility of losing the ability to work) Premature death) Disability)
Due to unemployment or retirement. Additional costs related to accidents, periods of illness
or the inability to safely perform certain daily activities (bathing, dressing, sitting from bed to
chair, etc.) with the need for repair Indirect (indirect) damages, e.g. due to immediate damage

Risks of liability - include the possibility. Loss due to damage or destruction of property of
othersb Loss due to bodily or bodily injury to others
Examples:

the possibility of loss of income for family members due to untimely death, disability or
retirement of the client. . In addition, a type of personal risk is the possibility of increased
costs related to medical care and long-term care.

Clients are exposed to property risks due to ownership of real estate and personal property.
Real estate includes the customer's residence and related buildings and personal property such
as household goods, clothing and automobiles.

Many perils (causes of loss) can cause direct damage to property or personal property,
including fire, storm, theft, flood, earthquake, and car collisions. Indirect damages refer to
loss of use of property as a result of direct damage. In addition to indirect damages called
additional living expenses, other consequential damages include waste costs, lost rental
income, and demolition damages.

The primary goal of the consumer should be to obtain adequate coverage. No amount of
budgeting and money management skills can survive a crisis, such as a major medical
emergency, without medical coverage. Likewise, a traffic accident should occur without
adequate liability insurance.

Risk management is your number one priority and that means making sure you have adequate
insurance. Insurance protects you by transferring the risk of major losses to an insurance
company. By paying a relatively small amount to the company each year, you can protect
yourself from the risk of losing a lot of money in the future.

There are two types of insurance: legacy and non-life insurance.Property is insurance, like
life insurance, that replaces income in the event of a claim.Indemnity (general insurance)
compensates or "covers" a loss, such as in the event of theft or an accident.

2.3 WHAT IS INSURANCE?

Term Policy - Term insurance covers you in the event of your death. You buy a policy for a
fixed term, e.g. ten years, thirty years, etc.Term insurance is a type of life insurance that
covers a certain period or a certain "period" of years. If the insured dies within the period
specified in the policy and the policy is valid, the death benefit is paid.

Whole Life - Whole life insurance adds coverage to your investment. Whole life insurance,
which is more expensive than term insurance, can include a money market account, bonds or
stocks. Over time, as you pay your premiums, whole life insurance builds up value, which
you can withdraw at the end of the policy term. Whole life insurance or whole life insurance
(in the Commonwealth), sometimes called "straight life" or "ordinary life", is a life insurance
policy that continues for the lifetime of the policyholder, provided the required premiums are
paid or due.

WHAT IS THE RIGHT AMOUNT OF INSURANCE?

Be aware that many insurance policies are designed to replace income if someone dies or
becomes disabled. So the child's life insurance does not have to be terribly large - it cannot be
replaced. A child's life insurance should cover "end costs" - income lost due to the parent's
funeral and absence. Parents should have much larger insurance policies to cover these
expenses as well as the future income that the parent expects to earn. The exact amount of
insurance varies from person to person, but it is wise to get enough insurance to cover certain
financial obligations:

• Funeral expenses

• Education

• Debt
• Final expenses
• Income.

2.4 WHY SHOULD LIFE INSURANCE BE THE FIRST STEP IN FINANCIAL

PLANNING?

As a result of rising inflation, the shift to nuclear families and lifestyle changes, life insurance
is very important. It is most important that every person first ensures his life sufficiently to
ensure the financial security of his dependents and then deals with other aspects of financial
planning.Financial planning is a dynamic process that involves figuring out an individual's
financial goals and long-term goals and the ways and means to achieve those long-term goals
and objectives. This include sport section, wealth creation, planning for contingencies and
emergencies, and planning for certain life milestones.

One's financial plan must be revised so that it is in sync with the different stages of one's life
and the different requirements of a particular life stage.Changing circumstances such as
getting married, buying a house, and raising a child requires a financial plan to be developed
in a specific time frame to achieve these goals. Today, a person has several options to choose
from when starting financial planning. It has been observed that people tend to focus on the
"wealth creation" aspect of financial planning and the "preservation" element is often
compromised or neglected.

Although the death of a breadwinner in the family is irreplaceable, adequate insurance

ensures that dependents receive the necessary resources to become financially independent
and largely keep the family's financial plans on track without having to compromise on
standard of living. This protection aspect is unique to life insurance and therefore should be
an important part of an individual's financial plan. Like risk management, the importance of
adequate life insurance in an individual's financial plan cannot be overemphasized.

In the event of the unfortunate death of the breadwinner, however, only life insurance will
help the family of the insured. There are many complex calculations and simple rules for
estimating the amount of insurance an individual needs. A simplified way is to calculate life
insurance for about 20 times a person's annual income.
CHAPTER 4

INVESTMENT PLANNING
There are two main types of assets purchased by consumers, which are personal assets and
investment assets. Personal property is purchased primarily for its use and convenience.
These include, for example, homes, cars and clothes. Investment assets are assets acquired for
investment purposes, defined as the purchase of an asset with the expectation that the asset
will generate a return associated with the risk.

Return (profit) results from an increase in price, revenue or a combination of the two. Income
is usually received in the form of dividends (if the asset is a stock), interest (if the asset is a
bond) or rent (if the asset is a lease). The difference between personal property and
investment property is not always clear.

For example, buying an antique car may be for fun, in which case it is personal property. It
can also be for investment purposes (appreciation) and thus an investment property. Or it
could be both for pleasure and investment. Jewelry is another good example of how an asset
can serve two purposes. In such cases, the ultimate difference depends on the intent of the
buyer.

The same property can be personal property for one person and a real estate investment for
another. Fortunately, asset classes are clear and unambiguous to most consumers.Involves
taking some risk as well as the desire to compound money over time. Investing properly is a
carefully planned and prepared approach to managing your money with the goal of
accumulating the funds you need.

And planning your investment strategy is all about discipline and patience.In investing, there
is a direct relationship between risk and return. In other words, as the profit potential
increases, so does the risk of loss. The right investment plan for you largely depends on your
comfort level and cannot be completely avoided while investing, but it can be mitigated.

Risk Tolerance:

Two Key Questions First, how comfortable are you with risk?
This is subjective and depends on many factors, including your financial goals, life stage,
personality and investment experience.Another important question is how well is your
investment plan designed to handle potential losses?

The more resilient your overall plan is to potential losses, the more risk it can take.

For example, time can be a powerful element. The longer you plan to invest, the more
flexible your investment plan will be to deal with setbacks.

When it comes to investing, "growth" means that the investment has the potential to increase
in value; if this happens, you may be able to sell it for more than you paid (of course, if the
investment loses value, you may lose capital).

Income comes from regular cash payments. Savings account interest is income. That means
interest on a certificate of deposit, interest on a bond and stock dividends.

Stability, a third possible investment objective, is related to the protection of the principal.
Stability-focused investing focuses less on increasing the value of an investment and more on
making sure it doesn't lose value. As much as we'd like to, we can't have it all. There is a
relationship between growth, income and the stability of our investments.

The more important one of these areas becomes, the more you may need to trade the other
two areas. The key is to tailor your investments to what you want them to do for you and
balance stability, income and growth to maximize total return at a risk level that suits you.

Key Considerations

• What kind of retirement do you want?

Maintaining financial independence in retirement depends largely on your desired lifestyle.

• When do you want to retire?

The earlier you retire, the less time you have to save and the longer those dollars will last.

• How long until you retire?

Remember that life expectancy has increased steadily over the years and is expected to
increase further. For many of us, planning for a retirement period of 25 years or more is not
unreasonable.

4.1 Four Steps to Creating Your Plan

1. Set Specific and Realistic Goals

For example, instead of saying you have enough money to retire, think about how much
money you need. Your specific goal may be to save Rs.50,000 before you turn 60 years old.

2. Calculate how much you need to save per month

If you need to save 50,000,000 rupees before the age of 60, how much should you save per
month? Decide if this is a realistic amount you can put aside each month. If not, you may
need to change your goals.

3. Choose your investment strategy

If you are saving for long-term goals, you can choose more aggressive and risky investments.
If your goals are short-term, you can choose conservative investments with lower risk. Or you
could take a more balanced approach.

4. Develop an investment policy statement

Develop an investment policy statement that guides your investment decisions. If you have an
adviser, your investment policy statement will set out the rules you want the adviser to follow
in relation to your portfolio.

Your investment policy statement should:

define your investment goals and objectives, describe strategies that will help you achieve
your goals, describe your return expectations and time horizon, detail how much risk you are
willing to take, and include guidance on types. the investments that make up your portfolio
and how easy access to your money should be, and determining how your portfolio is
monitored and when or why it should be rebalanced.

4.2 WHAT IS CONSIDERED WHEN CHOOSING AN INVESTMENT?

The consumer must consider several factors, the most important of which are:

• risk

• performance

• marketability and liquidity

• diversification

• impact of taxes on income risk

This is the possibility. lose or not gain value. There are several different risks to consider
when investing; some may be more important to you than others. Once you understand what
each of the following risks means, you can decide which ones will affect your personal
investment portfolio.

Financial risk (especially purchasing power risk) - related to the general health of the
economy. This can create uncertainty about the profitability of a particular investment and the
future purchasing power of capital as a result of changes in the general price level of the
economy.

Interest rate risk (also inflation risk) - when interest rates rise (inflation)or fall, the prices of
fixed income investments (CDs, bonds, etc.) will change. In practice, an increase in market
interest rates usually causes the market prices of existing securities to fall, and vice versa.

4.3 Return:

The goal of investing is to expect future returns sufficient to finance your goals as a
consumer. To better achieve these goals, the consumer must understand the different ways of
receiving income: interest, dividends, business profits, rental income and capital gains. "Total
return" is the true measure of performance or return on investment and can be divided into
two main factors:

4.4 Capital - the increase in the market value of your investment, which usually does not
fully realize until the property. is sold Current income - income regularly received over the
life of the investment (eg interest, rent or dividends).

Equally important in influencing the rate of return is the possible combination that earns
interest. Compounding is the effect of interest when interest is applied to both original
investments in addition to the interest already accrued on the investment.

"Rule of 72" may refer to a simplified calculation of compound effect.

In general, the number 72, divided by the investment rate, gives an estimated number of years
before you see a rule of 72:Number of years to double = 72 / interest rate.
4.5 Marketability and Liquidity:

Liquidity is the ease with which an asset can be sold and converted into cash without losing
the invested capital. For example, a house cannot simply be redeemed for cash, which is the
opposite of a blue chip stock due to the nature of the stock.Although both real estate
investments are desirable, it is often a trade-off that depends on the consumer's situation.

For example, a current account does not have a market where you can easily buy or sell it,
but it is very liquid. In contrast, listed shares generally have a high marketability, but selling
it may result in a loss of capital, which is not pure "liquidity".

4.6 Diversification:

It is important for the consumer to consider the investment principle when creating a
portfolio. Diversification is the distribution of assets among several securities (investments).
By diversifying, you can avoid having all your eggs in one basket or allocating all your
money to one investment that may not perform well over a period of time. By spreading the
risk, it can be minimized and is a sensible decision for most consumers. In general, price or
value fluctuations of different investments are not uniform; they do not all rise and fall at the
same time or to the same degree. Thus, following the principle of diversification, an investor
can protect at least part of his investment assets.

4.7 Effects of Taxes on Returns:

As the saying goes, "It's not what you get, it's what you keep!" Similarly, it is necessary to
separate the income from the investment and the tax refund after the fact. There are several
aspects to this, and the following are simplified examples:

1. An investment can generate income subject to ordinary income tax, such as investment
certificates or corporate bonds. The after-tax return on this investment is less than its current
yield (interest).

It can be calculated as follows: Current interest rate x (1- income tax of the investor) = tax
return.

Example: A CD with a taxable interest rate of 5% would have a tax return of 3.6% in one
30% tax bracket.

5 x (1 - .30) =3.5
So the investor didn't actually get 5% of his investment, he got a 3.6% return, which is
significantly less because the rest went to pay federal taxes.

