Direct coverage received in ET Wealth Dated 20/01/2014

This One of my Financial Planning Member

 Direct coverage received in ET Wealth Dated 20/01/2014

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General Mistakes in Personal Financial Life

A ) Spending more than you should

Sometimes, people spend impulsively, on things which they do not really need. Just because, your plastic card is in your wallet and you “might” need it in future makes you believe that you need to get it right now. A brand new camera, with a 100 megapixel sensor and a 2000 x zoom is available at an EMI of just 1999 per month — and suddenly you’re interested in Photography! An EMI of 2500 a month, for that magical million colour, anorexic Flat Screen TV creates a magical belief in you that your normal TV at home is now really blurry these days (not to mention really fat!)

Is there a need, to splurge on Movies and eat out, every weekend? A regular meal at home, with a movie on tv is also a good weekend, at times. With many people, savings occur, only if they are left with any money at the end of the month. This needs to change – start saving first, then spend on what’s necessary and then spend on your desires – last. Financial planning does not mean compromising your dreams or what you love to splurge on; it’s all about knowing what you need and what you don’t, & knowing it well! .

B ) No Financial Education to Spouse and Kids

Most people are more comfortable talking about SEX rather than FINANCE to kids (just kidding.) They don’t feel the need to tell their children that they have bought life insurance for them (the kids) should they be hit by a bus tomorrow (the parents, not the kids ). Once children reach an age of maturity like 16 or 17; when they can understand things & reason well and can take on responsibilities to some extent… Please start telling them about money and finances. Once you are gone, you can’t even regret.

Kids should know what your work is & how much you earn. They should be clear on how you are saving money to fund their education, bike , trips etc. Once they know about life t it, chances are they will be a lot more supportive, would be realistic in their demands & stay well within their limits. Kids don’t know sometimes, how much pain you take in earning money. Most of the times, kids know your salary and your designation at company and assume the family to be a “higher middle class” one. Once you tell them about Home loan EMI, Car Loan, other liabilities,Retirement Savings,  Education Expenses, Marriage expenses and the medical emergencies for which you are saving, they will have a better idea about the current situation and they will act responsibly.

Parents feel a little uncomfortable, telling their kids these things, as they feel children are still young and such information will create unnecessary psychological pressure and they would not talk about their demands and be unhappy. Parents feel that children should start learning about finance and applying that knowledge, once they are in a job and start earning. I say, if your finances and spending habits are messed up today, a big reason could be that, your parents never talked about finance with you openly. The same applies to spouses. Imagine, if you had all the knowledge and best practices you have learned on this blog, 10 years ago; or when you started earning? The situation would have been very different today, wouldn’t it?

Dont let this happen to your kids: Teach them!

C) Imbalanced Asset Allocation :-

A lot of people have a tendency to start working and then never look at, or review their finances.Tax Planning is nothing more, than a “signature” on some form for them. Initiatives from their side are limited to just calling an “agent” and nothing more. When they finally look back at their finances, they find that they have 40 Lacs in FD’s and 25  lacs lying in Bank. This happens a lot with NRI’s working outside the country. These are 35 yrs old who have 90% in debt or Cash, and 3-4 mutual funds and shares bought in recent years just for “trying”. This category misses a huge amount of returns which they could have made with just 4-5 hours of planning or hiring a proper investment consultant.

On the other hand, there are investors who have no PPF, no FD, no Debt Funds, no bonds; they just do share trading, buy direct stocks, invest in just Mutual funds (pure equity). Their imbalanced Asset allocation is responsible for the huge ups and downs their portfolio takes. One year the worth of their portfolio will be 10 lacs, the next year it will be 7, then suddenly it will be 14 lacs the next year. The numbers dance with huge fluctuations, but at the end of let’s say, a decade, they look back & find they are nowhere better than their “High debt Instrument” kind of Investor brothers.

D )Buying products from Close One’s

Will you sell a junk product to yourself if there’s a 35% commission and it will be a burden to you all your life ? I don’t think so, but if you had to sell it to your friend, colleague, brother-in-law, sister-in-law, father’s friend etc, you’d consider it, wouldn’t you? That’s what happens in real life too.

Most times, the “Best plan” comes from one of your relatives or someone known. STOP IT PLEASE! A simple NO might hurt your relations with said person, but it will save you, your hard-earned money, rather than waste it on idiotic products, which you’ll regret for life  It’s just common sense that there are better advisors and consultants than your relatives or a close ones, unless they themselves are known and respected in the field (of finance).  

