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THE TIMES OF INDIA, BENGALURU

TUESDAY, NOVEMBER 25, 2014

Fin Planning Goes Beyond Saving Taxes

Its a round-the-year exercise that helps provide for goals, create wealth
Partha Sinha | TNN

ans, one of the first steps of

financial planning is to profile the person, map his/her
financial goals, pinpoint the
kind of risks he/she should
be open to taking and then
put in place the type of assets
he/she should be investing in

or a large number of
Indians, especially
the salaried class,
financial planning
starts and ends with
tax planning. And for several
of these people, it starts
around January of every
year and ends by March of
the same year. However, the reality
is financial planning should be a
round-the-year
exercise, in
which tax planning is an integral part, but not
an end in itself.
Financial planning also involves
providing for ones
retirement, childs education and marriage,
putting in place a plan for
healthcare and medical
emergencies for the whole
family, life insurance, other
financial exigencies, etc.

Involve your entire family

The process of financial
planning also involves the
whole family and its not just
for an individual, unless
theres no immediate family.
So remember to take your
spouse along when you are
going to meet your financial
planner. Lately, financial advisers are also insisting on
involving teenaged children
so that the ideas, values and
benefits of financial planning could be ingrained in
their minds very early in
their lives so that unlike
their parents they have a
head start on the same.
According to a Mumbaibased financial planner, it is
seen that not all members of

Aim for emergency

fund, better returns

a family have
similar ideas about
the family's future needs.
Once a person came to us for
financial planning but was
very reluctant to bring his
wife along. When we insisted,
she joined us. While setting
goals, we saw that the person
had no idea about the expenses the family could incur for
their daughters wedding at
least 15 years down the line,
but his wife was very clear
about what the family will
need to do. From then on, that
person always came to us
with his wife, the financial
planner said.

Illustration: Ram

BUILDING BRIDGE TO BETTER LIFE

Start early and invest regularly
Map investments to goals and risk profiles
Value of goals should be inflation-adjusted
Invest every month for tax planning, and not just before
the financial year-end
Consider asset allocation & diversify across asset classes
Repay high-cost loans early
Plan to buy a house early in life
Consider term plan over other insurance plans
Have a family health insurance plan in addition to the
company-sponsored one (if any)
Have contingency fund for up to 6 months of expenses

Be ready to spend time

According to industry veter-

Clearly define your financial goals

before calling on a financial adviser
Mukund Seshadri

will submit the fact-finder

within a week, Ramesh
Ahuja (name changed) had
said. He seemed excited about
being helped by a financial
planner, and interested in going
through the entire planning
process. However, its been almost three months since and
the questionnaire necessary
for a financial planner to get a
better idea about an investor
is yet to reach us.
Often, people approach a
financial planner in right earnest and then delay sending
the relevant data and papers.
The reasons given are lack of
time, unavailable data, missing documents, etc. Often
such delays could be simply
the lack of priority on their
part. People spend lot of time
earning money, but spend
very little time so that their
hard-earned money works
harder for them.
Once in a training programme, the trainer asked
me, I am ready to coach you,
but are you coachable? The
situation is similar here: A
financial planner can deliver
the best results if his/her client and his/her family get
completely involved in the
entire process and together
take it in the right direction.
Here are five key requirements that you should be
ready with or at least start

to reach those financial goals.

This is an exhaustive process and the family of the person should be willing to spend
some quality time with the financial planner for better longterm results. Once the initial
meetings and planning are
over, the follow-up meetings
are, usually, not so time-consuming, according to planners and advisers.

working on before meeting a

financial planner:
Income: This includes income from salaries (including
bonus), house and property,
business and profession,
capital gains and other sources. This gives a clearer picture of ones cash inflows. For
salaried individuals, income
in hand is quite clear. However, for others it could be
calculated from income tax
returns and bank statements.
Expenses: Expenses are of

easily. Even if the amount is

small, you should track it
since it may eventually make
a big difference to your life.
Assets: Assets are those that
generate or have the potential
to generate returns. So a car
for a person in the travel business is an asset, but for an
individual it is not. Another
example is a self-occupied
property. This will surely
have some value, but if the
property is going to be used
only to stay and not rented

It is also important to
divide your milestones as
needs and desires. This is
because needs are
uncompromising and
should be high on priority,
while desires are not
two types: Fixed and variable.
Fixed expenses are easy to
track and are more or less
streamlined. They may include society maintenance
fees, salaries to domestic
help, etc. However, its slightly tricky to calculate variable
expenses, but these should be
closely monitored. Sometimes entertainment expenses can be detrimental to some
serious goals, like your own
retirement. Hence, it is very
important you keep track of
this. There are many apps
that can help you track this

out or sold then valuing the

same does not make sense.
While calculating assets and
investments, you should also
look at investments that are
not done voluntarily but are
available to you due to the
nature of employment. For
example, the employee provident fund, gratuity, superannuation, vested ESOPs, etc.
Liabilities: Liabilities can be
in the form of various loans
like home, car, personal, company, outstanding on credit
cards, etc. You should
also know the rate