2. If the yield of the investment is completely tax-free, for example the interest of some
municipal bonds, then the after-tax yield is equal to the current yield, because it has no tax
effect (the interest rate remains the same).

3. In some cases, an investment can generate income that is taxable only if it is realized as a
capital gain.For example, if no dividend has been paid on a share but its value has increased
from Rs.200 to Rs. 400 per share, no taxable event occurs to the investor until he sells the
shares, thereby "realising" a capital gain of Rs.200 per share.

Asset allocation includes the mix of investments in your portfolio. This can include a
combination of stocks, bonds, cash and real estate. Stocks are usually the riskiest investment,
but they provide the highest returns. Bonds earn less interest but are more stable than stocks.
Cash savings, including savings accounts, CDs, Treasuries and money market accounts, are
the safest investments but offer low returns over the long term.

Finally, owning real estate such as gold and silver is a very stable and safe investment that
usually protects against inflation but does not generate high returns. An important part of a
sound investment allocation strategy is diversification, so that if a portion of your investment
portfolio loses value, your entire retirement fund is not wiped out.
CHAPTER 5

Tax Planning
Tax can be defined as the management of financial affairs in such a way that, without
violating the law in any way, all tax credits, exemptions, compensations, refunds, rebates and
discounts arising from income are taken into account. fully used. Indian Tax Code.

Every tax planning scheme should be natural and not look like an artificial arrangement. A
tax planner should exercise great care and caution in designing any tax planning scheme as
failure to do so will cause great hardship and heavy tax burden to the assessee for whom the
scheme is designed.

5.1 Five Major Sources of Income

A.Salary IncomeSalary includes:

a) Wages

b) Rents

c) Pension

d) Salary

e) Fees, commissions, allowances, Profit from salary or their wages in lieu of or in addition

f) Salary advances

g) Participation fee

h) Annual addition to an approved pension fund

i) Transferred balance to a recognized pension fund

j) Contribution from the government or other employer to an employee's Pension account as

referred to in Sec. 80CCD.
Noteworthy:

a) Salary income is taxed on a "payment basis" or "receipt basis", whichever is earlier.

b) An employer-employee relationship is required between the payer and the payee for
income to be taxed under this section.

c) The income received from the taxable salary during the year consists of: the salary paid by
the employer (including the former employer) to the taxpayer during the previous year,
regardless of whether it was paid or not. ;

Salary paid by the employer (including the former employer) to the taxpayer during the
previous year before the deadline for its payment;

The employer (including the former employer) did not pay the salary to the taxpayer last
year, if it was not taxed in the previous year;

Exceptions - The fee, bonus or commission received by the partner's company is not taxable
on the basis of salary, but would be taxed on the basis of the company or profession.

Place of obtaining salary:

a) Salary is obtained for the provision of services even if paid outside India;

b) salary paid by a foreign government to its employee working in India is taxable Salaries;

c) Holiday pay paid abroad on account of leave earned in India shall be deemed to have
accrued in India.

Exceptions - If an Indian citizen renders services outside India and receives salary from the
Government of India, he will be taxed on the basis of the salary earned in India. of.
B.Income from Business/Profession:

It means any income that is shown in profit and loss account after considering all allowed
expenditures.

The following are few examples of incomes that are chargeable under this head: Normal
Profit from general activities as per profit and loss account of business entity. Profit from
speculation business should be kept separate from business income and shown separately.

Any profit other than regular activities of a business should be shown as casual income and
will be shown under “income from other sources” head. The value of any benefits whether
convertible into money or no from business/profession activities.

Any interest, salary, commission etc. received by the partner of a firm will be treated as
business/professional income in hand of partner. However, the share of profit from
partnership firm is exempt in hand of partner.

Amount recovered on account of bad debts, which were already adjusted in profit in earlier
years etc.

EXPENSES THAT ARE DEDUCTIBLE ON ACTUAL PAYMENT ONLY

Following expenses will be allowed if these expenses have been paid before or on due date or
before filing of income tax return: -

•Any tax, duty, cess or fees by whatever name called.

•Contribution to provident fund, ESI premium, gratuity fund or other funds for welfare of
employees.

•Bonus or commission or leave encashment payable to employees.

•Interest on loan from public financial institutions, state financial corporation or from
scheduled bank.

Illustration:

As per Profit & Loss Account of M/s XYZ Limited as on 31.03.17, the amount of net profit is
Rs.5,50,560/=. Following information also available with profit and loss account:

Rs. 20000/= paid as Advance Income Tax had been debited to profit and loss account.
Rs.10000/= spent for printing of brochures of a political party were also shown in profit and
loss account. Amount or provident fund for Rs.55000/= did not deposit till the date of filing
of return.

Compute the taxable income of M/s XYZ Limited.

Solution:

C. Income from house ownership

The income earned by the assessee from immovable property is considered as income from
house ownership. A residential property includes the building itself and the land attached to it.
Real estate means any building (house, office building, warehouse, factory, hall, shop,
auditorium, etc.) and/or land related to any building (building, garage, garden, parking lot,
playground, sports field, etc).

The property has many subtleties and types that are calculated in different ways. Tax liability
may not apply to actual rent or income received. If the property is not rented out, any income
that the property may generate is taxed.Before learning how to calculate housing income, it's
important to understand the terminology.

Annual Value:

This is the ability of the property to generate income, which is its annual value.
Council Value:

This is the value of your property as assessed by your local authority and on which they pay
council tax. A municipality has many factors that they consider before giving a value to a
municipality.

Fair rental value:

The rent that would be charged for a property with similar characteristics in the same (or
similar) area is the fair rental value.

Standard rent:

According to the Rent Control Act, the standard rent is fixed and owners cannot receive a
higher rent than is stated in the Rent Control Act. This law ensures that landlords receive fair
rent, that tenants are not abandoned and are protected from eviction.

Actual Rent Received/Received:

This is the actual amount the owner receives as rent from the tenant, depending on who pays
for water, electricity and other utilities.

Gross Annual Value (GAV):

This is the higher of:

• Rent received or receivable

• Fair market value

• Local authority assessmentWhere rent law applies, GAV is the higher of :Standard rent
receivedAnnual net asset value (NAV):

NAV = GAV - utility taxes paid deductions:

Two deductions are allowed in accordance with § 24 of the Income Tax Law to obtain the
actual taxable income of the apartment.

: Statutory deduction: 30% of the net value may be deducted for repairs, rent, etc., regardless
of the actual expenditure incurred. This deduction is not allowed if the annual value is zero.
Interest on Loan Capital:

Allowed as a cumulative deduction if the money was borrowed for the purchase/construction
of a house. Deduction is allowed whichever is less between Rs.1,50,000 or the actual amount
of interest (if the building is completed within 3 years of taking the loan on or after 1st April
1999). In other cases it is Rs. 0.30,000 and actual interest whichever is less.

Annual value: Annual value = NAV - Deductions.

Owner:

The income from the apartment is taxed to the owner of the property. The owner is the person
who has the right to receive income from the property. This means that the person receiving
the financial benefit of the asset receives the income.

How to save on residential income tax?

With careful planning, you can save a significant amount on taxes. Some of the things you
can do to save tax are:

Joint Home Loan - If you jointly own a property with someone and apply for a joint home
loan with your partner, you both are eligible for tax benefits of up to Rs. 150,000 pieces.

Planning a second home?

If you already have one private house registered in your name and you want to avoid paying
taxes on the second apartment, register another property in the name of your spouse/relative
to avoid excessive taxation.

Shared ownership - Income tax of the apartment can be shared between the co-owners and
thus reduce the burden.

Ownership of more than one property - If you own more than one property, only one of
them will be registered as a residence and the rest will be classified as independent properties
(SOP). It is important to assess the tax liability of all your properties and choose the one with
the highest tax liability to call home and give away the rest. You can also change the SOP
every year.

Empty homes - Homes you own are still taxed at fair rental value, so it's worth renting out
any empty properties, which allows for income without loss of taxation.

Example:Housing income includes income from real estate owned by an individual.

Suppose you own a property and have Rs. Rent 15,000/month. Also suppose you paid Rs.
10,000 in council tax this year and you have Rs. 50,000 interest on loan capital.

D. Income from Capital

Capital is the profit an investor receives when he sells capital at a price higher than the
purchase price. The transfer of capital assets must take place in the previous year. It is taxed
on the basis of capital gains and must include capital, capital transfer and income or gains
arising from the transfer.

Capital gains include all assets held by the assessee except the following:

• Shares in business.

• Consumables or raw materials held for commercial or professional activities.

• Personal effects that can be carried, except jewelry, archaeological collections, drawings,
paintings, sculptures or other works of art held for personal use.
• Agricultural land. The land must not be located within 8 kilometers of a municipality, union
of municipalities, notified area committee, town committee or municipal government with a
population of at least 10,000

• Gold loans, national defense gold loans and special bearer bonds.

• Gold deposit bonds under the gold deposit scheme.

Capital Gains Tax:Capital Gains Tax is a tax levied on the profit it has earned from the sale of
its assets. To facilitate taxation, capital is classified as short-term capital; and "Capital".

Short-term capital: If the taxpayer owns stocks and securities for a maximum of 36 months
before their transfer, it is treated as short-term capital.

Long-term capital: If the taxpayer owns stocks and securities for more than 36 months before
the transfer, it is treated as long-term capital. Shares listed on a recognized stock exchange,
units of equity-oriented mutual funds, listed bonds and government securities, UTI units and
zero coupon bonds are calculated as a holding period of 12 months instead of 36 months.

Capital gains in India:Long term capital gains on shares and mutual fund are not taxed in
India. However, short-term profits are taxed at 15 percent. In the case of debt mutual funds,
both short-term and long-term capital gains are taxed.

Short-term capital gains from debt funds are added to income and taxed according to the
personal income tax table, and long-term capital gains from debt funds are taxed at 20%
indexed and 10% non-indexed. Indexation is the adjustment of the purchase price to inflation.
Indexing increases purchasing costs and reduces profits.Taxpayer can use the CAMSOnline
and Karvy capital gain report, they send the report by post.

Calculation of capital gains: Capital gains calculations are as follows:

Short-term capital gain = consideration at full value - (acquisition cost + improvement costs
+ transfer costs)

Long-term capital gain = full value received or accumulated consideration value - (indexed
purchase price + indexed improvement cost + delivery cost).

Where;Indexed purchase price = purchase price X cost inflation index of the year of
purchase / cost inflation index of the year of purchase price of the improvement index = cost
of the improvement X cost inflation index of the transition year / cost inflation index of the
year of improvement \ n The transfer fee is an intermediary who is paid for the organization
of the sale, incurred legal costs, advertising costs, etc.

Example:

Mr. Sharma is a resident and sells a residential house for Rs.25,00,000 on 04.12.2013. He
bought a house on 07.05.2011 for Rs.5,00,000 and spent Rs.1,00,000 on its improvement in
May 2012. Last year, 2013-14, his income excluding capital gains was nil.

Since the property was held for less than 36 months, it is short term capital andShort term
capital gain = 25,00,000 – 5,00,000 – 1,00,000 = 19,00,000if Sharma sells the house on 12.3.
2015 at the same price, then he would have held the property for more than 36 months.

Indexed cost of acquisition is 5,00,000 X 852/711 = 5,99,156 Indexed cost of improvements

is 1,00,000 X 852/785 = 1,08,535Long term capital gain = 25,00,000 – (5 6 + 999). .08,535)
707 691=17 92 309Exemption from capital gains tax:

1. Agricultural land in rural India is not considered a capital asset, so there is no capital gain
on its sale.

2. You will not be taxed if you use the entire capital gain to buy an apartment. You must meet
the following conditions to get an exemption under section 54F:

• You must purchase the house within 1 year before the sale or 2 years after the sale.

• Constructed properties must be completed within 3 years of the handover of the original
house.

• You do not sell the house within 3 years of purchase or construction.

• The new house must be located in India.

• You may not own more than one residence other than the new one on the date of transfer.

• A new house cannot be bought within two years without a new one, and a residential
building cannot be built within three years.