 To be Continue.......................

Nitin Sawant - 9422518694 /9145354545

Why do I think I don’t need financial planning ?

I am too young / old :-

While it is true that the younger you start the more beneficial the process will be, financial planning is worthwhile at any age. Although younger people may have more decisions to make regarding their financial lives, changing laws and circumstances can lead middle-aged people and seniors to have to adjust their financial plans as well. Changes in tax law, for example, may require many people to revisit certain investments or estate plans, and adequate disability planning becomes more important as people age.

 

I save enough :-
How much is enough can only be determined after you do your need analysis in a scientific manner.


I have enough assets to take care of my needs:-

What is termed as an asset is itself a debatable issue, however generally an ‘Asset’ is “what produces an income for the holder.’ And if left unmonitored assets could lose its value due to market forces and may be insufficient to fulfill the needs when they arise.

I can always borrow when I need to:-

Borrowing of money depends on various parameters such as interest rates, repayment capacity and eligibility which may change from time to time and is independent of the timing of requirement. Therefore complete dependency on borrowing is not recommended.

I don’t need to think about retirement, my kids will take care of me:-

Every individual has his/her own priorities which are more or less decided by circumstances. In such a scenario, it is always advisable to build the nest before it rains instead of depending on someone else, even if that someone is your own child.


My business will take care of me :-
Business is one of the most volatile sources of income. There are many governing factors such as recession and liquidity in the market which could adversely affect the profitability of a business. Therefore it is recommended to avoid excessive dependency on one’s own business and create a parallel passive source of income through an appropriate investment portfolio sufficient enough to provide for the financial goals.
I do enough investments to save tax:-

Investing to save tax is the most popular practice prevailing in India. No doubt that is one of the strategies of tax planning. However, many a times such investments are done without analyzing the instrument or the financial objective.


My business will always be profitable, so I reinvest all my income into my own business :-

As the old adage says, don’t put all your eggs in one basket even if the basket is your own!! Therefore reinvestment into one’s own business should be after budgeting for creation of an appropriate investment portfolio sufficient enough to provide for the financial goals on a year on year basis and also after taking into consideration one’s life stage.



I’ll always have my job:-
In the current economic situation, job security is a very distant dream. Almost surely you would get another job, however, there is no guarantee of similar income being replaced in the new assignment and what about the period in between these jobs when there is no income and only expenses? Would you be able to sustain your current lifestyle?



I am insured :-

Insurance is just one aspect of financial planning. In addition to checking whether you are adequately insured in a scientific manner, we should also take care of the various financial goals in a systematic way by making sure that adequate cash flows are available at the right time.



Can I do my own Financial Planning?:-

Some personal finance software packages, magazines or self-help books can help you do your own financial planning. However, you may decide to seek help from a professional financial planner if:

§ You lack expertise in certain areas of your finances. For example, a planner can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.

§ You need to infuse more accuracy in what you have done for yourself

§ You don’t have enough time to spare for doing your own financial planning.     Visit : www.shreewealth.com  

''Money Plus" Artical

Shree Wealth Consultant Pvt. Ltd.

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Regards,

Nitin R. Sawant

MBA (Finance), CFPA

Consultant - Financial Planning

SHREE WEALTH CONSULTANTS PVT LTD.

First Floor; Nabilal Complex;

shivaji Chowk;Vita,

Sangli- 415 311. India

Ph. 02347-276435

Mobile No- 9145354545/ 9422518694

Gmail / Skype id-nrsawant

Indian Union Budget

Indian Union Budget

The news related to budget must have started flowing around you. Budget is now more of a media event rather than an accounting exercise. Forget for a minute about the Indian Union budget just answer a simple question: What is budget? The definition goes like this – A budget is a list of all planned expenses and revenues. It is a plan for saving and spending. Be it you who do budgeting for your monthly income or expense or be your organization where you work – a budget is an organizational plan stated in monetary terms.

In the end of the article you can check highlights of latest budget.

The purpose of budgeting is to:

1.   Provide a forecast of revenues and expenditures. On this our strategies, events and plans are carried out.

2.   Gives us a chance to measure actual to forecasts.

If you experience practically this is what we do in our investments also. We try to check our earnings and expenditures. The excess of earnings over expense is our saving and we put that saving in some capital use so that we get benefited in future. When this activity takes a macro form and is done by a nation, it becomes a Union Budget. Let’s try to figure out how does a Union or country like ours prepares it budget.