at which the loan is being repaid, the tenure, current outstanding amount and the
terms of repayment.
Milestones: This is the most
crucial aspect of a financial
plan since its the one single
factor that makes the plan
customized. This has to be
done by involving the entire
family because financial
planning is always for the
family and not for a single
individual. It is also important to divide your milestones
as needs and desires. Needs
are uncompromising and
should be high on priority,
while desires are not. This
helps allocate assets to those
goals which will deliver the
best result in the given contours of ones finances. This
is the starting point of any
financial plan and, hence,
clarity here is crucial.
A financial planner can
make a significant difference
to your life, but data adequacy
is the foundation on which
the entire process of planning is based. Your financial
data has to be accurate.
Hence, to ensure successful
goal accomplishment, it is
important that you are ready
with your data or at least
start work on them before you
approach a financial planner.
The writer is founder,
MSVentures
Financial Planners

DEMYSTIFIER
What is insider trading?
Swatantra Kumar answers: Last week, market regulator Sebi came out with a new set
of rules aimed at making insider trading tougher than before. As the term suggests,
insider trading refers to the act of buying or selling the stock of a company by
someone who has access to news from the inside of
the company which, in most cases, is not available
to the general public. Although insider trading could
be legal or illegal, the term itself has a negative
connotation. Regulators around the world have put in
place strict guidelines about such trading. So, if the
trading by an insider is done while staying within the
limits of the rules, it is perfectly clean. Several
traders and investors look at insider trading
disclosures to gain vital information about the
happenings within a company.

Send in your suggestions, queries to investor.swatantra@gmail.com;

for a free financial planning booklet, please SMS EDU to 5676756
Mutual Fund investments are subject to market risks, read all scheme related documents carefully

Advisers and planners also say that,

since salaried people
have a regular cash
flow, they are less likely to put in place a plan
to meet any financial
exigencies. In todays
world where hire and fire
is almost becoming the
norm at the workplace, every
individual should have an
emergency corpus to take
care of monthly expenses for
at least six months, according to financial planners.
Another common trait
among salaried people is that
they are usually risk-averse
in nature and prefer investing in debt instruments over
equities. However, given the
high rate of inflation that a
country like India faces, they
should always look at investing in assets that have the
potential to beat the rate of
inflation in the long run,
says a top executive at a mutual fund house.
Equities form the best
asset class that has in the
past beaten inflation and investors should look at this
seriously. If you are not qualified or experienced enough
to invest in equities directly,
you can take the mutual fund
route, the executive adds.

Monitor your budget

to keep tabs on inflows
Vishal Dhawan

few months ago, I was

talking to the passing
out batch of a business
school. I thought to myself:
These students had everything going for them except
one essential thing, that is
their level of financial education and awareness about personal finance. Incidentally, the
topic of that session was financial planning, and whether it makes your life any better
when you have a plan.
Here are some of the benefits of having a financial plan
for you and/or having a financial planner on your side:
A master view of all your
finances: A financial plan
helps investors understand all
the moving parts of their financial lives and make more
sense of how all the pieces fit
together to achieve what they
want with their money.
Priorities and trade-offs: A
financial plan can help you
prioritize the goals that your
investments would go towards. For example, would
you be jeopardizing your
childs education by upgrading your home/car, and such
trade-offs. The implications of
such trade-offs would also be
clearly understood through a
financial plan.
What gets measured, gets
monitored: As part of a financial plan, you are required to monitor budgets
and surpluses. Thus, you
would be more aware of your
cash flows. A common com-

KNOW YOUR ASSETS

NEXT WEEK

n our next edition, we will tell

you how mutual fund
investments could accelerate
wealth creation for you.

plaint of investors having a

financial plan is that, We
dont know where my money
goes. The planning process
would help in this regard.
Similarly, an adviser would
also track your investment
performance to understand
where you are with respect to
your lifes goals.
Investments are in line
with what you need: Many
a times, we have invested in
products that may be risky or
may be locked-in, thereby not
having access to our own
money when we need it. This
happened because a friend or
relative suggested some investment and you just went
ahead with it without paying
heed to whether that was relevant to you or not. For example, a PPF account may be a
good investment, but not if
you plan to become an entrepreneur in two years and need
contingency provisions.

Preparedness for surprises:

We all know that life is full of
surprises. A financial plan
helps you gear up for such
eventualities by suggesting an
appropriate risk-management
plan for your life, health and
other assets.
Everythings in one place:
Several investor families we
deal with as an adviser have
given this feedback. The ease
of knowing that all your financial details, documents,
investments, details of assets
and liabilities, etc basically
all things related to the familys finances are documented with your adviser and can
be accessed quickly is a big
comfort for most.
Helps pass on wealth to
your next generation: The
answer to the question Does
your family know about your
finances? is usually a No
in the Indian context as, mostly, the lady in the house does
not want to be involved in financial matters. Increasingly,
this is changing among the
younger population since a
financial plan/planner could
help aid the process to smoothly pass on all your hardearned wealth to your spouse
and to your next generation in
the most efficient manner.
If you take care of all of
these points in right earnest,
then you must have planned
well financially. Else, its
time to get that financial
plan in place.
The writer is founder,
Plan Ahead Wealth Advisors