• If you invest in a capital gains account system, you do not have to pay tax on the capital
gains. However, the money must be invested for the period specified by the bank. If you do
not keep the invested money for a certain period of time, it is treated as a capital gain.
• The purchase of capital growth bonds is exempt from tax. This only applies if it is long-term
capital and the exemption is based on Article 54 of the EC Treaty Unless you intend to invest
in another property, the capital gains account system is useless. In this case, you can invest in
specific bonds for a specific purpose and they are redeemable after 3 years. You get 6 months
to invest in these bonds.If you meet these conditions and invest all the proceeds of the sale in
the new house, you will not have to pay tax on the capital gains.

3. Capital Loans:

According to Section 54 EC, tax relief can be claimed by investing capital gains earned on
long-term capital assets in bonds issued by National Highways Authority of India or Rural
Electrification Corporation Limited. Investments in bonds must be made within 6 months.
They cannot be redeemed before 3 years. It is possible to earn a guaranteed interest rate on
the loan. The maximum amount that can be invested in capital growth bonds is Rs 50,00,000.
This benefit cannot be used for short-term capital gains.

E. Income from other sources:

Income from other sources is one of the five categories of income under which income is
generally classified in the Income Tax Act, 1961. This category includes income that is not
can be reported under other income, ie. income from salary, income from residential property,
profit from business or profession and income from capital gains.

The total taxable income under this head is calculated according to the accounting method
followed by the assessee. accrual or cash basis. The exception is dividend income and interest
income, ie. regardless of the accounting method, assessees must submit and pay tax on the
previous year's dividends and interest.

Dividends:

Untaxed dividends include dividends exempted U/S 10(34) viz. dividends from Indian
companies, dividends subject to corporate income tax, investment fund income.Winnings:this
includes winnings above Rs 10,000 from lotteries, puzzles, contests, games and all forms of
gambling and betting. E.g. card games, horse racing, game shows, etc. Interest received:All
interest income (from allowances/allowances) earned in the previous year is taxable.
However, a 50% deduction may be claimed from this result.Income not reported under the
heading "Profits and profits of the trade or profession":
This includes contributions made by the employer to the employee social fund, interest
accrued on securities, rental income from furniture, equipment and machinery (including
buildings where it cannot be transferred separately), the insurance income of the key.

Gifts:

this includes monetary or non-monetary items received without consideration or due

consideration. Gifts in kind include all real estate and certain movable property.Gifts are
taxable only if the total amount received in the previous year is more than Rs.50,000 and
applies only to gifts received by individuals after 1.10.2009 or HUF.

This does not apply if the assessee receives money from relatives or from a local authority or
trust, educational/medical institution, institution or other such institution as defined in section
10(23C) as a marriage gift mentioned in a will or inheritance. of a deceased donor.

Gifts include gifts of money, real estate and tangible property.Monetary gifts - sums of money
received unpaid or without proper remuneration.Gifts from relatives are gifts from parents of
the assessee, siblings or sisters of parents (ie aunts, uncles), all predecessors or descendants
of relatives, brother, sister; spouses of siblings spouses, parents of spouses, siblings of
spouses, predecessor/heir of spouse and their brothers or sisters.

Calculation of IT tax on income from other sources with example:

• Mr. Shah earned Rs.50,000/- as dividend from share trading last year. He asked his son-in-
law Shah how to include it in his tax returns. He argues that the dividends he earns are not
taxed because they are dividends from a domestic company.

• Mr Shah also earned Rs 100,000 as interest from fixed deposits held in various banks. He
must declare the amount of "income from other sources that increases his tax income".

• Mr. Shah's wife asks him if he has to pay income tax on the money given by the wedding
guests last year. Don't worry, she says, because gifts received at the time of the wedding are
tax-free. Gifts received from relatives in various situations after the wedding are also exempt
from tax

.• Mr. Shah's wife then asks about a piece of jewelry that a neighbor gave her after she got her
medical degree. It cost him almost 1 million. He calms her jittery nerves by reminding her
that he graduated in 2008 and the gift tax only applies to gifts received after October 1, 2009
.• They also didn't have to worry about leaving money behind. Mr. Shah's favorite uncle, who
died last year, as it came to them through his uncle's will.These examples show how the tax
rules for taxing income from other sources should be understood. The main elements are the
type of income, the source of income, the time of receipt of income and the amount of
income received. By analyzing these elements, it is easy to figure out how to deal with
income from other sources.

How to legally save tax?

Tax relief helps reduce taxable income. This will reduce your overall tax bill and help you
save tax. However, the amount of the deduction differs depending on which tax credit you
claim. Tax relief can be applied for tuition fees, medical expenses and amounts used for
charity. You can invest in various plans like life insurance, retirement savings, government
savings schemes etc. to get tax deductions.

The Government of India provides tax exemptions on various expenses incurred on various
activities to encourage individuals and corporate bodies to engage in social welfare activities.
Tax relief can be claimed for money spent on education, medical expenses, charity, insurance
investments, pension schemes, etc. These deductions are intended to encourage members of
society to participate in certain beneficial activities that help everyone involved in the
process.

Tax benefits under section

80C:Section 80C of the Income Tax Act provides tax benefits for various payments.
Individuals as well as Hindu undivided families can take these deductions. Eligible taxpayers
can claim deductions of Rs 1.5 lakh per year under Section 80C and that amount is a
combination of Section 80 C, 80 CCC and 80 CCD deductions. Some popular investments
that are eligible for this tax credit are listed below.

• Life insurance payment (for self, spouse or children)

• Payment to a pension/retirement fund

• Tuition for the education of up to two children

• Payments for housing construction or property purchase

• Fixed deposit payments with a minimum duration of 5 years

This section includes various additional deductions like Mutual Funds, Retirement Savings,
Purchase of NABARD Bonds, etc.

Clauses of Section 80C:

Section 80C contains an exhaustive list of deductions to which an individual is entitled,

which led to the creation of relevant clauses to provide clarity to taxpayers.

TsÜS Section 80: Section 80 of the Income Tax Act provides tax benefits for pension fund
investments. These pension funds can be from any insurance company and can be applied for
up to 1.5 lakhs. Only private taxpayers can claim this deduction.

Section 80 of the CCD: Section 80 of the CCD aims to promote the saving habit of
individuals by giving them incentives to invest in pension schemes notified by the Central
Government.

Payments made by both the individual and his employer are entitled to a tax reduction if the
deduction is less than 10% of the individual's salary. Only private taxpayers are entitled to
this deduction.

CCF Section 80: Open to both Undivided Hindu Families and Individuals. Part 80 CCF
contains provisions for tax deductions to secure long-term infrastructure loans notified by the
government. A maximum deduction of Rs 20,000 can be claimed under this section.

Section 80 CCG: Section 80 CCG of the Income Tax Act allows a maximum deduction of Rs
25,000 per annum and certain individual residents are entitled to this deduction. Investments
made in share savings programs announced by the state are personal contributions if the limit
is 50% of the invested amount.

Tax deductions under section 80D:Section 80D of the Income Tax Act allows deductions
from amounts that a person has used to pay for health insurance. This includes payments
made to a government health plan for your spouse, children, parents or yourself. A deduction
of Rs 15,000 can be made for insuring the spouse, dependent children or oneself, while the
amount is Rs 20,000 if the person is above 60 years of age.Individuals as well as Hindu
Undivided Families can avail this deduction if the payment is made in a manner other than
cash.

Sub-sections of Section 80D:Section 80D is further divided into two sub-sections to explain
the benefits available to taxpayers.Section 80DD: Section 80DD contains provisions for
deduction of tax in two cases. Allowable deduction is Rs 75,000 for normal disability and Rs
1.25 lakh for severe disability. This deduction can be claimed for the following expenses.

For payments made for treatment of disabled dependentsAmount payable as premium for
purchase of insurance or maintenance of such dependent deduction is Rs 75,000 in case of
normal disability and Rs 1,25,000 in case of severe disability. This deduction can be availed
by Hindu undivided families as well as individuals living there. In this case, the dependent
can be either a spouse, sibling, parents or children.

Section 80DDB: Section 80DDB can be used by HUFs and resident individuals and contains
provisions for deducting expenses incurred by an individual/family for treatment of certain
diseases. Allowable deduction is limited to 40,000 rubles, which can be increased to 60,000
rubles if the treatment is for an elderly person.

Tax benefits § 80E:§ 80E of the Income Tax Act is designed so that training does not
become an additional tax burden. According to this provision, the taxpayer is entitled to a
deduction when repaying the interest of the loan taken for higher education. The loan can be
used either by the taxpayer himself or to support the education of his parish/child. This
deduction can only be used by individuals, and loans from approved charities and financial
institutions are allowed for tax reduction. of.

5.2 Tax Deductions under Section 80E:

The provision outlined in Section 80E of the Income Tax Act aims to prevent the imposition
of additional tax burdens on individuals seeking higher education. It allows taxpayers to
claim deductions on the interest repayment of loans taken for educational purposes, either by
the taxpayer themselves or to support the education of their dependents. This deduction is
exclusively available to individuals who have obtained loans from approved charitable
organizations and financial institutions authorized for tax benefits.

Subsections of Section 80E:

Section 80EE pertains to deductions applicable solely to individual taxpayers who have taken
loans to acquire residential property, with the interest repayment of such loans qualifying for
deductions. The maximum deductible amount under this section is capped at Rs 3 lakhs.
5.3 Tax Deductions under Section 80G:

Section 80G incentivizes taxpayers to contribute to funds and charitable institutions by

offering tax benefits on monetary donations. All taxpayers are eligible for this deduction upon
providing evidence of payment, and the deduction limit is determined based on specific
criteria.

Donations made to funds such as the National Defense Fund, Prime Minister’s Relief Fund,
and National Illness Assistance Fund qualify for a full 100% deduction.

Similarly, donations to local authorities, associations, or institutions supporting family

planning and sports development also qualify for a 100% deduction, subject to certain limits.

On the other hand, donations to funds like the PMs Drought Relief Fund and the Rajiv
Gandhi Foundation are eligible for a 50% deduction.

Furthermore, contributions to religious organizations, local authorities for non-family

planning purposes, and other charitable institutions qualify for a 50% deduction, subject to
specific qualifying limits.

The qualifying limit is defined as 10% of the taxpayer's gross total income.

Subsections of Section 80G:

Section 80G has been subdivided into four sections for better comprehension.

Section 80GG allows individual taxpayers who do not receive house rent allowance to claim
deductions on the rent paid by them, up to a maximum of 25% of their total income or Rs
2,000 per month, whichever is lower.

Under Section 80GGA, all taxpayers without income from business or profession can avail
deductions on donations made towards social, scientific, or statistical research or the National
Urban Poverty Eradication Fund.

Section 80GGB permits Indian companies to claim deductions on donations made to a

political party or electoral trust.

Lastly, Section 80GGC allows deductions on funds contributed to a political party or electoral
trust by an assessee, excluding local authorities and artificial juridical persons.
5.4 Tax Deduction under Section 80QQB:

Section 80QQB enables tax deductions on royalties earned from book sales, exclusively for
resident Indian authors, with a maximum limit of Rs 3 lakhs. Royalties from literary, artistic,
and scientific books are eligible for deductions, while royalties from textbooks, journals, and
diaries do not qualify. Authors receiving royalties from foreign sources must repatriate the
amount within a specified time frame to avail tax benefits.

Tax Deduction under Section 80RRB:

Section 80RRB provides tax relief to patent holders by offering deductions on royalties
received from patents. Resident individuals earning income through patent royalties can
claim deductions up to Rs 3 lakhs, provided the patent was registered after 31/3/2003.
Royalties received from foreign countries must be brought back within a specific timeframe
to qualify for tax deductions.

5.5 Tax deduction under section 80TTA:

Undivided Hindu families and individual taxpayers can claim 80TTA. This section allows a
deduction of Rs 10,000 annually from interest earned on money invested in bank savings
accounts.