What is Indian Union Budget?

The Budget is the annual statement of Government of India (GOI) accounts for the previous fiscal year. The Government makes provision for it expenditure. These provisions are compared with the actual income & expenditure. It is also a statement of next year’s tax and tariff provisions and a projection of the receipts and disbursements in the next fiscal year.

What is the Finance Bill?

It is the part of budget which are basically numbers. The Finance Bill contains the tax and tariff provisions and it has to be passed by parliament. If there are no changes from previous provisions, there can be a Vote on Account to extend previous provisions rather than a new Finance Bill. Once approved the Bill becomes the Finance Act and it is for a specific period. This is Part B in the Budget Speech.

What is the structure of the Budget?

The GOI finances are organized under three accounts. There is the Consolidated Fund, the Contingency Fund and the Public Accounts. There are receipts and disbursals on each account.

The Consolidated Fund includes all disbursals and receipts on the Capital and Revenue Accounts.

Contingency fund includes moneys at the disposal of the President and governors to be used to meet unforeseen expenditures in case of disasters.

The Public Account includes receipts and disbursals on the Small Savings, Public Provident Fund account and well as the government reserve and miscellaneous accounts.

What does the Revenue Account cover?

This is how the government earns. The revenue account includes tax and non-tax receipts and disbursals. Non-Tax receipts include accounts such as fiscal services (currency, coinage), Interest receipts, dividends and profits and other non-tax revenues such as receipts of different departments, and also grants such as external assistance.

What is the revenue deficit/surplus?

        The difference between Revenue Receipts and Disbursements on the Revenue Account is known as the revenue surplus or deficit depending on whether receipts exceed disbursements or not. A Revenue Deficit is a dangerous signal since it means that government is spending more than it receives just keeping routine business running.

What is the Capital Account?

The Capital Account includes receipts and disbursals on the account of Public Debt and the recovery / disbursals of loans from state government.

What is a Capital Account Surplus/Deficit?

The difference between capital receipts and disbursals is the Capital Account Deficit or surplus. Wise investment on Capital Account is required to build infrastructure and other developmental activities since revenue account disbursals keep current programmes running. A Capital Account deficit may be justified if it is building assets that will be useful in future.

What is the Fiscal Deficit?

If you read any review on Indian capital markets from any of the Foreign Institutional Investor, it will always contain concerns over fiscal deficit. You keep this hearing it too often as a warning siren.

The difference between total government spending on account of revenue, capital and net loans and between total government receipts on account of revenue and of capital receipts that are not borrowings.

The important point to note is that accumulated interest burden from previous years is reflected in the Fiscal Deficit as well as this fiscal’s revenue and capital surpluses/ deficits. The Fiscal Deficit is usually shown as a percentage of GDP. A low Fiscal Deficit is considered the best symptom of financial health. India has a Fiscal Deficit in the range of 5.6 per cent. This is much higher than considered safe.

What is plan and non-plan expenditure?

There are two components of expenditure – plan and non-plan. Plan expenditures are estimated after discussions between ministries and the Planning Commission. Plan Expenditure is designed for asset-building and infrastructure projects.

Non-plan revenue expenditure is accounted for by interest payments, subsidies (mainly on food and fertilizers), wage and salary payments to government employees, grants to States and Union Territories governments, pensions, police, economic services in various sectors, other general services such as tax collection, social services, and grants to foreign governments.

Non-plan capital expenditure includes defense, loans to public enterprises, loans to States, Union Territories and foreign governments.

The Non-Plan expenditure is generally considered useless at generating assets. However the NP Capital expenditure can include funding to states to help development projects in the states. In general, Plan expenditure is more useful however. So a cut in government spending that impacts Plan Expenditure may cause stagnation in future.

What is fiscal policy?

Fiscal policy is the taxation profile. Governments usually change taxation, volume of spending, and size of the budget deficit or surplus to affect public expenditure. This is voted in the Finance Bill. Fiscal policy is combination of a nation’s policy towards Taxation, Government Expenditure, Employment, Development of a country & Deficit planning.

What is the monetary policy?

Monetary Policy is the control of interest rates and money supply. Much of this is theoretically under the control of the autonomous RBI rather than the Finance Ministry. But some rates such as PPF / Small Savings are controlled by FM. They may be changed in the Budget.

Key Highlights of Indian Union Budget 2012-2013

please download the file

http://www.4shared.com/office/uELRjB4E/budget_key2012_-2013.html