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Introduction To PFM: Submitted To-Dr. Manish Sitlani Submitted by - Rajkumar Gangwal Neelam Tourani

Personal financial management involves defining financial goals, developing strategies to achieve those goals, implementing plans, monitoring progress, and revising as needed. The key aspects of personal financial management include setting short, intermediate, and long-term goals; creating plans for acquiring assets, managing liabilities and insurance, saving and investing, tax planning, and retirement; developing and following budgets; and regularly analyzing personal financial statements to evaluate net worth and make adjustments. Personal financial management is essential for effectively using financial resources to achieve life objectives.

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37 views

Introduction To PFM: Submitted To-Dr. Manish Sitlani Submitted by - Rajkumar Gangwal Neelam Tourani

Personal financial management involves defining financial goals, developing strategies to achieve those goals, implementing plans, monitoring progress, and revising as needed. The key aspects of personal financial management include setting short, intermediate, and long-term goals; creating plans for acquiring assets, managing liabilities and insurance, saving and investing, tax planning, and retirement; developing and following budgets; and regularly analyzing personal financial statements to evaluate net worth and make adjustments. Personal financial management is essential for effectively using financial resources to achieve life objectives.

Uploaded by

Nancy
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Introduction To PFM

Submitted To- Submitted By-


Dr. Manish Sitlani Rajkumar Gangwal
Neelam Tourani
Personal Financial Planning
 The best way to achieve financial objective is
through financial planning.
 It helps us define our financial goals and
develops appropriate strategies to reach them.
 With personal financial planning we can
acquire use and control our financial
resources more efficiently.
Financial Planning process
 Define financial goals.
 Develop financial plans and strategies to achieve
goals
 Implement financial plans and strategies.
 Periodically develop and implement budgets to
monitor and progress towards goals.
 Use financial statements to evaluate results of plans
and budgets, taking corrective action as required.
 Revision
Defining Financial goals
 Financial goals are results that an individuals
wants to attain.
 Without financial goals, it’s impossible to
effectively manage your financial resources.
Types of goals
(1) Long Term Goals (6+ years)
(2) Intermediate Goals (2-5 years)
(3) Short Term Goals (1 year)
From Goals to Plans
 Financial plans provide the road map for
achieving your financial goals. Reaching to a
particular goals requires different types of
financial planning
(1) Asset Acquisition Planning
(2) Liability and insurance planning
(3) Savings and investment planning
(4) Tax planning
(5) Retirement and Estate planning
Asset Acquisition
 We accumulate assets throughout our lives
and it is very important to manage these
assets which are as follows
(1) Liquid Assets (Cash, Savings, accounts and
money market funds) used to pay everyday
expenses
(2) Investments ( stock, Mutual funds, bonds)
used to earn returns
(3) Property( Land, House, Vehicles, jewelry,
Home electronics etc.
Liability and Insurance
(A) To manage debt burden is just as important
as to manage assets
 Liability is represented by amount of debt we
incur. It includes Home loan, Education loan, car
loan, credit card balances and other borrowings
(B) Insurance is a risk management technique, it
reduces financial risk and protect both income
(life, health and disability) and assets
 But having wrong amount insurance can be
costly too.
Savings and Investments
 People acquire wealth through savings and
subsequent investing of funds in various
investment vehicles like stocks, mutual funds,
bonds, real state, commodities and so on.
 The higher the rate of return on investments of
excess funds, the greater wealth they
accumulate.
 How long an investor keep his money is also
very important aspect of investment planning
Tax Planning
 The goal of tax planning is to arrange your
financial affairs so as to minimize your tax
burden
 Tax Planning is moral way of tax savings,
there are various deductions, relieves and
incentives provided under income tax act.
Retirement and Estate Planning
 It is very important to manage financial
recourses to attain those goals which are
important after retirement, this might
include
Maintaining standard of living
extensive travel
frequent dining at better restaurants etc.
Financial Planning process for a client

 Establishing client planner relationship.

 Gathering data and determining goals and


expectations.

 Determining the clients financial status by


analyzing and evaluating the clients’ information.
 Analyzing objectives, needs and financial
situation of the client.

 Developing and presenting financial plan.

 Implementing the financial plans.

 Monitoring and Review


Personal Budgeting

1.Record Keeping-
Permanent records
Temporary records

2. Preparing a personal budget-


Budget Preliminaries
Gathering data
3. Setting Goals ( short term and long term)-
Establishing priorities

4. Steps in Budgeting-
Estimating Incomes
Estimating Expenses

5. Finalizing budget-
Surplus budget
Balanced budget
Deficit budget
Some rules on Personal Budgeting-

 Goals Should be reasonable.

 Fixed items of expenditure and necessities


should be provided first.

 Savings should not be left to be made if


there is any residue income.
• Provisions for less frequent items of expense
should me made.

• Size of expenses should not be the basis of


cutting an expense.

• Need to differentiate between value judgment


and rule of thumb.

• Provision for budget variation over the life


cycle.
Personal Financial Statements
There are two types of personal financial
statements. They are-
1. Balance sheet statement of net worth.
2. Income Statement.

Analysis of financial statements-


1. Analyzing assets and liabilities.
2. Analyzing expenditure pattern.
3. Analyzing net worth.
Classification of Assets-
1. Financial assets-
Shares, debentures, etc.
2. Non financial assets-
Gold, land, etc.
3. Earning assets-
Cash and cash equivalents & investment
assets.
4. Non earning assets-
Use assets. Ex- Residential house, car, etc.
Classification of Liabilities-
1. Short term-
Outstanding cheques or bills, credit card
dues.

2. Medium term-
Consumer Durable loans, vehicle loans.

3. Long term-
Education loan, house loan.
Personal Income statement-

Gross Income
- All Compulsory deductions
( PF, IT, PT)
= Disposable Income
- Recurring Payments
( Interest, Monthly expenses)
- Non Recurring Payments
( Installments)
Statement of Net worth

 The statement is in the format of a


Balance sheet.

 NET WORTH = TOTAL ASSETS –


TOTAL LIABILITIES
Thank You

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