Tax deduction under section 80U:

Tax credits under section 80U can be claimed only by resident disabled taxpayers. A
maximum of Rs 75,000 per annum can be claimed by disabled people from the concerned
medical authorities. People with severe disabilities are eligible for a maximum deduction of
Rs 1.25 lakh if they meet certain criteria. Some of the disabilities classified as tax credits are
autism, mental retardation, cerebral palsy, etc.

5.6 INCOME TAX CALCULATION

Every taxpayer must have professional knowledge of income tax calculation that only makes
life easier. This not only helps to estimate the amount of tax to be paid in the financial year
but also gives a clearer idea of how to save tax. Income tax is a tax levied by the state on
individual income. Calculating your annual income tax may seem like a complicated process,
but it's easy if you know the income tax tables for that year and can do the math.
 Slab IncomeSlab(Rs.) IncomeTaxRate
0 0to2,50,000 NIL
1 2,50,001-5,00,000 10%
2 5,00,001-10,00,000 20%
3 10,00,001andabove 30%

Source: simpleinterest.in
CHAPTER 6

RETIREMENT PLANNING
Commencing retirement preparation at a young age is essential due to shifting lifestyles,
extended longevity, and enhanced expectations that have significantly transformed the
retirement landscape. Presently, individuals look forward to active, vibrant retirement years
characterized by life enjoyment and financial independence, considering retirement not
merely as a short end phase but as a rewarding period of life. Furthermore, a considerable
portion of the population is progressively inclined towards attaining the financial autonomy
linked with retirement.

Encouraging younger individuals to take retirement planning seriously is crucial, prompting

the need to initiate planning when they are relatively youthful. Convincing younger clients
about the importance of early planning may require specific strategies. Highlighting the
substantial benefits of commencing early, such as the significant impact of compounding, can
serve as a motivating factor. For instance, initiating savings at age 30 with a 7 percent return
rate can amass approximately Rs. 86,00,000 by age 65, in contrast to only Rs. 8,20,000 if
starting at age 40, showcasing the power of compounding vividly.

The majority of Indians are not saving sufficiently to sustain even a basic retirement lifestyle,
necessitating careful planning to address potential contingencies arising from various factors
like Social Security adjustments, company pension reductions, inflation spikes, higher tax
rates, and premature retirement situations. The feasibility of retiring at age 60 or earlier might
not be realistic in the future, considering the trend of increasing life expectancies, leading to
potentially longer retirement periods. To ensure financial longevity, clients should plan for
outliving the average life expectancy.

For many individuals today, maintaining their pre-retirement standard of living typically
requires 60 to 80 percent of their pre-retirement earnings. Collaboration with financial
advisors can aid individuals in focusing on pertinent issues, devising a retirement plan, and its
effective implementation, leveraging the advisor's expertise, impartial perspective, and
encouragement. Retirement planning is a complex process, necessitating retirement advisors
to address challenging inquiries regarding their role, clients' retirement income needs,
available income sources, and strategies for optimizing retirement incomes.

Eliminating obstacles to retirement savings is paramount, with clients advised to save at least
10 percent of their gross earnings for long-term financial objectives like retirement, although
individual circumstances may necessitate modifications to this rule. Unexpected expenses
such as uninsured medical bills, home or auto repairs, and unforeseen unemployment periods
pose a significant hurdle to retirement savings, underscoring the importance of establishing
emergency funds to handle such contingencies. Many Indians remain underinsured,
emphasizing the need for adequate protection against catastrophic financial risks that could
deplete savings and impede future saving efforts.

Conducting a thorough insurance needs assessment for clients is essential to ensure adequate
coverage, with disability and umbrella liability insurance being commonly overlooked areas.
Divorce can pose a challenge to retirement savings, particularly for individuals left with
minimal or no pension benefits or alternative retirement income sources. Such clients may
face a limited timeframe to accumulate retirement assets, heightening the urgency to build
substantial pension provisions.

The absence of a retirement plan at one's place of employment is another prevalent issue with
retirement planning. Because their employer(s) does not offer retirement benefits, some
employees are not able to participate in a plan. In reality, the most recent statistics from a
2011 Nationwide Insurance-sponsored survey of 501 small firms shows that just roughly one
in five (19%) of them provide their employees with any kind of retirement plan. Numerous
businesses mentioned the high implementation costs and administrative burdens of their
programs.Moreover, just 11% of the polled small firms said that they would be adding an
employer-sponsored plan.
Employees who have switched jobs a lot could also receive little or nothing in their pension
when they retire. According to statistics, workers nowadays are not likely to work for one
company their whole lifetime and will usually hold seven full-time jobs.These individuals
typically don't work for an employer long enough to qualify for vested defined-benefit
pension benefits, thus they won't accrue vested benefits. Even in the event that they did
become vested, many of them chose to spend the money instead of investing it or rolling it
over for retirement when they were let go from their jobs.

Obstacles to Saving for Retirement

1. Propensity to spend all of one's money

2. Unexpected costs

3. Insufficient insurance protection

4. Separation

5. There's no employer plan accessible

6. Regular shifts in employment

7. A poor understanding of finance

8. Further needs for accumulation

Techniques that you could suggest in order to achieve this goal are:

 Getting a reverse mortgage

 downsizing to a less expensive house
 maximizing pensions

When a client decides to sell her current residence and move to a smaller and more affordable
home, the proceeds from the sale can serve as a significant source of retirement funds. For
instance, if a retiree sells her property for Rs.3Cr and purchases a new home for Rs.2Cr, the
Rs.1Cr difference can be invested in immediate annuities or other financial instruments to
generate additional income. This approach is highly advantageous from a financial standpoint
as it allows retirees to leverage their primary financial asset - their home.
In situations where a client wishes to access the equity in her home without selling it and
downsizing, a reverse mortgage can be a viable option. This increasingly popular financial
product provides individuals with a nonrecourse loan secured by their property, which does
not require repayment as long as they continue to reside in and maintain the home.
Essentially, a reverse mortgage enables homeowners to retain ownership of their residence
while accessing substantial funds from the property's equity, which can be utilized for various
purposes without the obligation of repayment.

A reverse mortgage is typically available to homeowners aged 60 or above, who use the
property as their primary residence and have either no existing debt or a minimal amount that
can be settled using part of the reverse mortgage proceeds. The loan amount disbursed to the
client is influenced by factors such as the homeowner's age, the property's equity value,
prevailing interest rates, fees, and the specific reverse mortgage program employed.
Generally, repayment of the loan is triggered upon the last surviving borrower's death, sale of
the property, or permanent relocation. In case property values decline, the lender bears the
loss, and any remaining equity post-repayment of the loan is passed on to the borrower's
heirs. Additionally, since reverse mortgages are considered loans, the funds received by the
homeowner are not subject to taxation.

As a financial advisor, you are likely to encounter numerous inquiries regarding reverse
mortgages, necessitating a comprehensive understanding beyond this overview. It is
important to recognize that reverse mortgages may not be suitable for everyone due to certain
drawbacks. Homeowners opting for a reverse mortgage must continue to reside in and
maintain the property adequately to safeguard the lender's interest, cover homeowner's
insurance costs, and consider the implications on leaving the property to their heirs, who
would need to repay the outstanding loan to assume ownership.

Pension maximization entails a strategic approach to selecting a payout option upon

retirement, particularly for employees nearing retirement age who are presented with various
retirement plan payout alternatives. The objective is to replace the spousal payout from the
pension with a death benefit that is equivalent to or exceeds the after-tax amount that would
have been received following the retiree's demise. In this scenario, the retiree opts for a single
life payout and utilizes the surplus funds from the single versus joint life payout to procure
permanent life insurance coverage.

Employer-sponsored retirement plans often specify the form of distribution that clients will
receive. For married clients, the standard benefit format typically involves a joint-and-
survivor benefit that disburses 50 to 100 percent of the joint benefit to the surviving spouse.
An alternative strategy for married individuals is to select a different payment option with the
spouse's explicit consent, deviating from the normative benefit structure.
CHAPTER 7

ESTATE PLANNING

A narrow interpretation of estate planning is that the process primarily involves the
preservation and allocation of a client's estate. Conversely, the broader perspective suggests
that estate planning is an essential element of financial planning, with financial advisors
aiming to optimize the client's distributable wealth and appropriately transfer it to
beneficiaries. According to this broader view, the estate plan should incorporate life-cycle
financial planning strategies to enhance the client's distributable wealth and plan for the
distribution of such wealth. Estate planning is thus an integral part of a comprehensive
financial plan and should consider other significant planning areas, including insurance
planning, employee benefits planning, investment planning, income tax planning, and
retirement planning, within a holistic plan.

7.1 Three Key Inquiries in Estate Planning

Determining who should inherit the client's property. Deciding how beneficiaries should
receive the property. Establishing when beneficiaries should receive the property.

Since the other major planning areas within a comprehensive financial plan are addressed
elsewhere, this discussion will adhere to the narrow perspective and concentrate on
conserving and distributing a client's estate. It is essential to recognize that a client's estate
plan typically extends beyond this narrow focus and is an essential component of a
comprehensive financial plan.

Selecting appropriate options in estate planning involves addressing the "who," "how," and
"when" questions. The client needs to identify the recipients of their property. The "who"
question is generally straightforward for the client to answer and often does not require
extensive professional guidance.

Furthermore, the client must determine how their beneficiaries will obtain the property. For
instance, the property can be distributed outright to beneficiaries or left in trust with specific
restrictions. Beneficiaries might also receive a partial interest in the property, such as a life
estate. Professional advice is usually necessary for the client to address the "how" question
effectively. Competent financial advisors can understand a client's objectives and develop a
transfer mechanism that aligns with these goals and complies with relevant property laws.
The planning for the "how" question often revolves around minimizing transfer taxes within
the context of the client's objectives. It is crucial to determine the timing of the distribution of
a client's estate. Generally, property distributions occur after the client's death. However,
there are instances where transferring specific assets during the client's lifetime is
appropriate. Lifetime giving can help reduce the client's estate tax burden, particularly for
affluent clients. Planned lifetime giving is often advised to lower the amount of taxes payable
upon testamentary dispositions.

7.2 ESTATE PLANNING DOCUMENTS

An estate plan, which is a subset of a comprehensive financial plan, serves as a guide for
assembling and distributing a client's wealth during their lifetime or at death. However, an
estate plan is ineffective unless the necessary documents to execute it have been meticulously
drafted. Documents such as wills, trusts, and others must be carefully prepared to avoid
pitfalls and provide clear instructions to the relevant parties involved, such as personal
representatives, fiduciaries, and beneficiaries. These directives should adhere to state laws
and reflect the client's intentions. Given the legal implications, an attorney specializing in
estate planning in the local jurisdiction should draft these documents.
Wills
Despite the significance of a will in an estate plan, a considerable number of Americans pass
away without a valid will, leaving the distribution of their estates subject to state intestacy
laws. This often results in court-appointed administrators managing the estates of these
individuals, leading to unnecessary taxes and expenses. A valid will is essential to execute a
cohesive estate plan, regardless of whether it is a result of single-purpose, multi-purpose, or
comprehensive financial planning. Without a will, the distribution of your property upon
death will be dictated by your state's intestacy laws, disregarding your preferences.
A will:
Specifies the distribution of your property. Appoints an executor and guardian for minor
children. Can help achieve various estate planning objectives, such as tax minimization.
For a will to be valid, it must be in writing, signed by the testator, and witnessed.
Requirements for a Valid Will Although the requirements for wills are established in the laws
of the various states and differences do exist, several items are universal. With some minor
exceptions for very rare circumstances, the following are generally required for a valid will:

• The will must be in writing.

• The will must be dated.

• the testator (maker) of the will must have the legal capacity (that is, in terms of age and
mental capacity) to make a will.

• The testator, or creator of the will, must sign the will at the end of the document, usually in
the presence of witnesses.

• A number of witnesses (generally two or three) must sign the will after the testator’s
signature.

