FINANCIAL PLANNING

A Presentation to IRSE Probationers

RP SaxenaSP/Engg

GOVERNMENT IS POOR PAY MASTER

Why have we joined Government service Why have we joined Railway

For National service Job satisfaction Fast Promotions Facilities –Inspection carriage Comfort All the above……. Or For Money

FINANCIAL PLANNING

• Money is very important

• -one need money for basic needs of life• -home, education , marriage & health care need

money• Money required for Living comfortably• How much money to live comfrtably?• Things of comforts are very costly now a days in

compare to 30 yr back

• Really ? • Actualy it is need vs greed .need are limited .

Greed is unlimited

SITUATION 30 YEAR BACK

Salary of class 1 Asst engineer was Rs 945 per month & DEN about 1500 per month

Purchase of TV 6 month salary Purchase of refrigerator 4 month salary Purchase of scooter -1 yr salary

Purchase of car- 4 yr salary Purchase of AC 2 to 3 yr salary Purchase of house -30 yr salary

Today ADEN get Rs 4.2 lakh per year

-HOW MUCH MONEY ONE NEED IN LIFE

With Salary Rs 4.2 lakh per year Car 1 yr ,AC ,TV.fridge.one to two month salary -Children education need 3 to 4 yr salary -Health care- major operation heart ,kidney, brain

etc need 1 to 2 yr salary -Buying house need 10 yr salary

-to save such money , you need 32 yr of service & have to save 40 to 50% of your salary annually

Not only you have to save ,you have to invest wisely – investment advise is whole time carrier

STAGES OF EXPENDITURES Normally single- for first three year of service

First child after 5 yr of service –( Sr scale 6-7 lakh pm) 2nd child after 8-9 yr of service (JA grade 10 lakh per

yr) Higher education of children after 18 yr of service

and will continue upto 24 yr of service – no saving is possible during this time from current saving

Buying house-after 25 year of service ( SAG 18 lakh per yr)

Children marriage –around 30 yr of service (20 lakh per yr)

HOW MUCH ONE SHOULD SAVE

One has to save to meet short & long term liability

What is family one has to support on long term

As a thumb rule A family means Husband , wife , 2

children & parents ( 5 units) One has to save to meet emergency-6th

unit

SAVE & SPEND OR SPEND & SAVE How much one should save? Or How much one should spend? Spending units…? Self , wife, 2 children ,parents & emergency So six spending units are reasonable

The distribution of expenditure need to be in 6 units One can decide distribution on his own .My

distribution is as under

Self -25% wife 25% children 30% parents 10% emergency 10%

HOW MUCH ONE SHOULD SAVE ( MINIMUM)

Unmarried – saving 75% of your take home salary

Married – 50% of your salary One child -35% of your salary Two children 20% of your salary If parent is dependant then 10% of

salary

With time ,your salary increases & your initial saving also start giving return , so you are well prepared for future liability

INVESTING – CUMULATIVE IMPACT Normally a person joins service in age group of

22-23 yr & retires at 60 yr Effective service is 37 yr Initial salary as probationer – 4.2 lakh per

year @Rs 36000 pm Each one lakh saved & invested at start of service

at a rate of return of 12% by paying 30% income tax becomes 22 lakh at retirement .One lakh , in any case, one has to save for income tax

First yr, if you save 3 lakh , it becomes 66 lakh at retirement ( 37 year)

CUMULATIVE EFFECT OF SAVING

3 yr saving only of Rs 3 lakh per yr ,one  get 1.5 cr to 1.8 cr at the time of retirement depending n your age of joining

If one continue save even at reduce rate at later part of service , financial security for entire life is intact

So key to financial security is start saving early & investing it wisely

POWER OF CUMULATIVE

yr amt amt amt amt1 3.00 7.10 16.81 39.802 3.27 7.74 18.33 43.393 3.56 8.44 19.98 47.294 3.89 9.20 21.77 51.555 4.23 10.03 23.73 56.196 4.62 10.93 25.87 61.247 5.03 11.91 28.20 66.758 5.48 12.98 30.74 72.769 5.98 14.15 33.50 79.3110 6.52 15.42 36.52 86.45

HOW LONG YOU SHOULD SAVE

After initial 3 yr saving of Rs 3 lakh per yr, just save what ever you can in subsequent yr

You may develop saving habit by that time In addition.. By 3rd year, you will be promoted and your

salary will increase So you may be able to save more Please remember – Initial years’ saving will

be lifetime saving & it will make you financially secure

SOME IMPORTANT ASPECTS ABOUT WEALTH

What happened to 8 wealthiest people in the world?

“In 1923, Eight of the wealthiest people in the world met. Their combined wealth, estimated, exceeded the wealth of the government of the United States. These men knew how to make a living and accumulate wealth. 

what happened 25 years later.

MAKE LIFE RATHER THAN MAKE MONEY

1. President of the largest steel company, Charles Schwab, died bankrupt.

2. President of the largest gas company, Howard Hubson, went insane.

3. One of the greatest commodity traders, Arthur Cutton, died insolvent.

4. President of the New York Stock Exchange, Richard Whitney, was sent to jail.

5. A member of the President’s Cabinet, Albert Fall, was pardoned from jail.

6. The greatest “bear” on Wall Street, Jessie Livermore, committed suicide.

7. President of the world’s greatest monopoly, Ivar Krueger, committed suicide.

8. President, Bank of International Settlement, Leon Fraser, committed suicide.

They forgot to make a life ! Just made Money !

Money provides food for the hungry, medicine for the sick, clothes for the needy, but is only a medium of exchange.

we live in a time where earning is a necessity but let not the earning enter our hearts, for what was once a means of living will be become a means of destruction.

The ship needs water, but if the water gets into the ship, the ship will face problems and sink.

People are engrossed in their professional life and neglect their family, health and social responsibilities.

Our kids are sleeping when we leave home.They are sleeping when we come home.Twenty years later, we’ll turn back, and they’ll all be gone !!!!!.

One should know “how to make a living and how to live.”

PLAN & BE CHEERFUL

Any extra money which is not spent in your life time is nothing but a piece of paper

Why get worried for these piece of Papers

LIFE IS PRECIOUS...LIVE IT AND NOT JUST SPEND IT.........

BE HONEST … HOWEVER

THANKS