Source: l ondonmedarb.com

The principal's last will and testament serves as the cornerstone of the estate plan. While the
primary purpose of the will is to dictate how the client's assets are distributed, it also fulfills
other important functions. A well-crafted will can achieve the following goals:

Designate the executor (or executrix) who will oversee the administration of the client's
estate. Name guardians for any minor children of the testator. Establish testamentary trusts
that will come into effect upon the testator's death to manage the testator's assets for the
benefit of specified beneficiaries. Identify the trustee(s) of any trusts established by the will.
Provide instructions to the executor, executrix, and/or trustees on how to manage the estate or
testamentary trusts. Set the compensation for the executors and/or trustees named in the will.

Trusts
A trust represents a legal arrangement where one person acts in a position of trust regarding
another individual's assets. This fiduciary relationship entails the holder (fiduciary) receiving
and retaining ownership of the assets for the benefit of another person (beneficiary), to whom
the fiduciary owes the utmost duty of good faith. In a legal trust setup, the fiduciary is
commonly referred to as a trustee. The trustee is responsible for managing the assets provided
by the grantor for the beneficiaries' benefit. Trusts are often utilized to provide for
beneficiaries who are unable to manage the assets themselves, such as minor beneficiaries.
The trustee oversees the trust assets based on the specific terms outlined in the trust
agreement. These terms reflect the grantor's instructions and intentions regarding the trust
management. They may include directives on investment goals and provisions for the
beneficiaries. The terms can be highly specific and limiting, granting the trustee minimal
discretion. They may also outline scheduled distributions of income or principal to designated
beneficiaries.
Power of Attorney
A power of attorney is a written instrument that empowers the principal to appoint an agent,
known as the attorney-in-fact, to act on their behalf. The agent is authorized to act solely
within the scope of the powers outlined in the document. Under a general power of attorney,
the principal grants the agent authority to act on their behalf. The agent is typically a trusted
individual chosen by the principal. The power can range from limited actions, like bank
deposits, to broad authorizations allowing the agent to engage in various transactions. A
conventional power of attorney becomes void upon the principal's incapacity. In contrast, a
durable power of attorney remains valid even if the principal becomes incapacitated.
Deathbed transfers
To plan an estate, one must be aware of how property is transferred upon death under the
laws of the jurisdictional state. A frequent misperception is that the client's will specifies how
his entire fortune will be divided upon his passing.In most cases, the distribution of the
client's property is only slightly impacted by the will.
CHAPTER 8

REVIEW OF LITERATURE

1. (Nazneen, 2024) : This study examines how financial literacy affects the financial status of
bank employees in Saudi Arabia. The study uses a sample of 183 individuals and a
comprehensive framework that includes components such as financial behavior, risk
management, financial planning, financial knowledge, financial confidence, financial
communication and general financial enjoyment. Using correlation and regression analysis,
the study finds strong positive associations between many aspects of financial well-being and
financial literacy. Financial literacy has a positive effect mainly on risk management,
financial behavior, overall financial satisfaction and financial security. The findings highlight
the multifaceted nature of financial well-being and highlight the critical role of financial
literacy in shaping positive financial outcomes. In addition, the study identifies certain areas
where targeted financial literacy initiatives can be implemented to improve the overall
financial well-being of the banking workforce. The study sheds light on the relationship
between financial literacy and well-being in a specific professional context, which is
important information from both an academic and a practical perspective. The banking
industry needs tailored financial education programs because of the social and managerial
implications. In addition to benefiting individual workers, these programs also help the
overall economic health of the community. In summary, the study also provides
recommendations for other research directions, such as longitudinal studies and studies on the
functionality of digital financial literacy in a changing banking environment.

2. (Sumit Agarwal a, 2015) : This study examines how financial literacy affects the financial
status of bank employees in Saudi Arabia. The study uses a sample of 183 individuals and a
comprehensive framework that includes components such as financial behavior, risk
management, financial planning, financial knowledge, financial confidence, financial
communication and general financial enjoyment. Using correlation and regression analysis,
the study finds strong positive associations between many aspects of financial well-being and
financial literacy. Financial literacy has a positive effect mainly on risk management,
financial behavior, overall financial satisfaction and financial security. The findings highlight
the multifaceted nature of financial well-being and highlight the critical role of financial
literacy in shaping positive financial outcomes. In addition, the study identifies certain areas
where targeted financial literacy initiatives can be implemented to improve the overall
financial well-being of the banking workforce. The study sheds light on the relationship
between financial literacy and well-being in a specific professional context, which is
important information from both an academic and a practical perspective. The banking
industry needs tailored financial education programs because of the social and managerial
implications. In addition to benefiting individual workers, these programs also help the
overall economic health of the community. In summary, the study also provides
recommendations for other research directions, such as longitudinal studies and studies on the
functionality of digital financial literacy in a changing banking environment.

3. (Dr.M.V.Subha1, 2017) : Economic and financial sector reforms increased the disposable
income of the public. The availability of new financial products offered by many financial
intermediaries, both on the credit and investment side, forced the investment public to
understand the level of each product and product provider and make an informed decision
about where they should invest. At the same time, people outside the formal financial system
need to be educated about banking and why they should be in a relationship with banks.
Financial literacy is seen as an important factor in promoting financial inclusion and
ultimately financial stability. Financial literacy would benefit financially marginalized people
as they would understand the benefits and ways to join the formal financial system. It can
also benefit those involved financially by helping them make informed choices about the
products and services available in the market to the best of their ability. This article highlights
the importance of financial literacy and research opportunities in the field.

4. (Sharma*, 2019) : Objective - The objective of this study is to understand and investigate
financial literacy and its impact on investors for effective future financial planning.
Design/Methodology/Approach - Descriptive and causal research involving 150 MCD school
teachers who responded to the survey. Data were analyzed using descriptive statistics, ranks,
and chi-square tests to test for the effects of certain key characteristics of financial literacy
and investment behavior. Findings - One of the very important findings includes the impact
of awareness about financial investment instruments on knowledge level, interest level and
commitment level which plays a very important role in decision to invest in a particular
financial instrument. Limitations/Implications of the Study - This study covers only a limited
segment of investors viz. teachers of MCD schools and the study can be continued with
different groups of investors. Practical Implications: Financial market firms can work to
increase awareness of the technical details of various financial instruments so that improved
literacy can help better understand financial instruments in line with each investor's financial
goals. Originality/Value - The study is descriptive in nature to analyze the impact of financial
literacy and investment behavior on pre-purchase decision characteristics that trigger
complex purchase behavior of financial investment instruments related to the financial
planning process.

5. (Niranjan Kulkarni, 2022) : Financial planning is a buzzword in today's world. The aim of
the authors is to understand the awareness of the Z generation (those born in the years 1997-
2012) about the need and implementation of financial planning using the collected primary
data. The authors want to understand the perspective of Generation Z on earning-savings-
consumption in relation to the concept of financial planning. Increased per capita income,
longer life expectancy, different social structure from joint family to nuclear family and lack
of a strong social security system; to justify the need to change the management of personal
finances. Regulators and governments are pulling back from guaranteed pensions, and
employers are pulling back from offering lifetime employment. Therefore, individuals must
now take responsibility for wealth creation. This highlights the need and importance of
personal financial planning. The authors sought to understand the level of financial planning
awareness among future savers aged 18-25 (Gen Z) by testing their exposure to the current
pan-India financial system, which includes financial institutions, markets, instruments and
services.

6. (Mousumi Singha Mahapatra, 2023) : The cognitive processes involved in an individual's

mental accounting are crucial in the realm of financial decision-making. Limited knowledge
exists, particularly within the Indian context, regarding the variations in mental accounting
among individuals and how this impacts their financial planning. This research endeavor
seeks to comprehend how individuals' mental accounting systems shape their financial
decision-making. The authors further investigate the impact of individuals' cognitive
capabilities on financial decision-making, labeling this precursor as financial cognition.
Utilizing partial least square structural equation modeling, the data has been meticulously
examined. The findings indicate that mental accounting serves as a mediating factor between
financial cognition and personal financial planning. This outcome solidifies the notion that
individuals' financial cognitions play a significant role in shaping their mental accounting
process, highlighting the importance of psychological mechanisms driving financial decision-
making.
7. (Bhushan, 2019) : Financial literacy entails the capacity to make well-informed
assessments and to enact efficient choices pertaining to the utilization and administration of
finances. Previous studies on financial literacy have revealed that there is a global deficiency
in levels of financial literacy. Diverse measures like financial education schemes are being
implemented by governments, institutions, and establishments to enhance the standard of
financial literacy within society. In order for financial education initiatives to yield positive
outcomes, they should be structured around the various components of financial literacy
including financial knowledge, financial conduct, and financial mindsets to ensure
individuals derive maximum benefits from financial literacy schemes. Hence, to enhance the
financial literacy of the populace, emphasis must not solely be placed on financial knowledge
and financial consciousness, but the evaluation of financial attitudes and financial behaviors
is also imperative.

8. (Dam, 2021) : Financial planning entails a combination of artistic elements intertwined

with scientific principles, aimed at effectively managing one's financial resources to foster
future accumulation while catering to daily monetary needs effortlessly. The expansion of the
financial services sector has presented a plethora of investment products for individual
investors to choose from. It is imperative for individuals to possess financial literacy to craft
pragmatic financial strategies and identify the most appropriate investment instruments that
outperform inflation, leading to wealth growth. This research endeavors to scrutinize the
interplay between individuals' age, income, and financial planning strategies, along with
investigating whether age and income exhibit a favorable relationship with the selection of
investment vehicles. Findings indicate that a significant proportion of individuals establish
financial objectives, yet they lack the knowledge on how to attain these future financial
targets. Moreover, investors often lack the accurate understanding of the optimal investment
options aligned with their age and income bracket.

9. (Shah, 2021) : With the paradigm shift in the financial landscape and financial system,
there is a growing need for financial literacy among households. In countries like India,
where financial literacy regarding financial planning is still at a nascent stage, individuals
often seek guidance from financial intermediaries. The latest research has delved into the
various components of personal financial planning that are taken into account by financial
planners and intermediaries, as well as the factors that influence their advice to households.
The survey responses were collected from financial intermediaries, revealing that they
consider a range of process factors such as assessing client information, providing
recommendations, analyzing available options, managing client-planner relationships,
evaluating financial behavior, and monitoring progress. Furthermore, they prioritize personal
finance components in the following order: Money management, Risk Management
(Insurance planning), Retirement & Estate planning, Tax planning, Investment planning, and
Credit Management when offering advice to clients. Additionally, they factor in the client's
Current life stage, Current situation, Regular income, Risk appetite, Financial objectives, and
Economic conditions when developing a financial plan for the household.

10. (Bhatt, 2018) : Rationale – Personal financial planning constitutes a structured procedure
aimed at delineating an individual's life objectives and managing monetary resources
correspondingly. Consequently, it encompasses a proficient and successful distribution of
one's earnings and other assets, ensuring the fulfillment of the person's necessities,
preferences, and aspirations. Due to the relatively low levels of financial literacy in India, and
the embryonic stage of formal training in this domain, there exists a scarcity of scholarly
investigations. The primary goal of the research is to shed light on the financial planning
strategies adopted by individuals, examining potential divergences between males and
females. Purpose – The fundamental objective of this examination is to acquire an
understanding of how individuals allocate their income and the various motives driving their
investment decisions. Furthermore, the analysis endeavors to identify favored investment
channels and ascertain potential gender-based disparities in preferences. Ultimately, the
researchers seek to investigate the prevalence of structured financial planning practices
among individuals and explore dissimilarities based on gender.
Design/Methodology/Approach - The investigation was carried out in the Ahmedabad district
of Gujarat, with a sample of 196 participants selected based on judgmental criteria to fulfill
the study's objectives. The response rate stood at 78% (n=150), which is deemed satisfactory
for research purposes. The sample was evenly divided between male and female participants,
and data collection took place during June-July 2013. Data analysis was conducted utilizing
multivariate techniques such as Multivariate Analysis of Variance (MANOVA). Findings -
The analysis revealed that a significant portion of income is allocated to meeting
consumption requirements, followed by savings. Earnings are nearly equally distributed
between investments and the establishment of emergency funds. The primary reasons for
investing are to cater to children's needs, saving for personal housing, and tax efficiency.
Fixed deposits emerged as the most favored investment instrument, indicating a tendency
towards safer investment options. Preferences diverged between males and females, with
males showing a preference for insurance policies, bullion, and stock markets, while females
displayed greater interest in bullion and PPF. Gender differences were observed in aspects of
personal financial planning, including satisfaction with current savings, tax optimization in
investment planning, and insurance coverage. Nonetheless, no notable distinctions were
found between males and females in other components such as defining financial objectives,
knowledge of investment options, and retirement income planning.

11. (MAHAPATRA, ALI, & MISHRA, 2023) : The realm of financial planning has garnered
attention in the realm of academic inquiry in India over the past few years. Indian households
exhibit unique behaviors and attitudes towards financial matters that may result in less than
optimal decisions in this domain. The current investigation delves into the impact of financial
cognition on the financial planning choices made by Indian households, while
conceptualizing financial cognition as a secondary element of financial attitude, risk attitude,
and financial knowledge. This inquiry scrutinizes the fundamental tenets of subjective
reasoning concerning financial choices, which underpin the process of financial information
assimilation. A total of 310 survey responses were amassed, and the partial least squares
structural equation model was employed to scrutinize and validate the proposed model. The
findings of this analysis corroborate a notable correlation between individuals' financial
cognition and their personal financial planning strategies.

12. (KUMAR, VIJAYABANU, & Amudha, 2020) : Financial literacy refers to an individual's
capacity to make sound financial decisions on a personal level. This capacity encompasses
comprehension of various financial products and concepts, engagement in discussions
regarding financial issues, selection among managing, spending, and saving funds, and
adaptation to the ongoing changes in the financial market. Given the escalating risks in global
markets and the emergence of increasingly complex financial instruments, investors are
compelled to exercise prudence in their financial dealings. Consequently, the significance of
financial literacy has been underscored on a global scale. The study aims to assess the impact
of individuals' financial literacy levels on their investment choices. A cohort of 469 investors
hailing from Tiruchirapalli was chosen through a method of stratified random sampling. The
primary data obtained were scrutinized utilizing percentage analysis and chi-square testing
through MS Excel. The findings reveal correlations between the respondents' socio-economic
attributes and their financial literacy proficiencies, with the exception of gender. Notably,
among the factors influencing financial literacy levels, age and health precede
responsibilities, particularly those linked to familial obligations. This observation underscores
the enduring presence of intergenerational bonds rooted in love and affection within Indian
society.

13. (Sweta Tomar a, 2021) : Several studies express concerns regarding the widespread
poverty experienced by women post-retirement. Despite the abundance of literature on
retirement preparation, the emergence of behavioral economics and the fusion of
psychological principles with financial planning and saving habits have added significance to
this phenomenon. This research delves into the impact of financial literacy as a cognitive
trait, alongside psychological characteristics such as retirement goal clarity, future time
perspective, attitude towards retirement, risk tolerance, and social group support, on the
retirement planning behavior of women. Utilizing partial least squares regression with PLS-3
and Multi Group Analysis, we examine a series of hypotheses grounded in theory. Our
findings demonstrate a positive correlation between future time perspective, retirement goal
clarity, and social group support, and retirement planning behavior, with these relationships
being influenced by financial literacy. Furthermore, future time perspective and retirement
goal clarity act as mediators in this context. The implications of our study extend to
professionals in financial planning, advisors, and consumers.

14. (Sahi, 2018) : The proliferation of investment products in India, stemming from economic
growth and financial market expansion, offers numerous options for individuals to allocate
their income. Nevertheless, inadequate financial knowledge hinders informed decision-
making in financial planning. Therefore, it is imperative for India to promote financial
literacy education to facilitate effective financial decision-making. This discourse
underscores the importance of advocating for financial literacy education in India today. The
necessity for enhancing financial education among Indians is driven by a range of factors,
including demographic, economic, financial, technological, and social aspects as delineated
in the article. Moreover, the article explores a proposed curriculum framework to
comprehensively cover various facets of financial literacy education. The provision of
financial literacy education holds significant importance for the nation's economic progress
and advancement. Consequently, the successful execution of financial literacy initiatives is
expected to yield multiple benefits such as heightened financial confidence, improved future
planning, consumer safeguarding, and enhanced financial inclusion, as also deliberated upon.

15. (Pimple, 2022) : The Organisation for Economic Co-operation and Development (OECD)
and its International Network on Financial Education (INFE) are devoted to continuously
enhancing the comprehension of Financial Literacy (FL) and implementing strategies for its
global enhancement. The Government of India has also adopted the FL definition provided by
OECD/INFE and is actively engaged in enhancing FL levels within the nation, recognizing
that an improved financial literacy among citizens can bolster economic development. The
Indian Government has articulated a clear vision for FL, aiming for universal financial
literacy and empowerment among its populace. To realize this vision, the Government of
India has formulated National Strategies for Financial Education periodically. The existing
National Strategy for Financial Education (NSFE) covers the period from 2020 to 2025. This
policy adopts a comprehensive approach to raise awareness among Indian citizens regarding
financial education encompassing banking services, financial market services, loan facilities,
insurance coverage, pension plans, and their functionalities. Moreover, the strategy addresses
the reinforcement of banking ombudsmen and other consumer forums to safeguard consumer
rights effectively. This research endeavors to assess the efficacy of governmental initiatives
aimed at enhancing FL levels among the general public. The study, conducted in the Mumbai
Metropolitan Region, seeks to evaluate the extent of financial literacy among residents of the
country's financial hub. However, the study is constrained to evaluating public awareness
solely concerning insurance and pension-related concepts.
CHAPTER 9

Research Study

9.1. Research Methodology:

Research methodology is a systematic approach and set of techniques employed in a research
investigation. It delineates the steps, tools, and procedures utilized to gather, analyse, and
interpret data, ensuring the validity and reliability of findings. It serves as a roadmap for
researchers, guiding them through data collection procedures, sample methodologies, data
analysis, and the generation of significant insights to address the research objectives.

9.1.1. Statement of the Problem:

The financial planning landscape for individuals is notably intricate and ever-changing, as
individuals consistently endeavor to attain and sustain financial stability and growth. This
research is concentrated on comprehending the crucial elements of financial planning for
individuals, which include risk evaluation, financial literacy, and investment tactics. The issue
at hand involves scrutinizing how individuals assess financial risks, maneuver through
external influences such as economic fluctuations and regulatory changes, and execute
calculated financial strategies to safeguard and enrich their financial well-being. More
specifically, there is a necessity to critically assess the awareness levels concerning financial
planning, the approaches individuals employ for risk evaluation, and the diverse investment
strategies they embrace. The primary objective of this research is to explore these factors to
offer insights into the financial planning procedure of individuals, underscoring the
significance of well-informed decision-making and strategic investment planning.

9.1.2. Research Design

 Causal research

To understand the direct cause-and-effect relationships in financial planning for

individuals, causal research will be utilized for the current project. This will involve an
exploration into whether specific strategies in financial planning can improve overall
financial stability, risk management, and investment outcomes. The objective will be to
scrutinize how various interventions in financial planning impact financial results over
time through controlled experiments or longitudinal studies. The purpose of adopting this
methodological approach is to pinpoint the fundamental causal mechanisms that underlie
the impacts of financial planning on the financial well-being and cognizance of
individuals, spanning from evaluating risk to devising investment tactics.
9.1.3. Sources of Data Collection:

 Both Primary and Secondary data have been used for this study

Primary Data: Primary data refers to information that is gathered initially, and holds a
distinctive characteristic of being original in nature.
Such data is collected firsthand, ensuring it is dependable and trustworthy. For this
research study, the primary data was collected through a well structured questionnaire and
survey form.

Secondary Data: Secondary data refers to information that has been previously gathered
by another individual or entity.
For this research study, the secondary data has been collected from financial institutions'
records, websites, government and public reports, as well as from financial planning
platforms and publications.

9.1.4. Sample Size:

100 responses were selected as a sample size in the study.

9.2.5. Sampling Technique:

In this study, Convenience sampling technique is used for selecting samples.
9.2.6. Data Analysis and Interpretation:

1) Gender

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the data
indicates that there is a nearly equal distribution of genders among the respondents. With
48% male and 52% female respondents, the study is likely to capture a balanced view of
financial planning awareness and practices from both men and women. This balanced gender
representation is crucial for understanding the diverse perspectives and experiences related to
financial planning, ensuring that the study's findings are relevant and applicable to a wide
audience.

2) Age
Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the age
group distribution of respondents provides a clear picture of which demographic segments are
most represented. Here’s the interpretation of the data:

 Under 18 (2%): This small percentage indicates that financial planning awareness
among minors is not a primary focus, which is understandable as this group is
generally not yet involved in significant financial decision-making.
 18-30 (53%): Over half of the respondents are in this age group, highlighting a
significant interest in financial planning among young adults. This demographic is
likely at the beginning of their financial journeys, dealing with issues such as
managing student loans, starting savings plans, and initial investments.
 30-45 (32%): This substantial portion suggests that middle-aged adults are also well-
represented. Individuals in this age range are often dealing with more complex
financial issues such as home ownership, investment diversification, and planning for
children’s education.
 45-60 (13%): This smaller group indicates that fewer respondents are in the later
stages of their careers. This group is typically focused on maximizing retirement
savings, reducing debt, and ensuring financial stability for retirement.
 60 & above (0%): The absence of respondents in this age group means that the study
does not capture the financial planning concerns and awareness of retirees or those
nearing retirement, which could be an important aspect for a comprehensive view.

Overall, the data shows a strong representation of younger and middle-aged adults. This
indicates that the study’s findings will mainly reflect the financial planning awareness and
practices of individuals in their early to middle stages of financial careers. The lack of older
respondents means that insights into retirement planning and financial stability in later years
may be underrepresented.

3) Educational Qualification
Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
education qualification distribution of the respondents is as follows:

 Higher Secondary (2%): Very few respondents, indicating that most participants
have pursued education beyond high school.
 Bachelor's degree (59%): The majority of respondents hold a bachelor's degree,
suggesting that most individuals in the study have a solid educational foundation and
are likely to have a reasonable understanding of financial concepts.
 Master's degree (39%): A significant portion of respondents have attained a master's
degree, indicating a high level of education and potentially a more advanced
understanding of financial planning.

Overall, the data suggests that the study captures the financial planning awareness of a well-
educated group, with the majority having at least a bachelor's degree. This implies that the
insights from the study are likely to reflect the perspectives of individuals who are relatively
well-informed about financial matters.

4) Profession

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
profession distribution of the respondents is as follows:

 Student (46%): Nearly half of the respondents are students, indicating a strong
interest in financial planning among those who are likely just starting their financial
journeys and looking to build a foundation for future financial stability.
 IT Professional (13%): A significant portion of respondents work in IT, suggesting
that tech-savvy individuals, who may have higher earning potential and specific
financial planning needs, are well-represented.
  Government Employee (17%): Government employees form a notable segment,
reflecting the financial planning concerns of individuals in stable, often pension-
secured jobs.
 Business Professional (20%): Business professionals make up a significant part of
the respondents, indicating that entrepreneurial and business-oriented financial
planning perspectives are included.
 Teacher (4%): A smaller percentage of respondents are teachers, suggesting a limited
but present interest in financial planning among educators.

Overall, the data indicates that the study captures a diverse range of professional
backgrounds, with a strong representation of students, IT professionals, government
employees, and business professionals. This variety ensures that the study reflects a broad
spectrum of financial planning awareness and needs across different career stages and fields.

5) How familiar are you with the concept of financial planning?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
familiarity with the concept of financial planning among respondents is as follows:

 Very familiar (43%): A significant portion of respondents have a strong

understanding of financial planning, indicating a high level of knowledge and likely
proactive engagement with financial planning strategies.
 Somewhat familiar (52%): The majority of respondents have a moderate
understanding of financial planning, suggesting that while they are aware of the
basics, there might be room for increased education and deeper understanding.
 Neutral (3%): A small percentage of respondents have a neutral stance, indicating
neither strong familiarity nor lack of awareness.
  Somewhat unfamiliar (2%): Very few respondents have limited familiarity with
financial planning, suggesting that most participants have at least some awareness of
financial planning concepts.
 Very unfamiliar (0%): No respondents are completely unfamiliar with financial
planning, indicating a baseline level of awareness among all participants.

Overall, the data suggests that the respondents have a generally high level of familiarity with
financial planning, with the vast majority being at least somewhat knowledgeable. This
indicates that the study's findings are based on a well-informed group, which can provide
valuable insights into the current state of financial planning awareness and practices.

6) Do you currently have a financial plan in place?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the data on
whether respondents currently have a financial plan in place is as follows:

 Yes (91%): The vast majority of respondents have a financial plan in place, indicating
a proactive approach to managing their finances and preparing for their financial
future. This suggests a high level of awareness and engagement with financial
planning practices among the participants.
 No (9%): A small percentage of respondents do not currently have a financial plan in
place. This could indicate various factors such as a lack of awareness about the
importance of financial planning, difficulty in creating a plan, or a belief that financial
planning is unnecessary.

Overall, the data suggests that the majority of respondents recognize the importance of
financial planning and have taken steps to create and implement a financial plan. This
indicates a positive trend towards financial literacy and proactive financial management
among the study participants.
7) How often do you review and update your financial plan?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
frequency with which respondents review and update their financial plans is as follows:

 Annually (62%): A significant majority of respondents review and update their

financial plans annually. This suggests a proactive approach to financial management,
with individuals regularly assessing their financial goals and adjusting their plans
accordingly to adapt to changing circumstances.
 Every few years (12%): A smaller percentage of respondents update their financial
plans every few years. While less frequent than annual reviews, this still indicates a
level of diligence in periodically reassessing and adjusting financial strategies.
 Rarely (21%): A notable portion of respondents rarely review and update their
financial plans. This suggests a potential lack of regular monitoring and adjustment,
which could lead to outdated or ineffective financial strategies over time.
 Never (5%): A small percentage of respondents never review or update their financial
plans. This indicates a significant gap in financial planning awareness and practices
among this subset of participants, potentially leaving them vulnerable to financial
risks and missed opportunities.

Overall, the data suggests a range of attitudes and behaviors towards the review and updating
of financial plans. While a majority of respondents engage in regular reviews, a significant
portion does so infrequently or not at all. This underscores the importance of promoting
regular financial plan reviews and providing education on the benefits of proactive financial
management to ensure individuals are effectively navigating their financial futures.
8) Have you conducted a risk assessment to determine your insurance needs (e.g., life,
health, property, liability)?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the data
regarding whether respondents have conducted a risk assessment to determine their insurance
needs is as follows:

 Yes, using professional tools and methodologies (13%): A minority of respondents

have conducted a risk assessment with the assistance of professional tools and
methodologies. This indicates a proactive approach to understanding insurance needs,
likely resulting in more comprehensive coverage tailored to individual circumstances.
 Yes, but without professional tools (61%): The majority of respondents have
conducted a risk assessment without professional tools. While less formalized, this
still suggests a level of awareness and initiative in evaluating insurance needs and
potentially taking steps to mitigate financial risks.
 No (26%): A notable portion of respondents have not conducted a risk assessment to
determine their insurance needs. This indicates a potential lack of awareness or
engagement with the importance of assessing and addressing insurance risks, leaving
them potentially exposed to financial vulnerabilities.

Overall, the data suggests varying levels of engagement with risk assessment for insurance
needs among respondents. While a significant majority have taken some steps to assess their
insurance needs, there is room for improvement in promoting the use of professional tools
and methodologies for a more comprehensive evaluation. This highlights the importance of
education and awareness initiatives to ensure individuals are adequately protected against
financial risks through appropriate insurance coverage.
9) How proficient are you in analyzing the risk-return trade-offs of various insurance
products?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
proficiency of respondents in analyzing the risk-return trade-offs of various insurance
products is as follows:

 Highly proficient (53%): A majority of respondents consider themselves highly

proficient in analyzing the risk-return trade-offs of insurance products. This indicates
a strong understanding of the complexities involved in evaluating insurance options
and suggests that these individuals are likely capable of making informed decisions
regarding insurance coverage.
 Proficient (20%): A notable portion of respondents consider themselves proficient in
this area. While not as high as the highly proficient group, this still suggests a solid
level of understanding and confidence in assessing the risk-return trade-offs of
insurance products.
 Moderately proficient (24%): Another significant group of respondents consider
themselves moderately proficient. This suggests a reasonable level of familiarity with
the concepts involved but perhaps some room for improvement in fully grasping the
nuances of risk and return in insurance.
 Slightly proficient (3%): A small percentage of respondents consider themselves
slightly proficient, indicating a basic understanding but potentially lacking confidence
in analyzing insurance product trade-offs.
 Not proficient (0%): None of the respondents reported being not proficient,
suggesting that all participants have at least some level of proficiency in analyzing
risk-return trade-offs in insurance products.

Overall, the data indicates a generally high level of proficiency among respondents in
analyzing the risk-return trade-offs of insurance products. This suggests that individuals
participating in the study possess a solid foundation of knowledge and skills related to
insurance planning, which is essential for effective financial planning and risk management.
10) To what extent do you believe your current insurance portfolio mitigates your
identified risks?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the beliefs
of respondents regarding the effectiveness of their current insurance portfolio in mitigating
identified risks are as follows:

 Completely (55%): The majority of respondents believe that their current insurance
portfolio completely mitigates their identified risks. This suggests a high level of
confidence in the adequacy of their insurance coverage in addressing potential
financial vulnerabilities.
 Significantly (32%): A significant portion of respondents believe that their insurance
portfolio significantly mitigates identified risks. While not as absolute as the
"completely" category, this still indicates a strong belief in the effectiveness of their
insurance coverage.
 Moderately (10%): A smaller but notable group of respondents believe that their
insurance portfolio moderately mitigates identified risks. This suggests that while they
have some confidence in their coverage, there may be areas where improvements
could be made to enhance risk mitigation.
 Slightly (3%): A minority of respondents believe that their insurance portfolio only
slightly mitigates identified risks. This indicates some doubts or concerns about the
adequacy of their coverage in fully addressing potential risks.
 Not at all (0%): None of the respondents reported believing that their insurance
portfolio does not mitigate identified risks at all, suggesting that all participants
perceive some level of risk mitigation from their current insurance coverage.

Overall, the data indicates a generally positive perception among respondents regarding the
effectiveness of their current insurance portfolios in mitigating identified risks. However,
there are varying degrees of confidence, with some respondents expressing more certainty
than others. This highlights the importance of regularly reviewing and reassessing insurance
coverage to ensure it remains aligned with evolving financial needs and risk profiles.
11) Are you actively engaged in portfolio management and asset allocation strategies?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the level of
engagement in portfolio management and asset allocation strategies among respondents is as
follows:

 Yes, independently (36%): A significant portion of respondents are actively engaged

in portfolio management and asset allocation strategies on their own. This suggests a
level of confidence and autonomy in managing their investments, potentially
reflecting a strong understanding of financial markets and investment principles.
 Yes, with a financial advisor (41%): A slightly larger portion of respondents engage
in portfolio management and asset allocation strategies with the assistance of a
financial advisor. This indicates a willingness to seek professional guidance and
expertise in managing investments, potentially to optimize portfolio performance and
mitigate risk.
 No (23%): A notable portion of respondents are not actively engaged in portfolio
management and asset allocation strategies. This could suggest a preference for
passive investment approaches, a lack of interest or knowledge in investment
management, or reliance on other financial priorities.

Overall, the data suggests a mix of approaches to portfolio management and asset allocation
among respondents, with a significant portion opting for both independent and advisor-
assisted strategies. This indicates a diverse range of investment preferences and levels of
financial engagement among participants, highlighting the importance of tailored financial
planning approaches to meet individual needs and objectives.
12) Do you implement modern portfolio theory (MPT) or other advanced portfolio
optimization techniques in your investment strategy?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
implementation of modern portfolio theory (MPT) or other advanced portfolio optimization
techniques among respondents is as follows:

 Yes (31%): A minority of respondents implement modern portfolio theory (MPT) or

other advanced portfolio optimization techniques in their investment strategy. This
indicates a proactive approach to investment management, leveraging sophisticated
methodologies to potentially optimize portfolio performance and manage risk more
effectively.
 No (69%): The majority of respondents do not implement MPT or other advanced
portfolio optimization techniques in their investment strategy. This suggests a
preference for simpler or more traditional investment approaches, potentially due to
factors such as risk tolerance, familiarity, or access to resources and expertise.

Overall, the data suggests that while a notable portion of respondents utilize advanced
portfolio optimization techniques, the majority do not. This indicates a range of investment
strategies and preferences among participants, reflecting diverse attitudes towards risk
management and investment sophistication.
13) How often do you rebalance your investment portfolio based on market conditions
and investment performance?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
frequency of portfolio rebalancing based on market conditions and investment performance
among respondents is as follows:

 Quarterly (25%): A quarter of respondents rebalance their investment portfolios on a

quarterly basis. This suggests a proactive approach to portfolio management, with
frequent adjustments made to maintain desired asset allocations and risk levels.
 Semi-Annually (28%): A slightly larger portion of respondents rebalance their
portfolios semi-annually. This indicates a regular review and adjustment schedule,
potentially allowing for sufficient time to assess market conditions and investment
performance before making changes.
 Annually (6%): A small percentage of respondents rebalance their portfolios
annually. While less frequent than quarterly or semi-annual rebalancing, this still
reflects a commitment to periodic review and adjustment of investment allocations.
 When necessary (41%): The majority of respondents rebalance their portfolios when
necessary, rather than adhering to a specific schedule. This flexible approach allows
for adjustments based on significant market movements or changes in individual
investment performance, potentially providing a more adaptive and responsive
investment strategy.
 Never (0%): None of the respondents reported never rebalancing their investment
portfolios. This indicates a recognition of the importance of periodically reviewing
and adjusting investment allocations to align with financial goals and risk tolerance.

Overall, the data suggests a range of approaches to portfolio rebalancing among respondents,
with a significant portion opting for either regular scheduled rebalancing or a more flexible
approach based on market conditions and investment performance. This diversity in
rebalancing strategies reflects individual preferences and attitudes towards portfolio
management, highlighting the importance of tailored investment approaches in financial
planning.

14) How adept are you at integrating tax-efficient strategies into your financial
planning (e.g., tax-loss harvesting, tax-advantaged accounts)?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
proficiency of respondents in integrating tax-efficient strategies into their financial planning
is as follows:

 Very adept (45%): Nearly half of the respondents consider themselves very adept at
integrating tax-efficient strategies into their financial planning. This suggests a high
level of skill and knowledge in leveraging tax-saving opportunities, potentially
resulting in significant tax savings and enhanced overall portfolio returns.
 Adept (30%): A significant portion of respondents consider themselves adept at
integrating tax-efficient strategies. While not as high as the very adept group, this still
indicates a solid understanding and application of tax-saving techniques in financial
planning.
 Moderately adept (18%): Another notable group of respondents consider themselves
moderately adept. This suggests a reasonable level of familiarity and capability in
incorporating tax-efficient strategies into financial planning, although there may be
some room for improvement or refinement.
 Slightly adept (7%): A smaller percentage of respondents consider themselves
slightly adept. This indicates a basic level of proficiency in tax-efficient strategies but
potentially a need for further education or experience to fully leverage tax-saving
opportunities.
  Not adept (0%): None of the respondents reported being not adept, suggesting that
all participants have at least some level of proficiency in integrating tax-efficient
strategies into their financial planning.

Overall, the data indicates a generally high level of proficiency among respondents in
integrating tax-efficient strategies into their financial planning. This suggests a strong
awareness of the importance of tax optimization in maximizing investment returns and
overall financial well-being, underscoring the importance of tax planning in comprehensive
financial planning initiatives.

15) Do you incorporate multi-year tax planning projections in your financial

strategy?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
incorporation of multi-year tax planning projections into respondents' financial strategies is as
follows:

 Yes (46%): Nearly half of the respondents incorporate multi-year tax planning
projections into their financial strategies. This suggests a forward-thinking approach
to financial planning, where individuals actively consider the long-term implications
of their tax decisions and take steps to optimize tax outcomes over multiple years.
 No (54%): The majority of respondents do not incorporate multi-year tax planning
projections into their financial strategies. This may indicate a focus on more
immediate financial concerns or a lack of awareness about the benefits of long-term
tax planning.

Overall, the data suggests that while a significant portion of respondents engage in multi-year
tax planning projections, there is still a notable portion that does not. This highlights potential
opportunities for education and awareness initiatives to promote the benefits of long-term tax
planning and encourage individuals to integrate such strategies into their overall financial
planning efforts.

16) Do you have a retirement plan in place?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the presence
of a retirement plan among respondents is as follows:

 Yes (89%): The vast majority of respondents have a retirement plan in place. This
indicates a proactive approach to financial planning, with individuals recognizing the
importance of saving and preparing for their retirement years.
 No (11%): A minority of respondents do not have a retirement plan in place. This
may suggest varying reasons such as being early in their career, not prioritizing
retirement savings, or lacking awareness about the importance of retirement planning.

Overall, the data reflects a strong awareness and engagement with retirement planning among
respondents. However, the presence of individuals without a retirement plan underscores the
need for ongoing education and awareness initiatives to encourage more individuals to
prioritize and actively prepare for their retirement.
17) How confident are you that you will have enough savings for retirement?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
confidence level regarding having enough savings for retirement among respondents is as
follows:

 Very confident (54%): A majority of respondents express a high level of confidence

that they will have enough savings for retirement. This suggests a strong belief in
their financial preparedness and ability to achieve their retirement goals through
diligent saving and planning.
 Somewhat confident (42%): A significant portion of respondents indicate some level
of confidence in their retirement savings. While not as high as the "very confident"
group, this still reflects a belief that they are on track to achieve their retirement
objectives, albeit with some reservations.
 Neutral (3%): A small percentage of respondents express a neutral stance, neither
overly confident nor unconfident about their retirement savings. This may indicate a
need for further evaluation or planning to clarify their retirement preparedness.
 Somewhat unconfident (1%): A minority of respondents express some level of
uncertainty or doubt regarding their retirement savings. This suggests a recognition of
potential gaps or challenges in achieving their retirement goals, prompting them to
reassess their financial strategies.
 Very unconfident (0%): None of the respondents report feeling very unconfident
about their retirement savings, indicating a generally positive outlook among
participants regarding their retirement preparedness.

Overall, the data suggests a range of confidence levels among respondents regarding their
retirement savings, with a majority expressing a high level of confidence. However, there are
still individuals who express varying degrees of uncertainty or concern, highlighting the
importance of ongoing financial education and planning to address potential retirement
savings gaps and enhance overall financial security in retirement.
18) At what stage of your career do you anticipate fully transitioning to retirement,
considering your financial independence goals?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, respondents'
anticipated retirement transition stages, considering their financial independence goals, are as
follows:

 Before 60 (47%): Nearly half of the respondents anticipate fully transitioning to

retirement before the age of 60. This suggests a desire for early retirement among a
significant portion of participants, potentially reflecting aspirations for greater leisure
time and freedom.
 60-65 (21%): A notable portion of respondents anticipate fully transitioning to
retirement between the ages of 60 and 65. This aligns with traditional retirement age
norms and may reflect a balance between career longevity and the desire for
retirement.
 65-70 (5%): A smaller percentage of respondents anticipate fully transitioning to
retirement between the ages of 65 and 70. This suggests a preference for extended
career involvement or a delayed retirement to ensure financial security and stability.
 After 70 (0%): None of the respondents anticipate fully transitioning to retirement
after the age of 70. This may indicate a general expectation of retiring before this age
or a belief that continued employment beyond 70 may not align with their financial
independence goals.
 Undetermined (27%): A significant portion of respondents have not determined a
specific retirement transition stage. This may reflect uncertainty about future career
plans, financial readiness for retirement, or evolving personal preferences regarding
retirement timing.

Overall, the data reflects varying retirement transition timelines among respondents, with a
notable portion aiming for early retirement and others planning to retire at more traditional
ages. The presence of respondents with undetermined retirement timelines underscores the
complexity and individuality of retirement planning, highlighting the importance of
personalized financial strategies and ongoing review and adjustment to align with changing
life circumstances and goals.

19) Do you have a will of estate plan in place?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, the
presence of a will or estate plan among respondents is as follows:

 Yes (74%): A significant majority of respondents have a will or estate plan in place.
This suggests a proactive approach to estate planning, with individuals taking steps to
ensure the orderly distribution of their assets and the protection of their loved ones in
the event of their passing.
 No (26%): A minority of respondents do not have a will or estate plan in place. This
may indicate varying reasons such as a lack of awareness about the importance of
estate planning, procrastination, or the perception that estate planning is unnecessary.

Overall, the data reflects a strong awareness and engagement with estate planning among
respondents, with a majority having taken steps to formalize their wishes and protect their
assets for the benefit of their heirs. However, the presence of individuals without a will or
estate plan highlights the need for ongoing education and awareness initiatives to promote the
importance of estate planning and encourage more individuals to take proactive steps in this
regard.
20) How familiar are you with the concept of estate planning?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, respondents'
familiarity with the concept of estate planning is as follows:

 Very familiar (36%): A significant portion of respondents are very familiar with
estate planning. This suggests a strong understanding of the importance and
intricacies of estate planning, indicating that these individuals are likely proactive in
managing their assets and ensuring their wishes are carried out after their passing.
 Somewhat familiar (40%): Another substantial portion of respondents are somewhat
familiar with estate planning. While not as high as the very familiar group, this still
indicates a reasonable level of awareness and understanding of estate planning
concepts among participants.
 Neutral (8%): A small percentage of respondents are neutral regarding their
familiarity with estate planning. This may indicate a lack of strong opinions or
knowledge about estate planning, suggesting a potential need for further education or
information on the topic.
 Somewhat unfamiliar (16%): A notable portion of respondents are somewhat
unfamiliar with estate planning. This suggests a need for more education and
awareness initiatives to increase understanding and engagement with estate planning
concepts among this subset of participants.
 Very unfamiliar (0%): None of the respondents reported being very unfamiliar with
estate planning, indicating that all participants have at least some level of familiarity
with the concept.

Overall, the data suggests varying levels of familiarity with estate planning among
respondents, with a significant portion expressing either strong or moderate awareness of
estate planning concepts. This highlights the importance of ongoing education and awareness
initiatives to promote understanding and engagement with estate planning practices among
individuals to ensure their financial and personal affairs are properly managed and protected.
21) Have you consulted with an estate planning professional?

Interpretation of data:

In the context of a comprehensive study on financial planning and its awareness, respondents'
consultation with an estate planning professional is as follows:

 Yes (26%): A minority of respondents have consulted with an estate planning

professional. This suggests that a portion of participants have sought expert guidance
and advice in managing their estate affairs, potentially leading to more comprehensive
and effective estate plans.
 No (74%): The majority of respondents have not consulted with an estate planning
professional. This may indicate varying reasons such as a preference for self-directed
estate planning, perceived cost barriers, lack of awareness about the benefits of
professional advice, or simply not considering estate planning as a priority.

Overall, the data suggests that while some respondents have sought professional assistance
with estate planning, the majority have not. This highlights potential opportunities for
education and awareness initiatives to promote the benefits of consulting with estate planning
professionals and encourage more individuals to seek expert guidance in managing their
estate affairs effectively.
CHAPTER 10

Results & Recommendations

10.1. Results of the Study:

This study aimed to understand the financial planning habits and awareness levels among
individuals.

Here are the key findings:

1)Demographics: The study included a diverse group of respondents, with balanced

representation across genders and varying age groups. Most respondents held at least a
bachelor's degree, and their professions varied widely, including students, IT professionals,
government employees, business professionals, and teachers.

2)Familiarity with Financial Concepts: Overall, respondents demonstrated a strong

familiarity with financial concepts, including financial planning, insurance needs assessment,
and investment strategies. However, there were some variations in familiarity levels across
different aspects of financial planning.

3)Financial Planning Practices: The majority of respondents reported having a financial

plan in place and expressed confidence in their retirement savings. Additionally, many
respondents indicated active engagement in investment management and tax-efficient
strategies.

4)Estate Planning: While a significant portion of respondents had a will or estate plan in
place, a considerable number had not consulted with an estate planning professional,
suggesting potential gaps in estate planning awareness and practices.

5)Retirement Goals and Transition: Respondents had varied retirement goals, with a
significant percentage aiming to retire before the age of 60. However, there was also a sizable
group with undetermined retirement timelines, indicating a need for further planning and
clarity in retirement goals.

6)Consultation with Professionals: While some respondents sought professional assistance

in financial and estate planning, the majority had not consulted with experts. This suggests
potential opportunities for increasing awareness about the benefits of professional financial
advice.

The study highlights the importance of financial planning awareness and practices among
individuals. While many respondents demonstrated strong familiarity with financial concepts
and actively engaged in financial planning, there were also areas for improvement,
particularly in estate planning and seeking professional advice. Overall, the findings
underscore the need for ongoing education and awareness initiatives to promote effective
financial planning and empower individuals to make informed decisions about their financial
futures.
10.2. Recommendations of the Study:
Following are the Recommendations for Awareness of Financial Planning:

1)Education Initiatives: Develop and implement educational programs to enhance

awareness of financial planning concepts, especially among demographics with lower
familiarity levels. These programs can be conducted through workshops, seminars, or online
resources to reach a wider audience.

2)Professional Consultation: Encourage individuals to seek professional guidance for

financial and estate planning. This can be achieved through awareness campaigns
highlighting the benefits of expert advice and making professional services more accessible
and affordable.

3)Tailored Guidance: Provide personalized financial guidance to address individual needs

and goals. This may involve offering resources and tools for self-directed planning while also
facilitating access to financial advisors for more complex financial situations.

4)Early Retirement Planning: Promote early retirement planning by emphasizing the

importance of starting retirement savings early and setting clear retirement goals. This can
include educational materials on retirement planning strategies and the benefits of long-term
saving habits.

5)Regular Review and Update: Stress the importance of regularly reviewing and updating
financial plans to adapt to changing life circumstances and financial goals. Encourage
individuals to revisit their financial plans annually or when significant life events occur to
ensure alignment with their current needs and objectives.

6)Estate Planning Awareness: Increase awareness about the importance of estate planning
and the potential consequences of not having a will or estate plan in place. This can involve
educational campaigns on estate planning basics and the benefits of consulting with estate
planning professionals.

7)Accessible Resources: Provide accessible and user-friendly resources for financial

planning, including online tools, calculators, and guides. These resources should cater to
individuals with varying levels of financial literacy and offer practical guidance on
budgeting, saving, investing, and retirement planning.

By implementing these recommendations, individuals can be better equipped to navigate their

financial futures with confidence and make informed decisions to achieve their long-term
financial goals.
10.3. Conclusion:
The study revealed valuable insights into the financial planning habits and awareness levels
among individuals. While many participants demonstrated a strong familiarity with financial
concepts and actively engaged in financial planning, there were also areas for improvement.
Here's the conclusion:

Based on the findings, it's clear that there is a need for increased awareness and education
about financial planning, especially in areas such as estate planning and seeking professional
advice. By providing accessible resources, promoting early retirement planning, and
encouraging regular review and update of financial plans, individuals can be better prepared
to navigate their financial futures.

Overall, the study underscores the importance of ongoing education and awareness initiatives
to empower individuals to make informed decisions about their finances and achieve their
long-term financial goals. Through targeted efforts and personalized guidance, individuals
can enhance their financial literacy and take control of their financial well-being.
Chapter 11
References/Bibliography
11.1 References