Is Personal Financing Only About Investing Money?

                        Scope Of Personal Financing

In our country, people think personal financing is only about investing the money or management of the portfolio. Personal Financing is taking about all the decisions in your financial career at a various stages in your life correctly. It guides you to take your financial decisions like (Buying A Second Home, Insurance According To Your Needs, Taxation, Reverse Mortgage). Scope of Personal Financing includes:

1. Insurance Planning.

2. Retirement Planning.

3. Estate Planning.

4. Tax Planning.

What is Insurance Planning?

Insurance Planning is the protection of your family, your loved ones, your assets, business, your home against various peril and hazards. It is the basic component of a personal financing. To choose an appropriate plan for the client by analysing all the risks is the most important thing. Insurance is a device transferring risk from an individual to a insurance company and reducing the uncertainty of risk via sharing with others. Insurance eases financial burdens that can occur when disaster strikes.

What is Retirement Planning?

Retirement Planning is the planning of life when one's paid work ends, not financially but in all aspects of life. The various aspects include lifestyle choices such as how to spend time in retirement, where to live and several other things. Previously, retirement planning is about setting aside enough money for retirement but now people also have a dreams in their eyes which they want to accomplish after retirement. In retirement phase, decades of your saving are paying out. To plan this phase of your life and make it supremely happy is an important task for a financial planner in personal finance.

What is Estate Planning?

Everyone has a estate. Your estate is comprised of everything you own- your car, home, saving accounts, investments, life insurance etc. You can't take it when you die. You need to plan all this and this is called estate planning. Estate Planning is for everyone. It is the care of your loved one's, family when you are not actually there to take care of them. You should do this by considering a proper person in this field whom you can trust and expect best advice and guidance.

What is Tax Planning?

Tax Planning plays a vital role in all aspects of finance. The purpose of tax planning is to ensure tax efficiency. The selection of investments and types of retirement plans must complement the possible deduction of tax. It includes taking the maximum advantage under various tax reductions given by the government. It includes timing of income, size, timing of purchases and planning for expenditures or engaging in tax gain-loss harvesting.

 

Role Of A Financial Planner, Fees Structure & Charges

                                  Financial   Planner

A financial planner is an educated person who uses his financial planning skills to enable the client to achieve his desired financial goal. Financial Planner does the risk profiling and put his clients amongst the three categories. 

1. Conservative

2. Moderately Conservative

3. Moderate

4. Moderately Aggressive

5. Aggressive

    

                         Categories of Potential Client

1. Young Adult (21-25)

2. Young Family(25-40)

3. Mature Family(40-50)

4. Empty Nesters(50-55)

5. Pre-Retiree/ Retiree(55-65+)

People in the different age group have different goals, liabilities, financial responsibility. Financial Planner makes a financial plan for you to achieve them. 

                         Process of Financial Planning

1. Knowing your client is one of the most important and basic things amongst all the other things to do in financial planning. Financial Planner takes the interview in a little bit informal way so that the client can talk about  it's financial problem & financial issues.

2. Collecting client"s information in various means like the short term goals, medium term goals, long term goals, about his assets and liabilities. Financial Planner is your friend. A relationship of trust is very important. 

3. Data collection forms are also there in which you need to fill the information required by your financial planner correctly.
4. Agreement on the next step if client agrees with financial planner and allows him to make his financial plan.

                       Fee Structure Of A Financial  Planner

Certainly, there is not a definite fee structure. It varies client to client. Sometimes, the client may charge a pre-defined fee to make a financial plan. Accordingly, they may charge a percentage to make a financial plan depending upon the corpus of the client. The fee to review & renew the plan is not very high and it's generally pre-defined mentioned in the agreement.

                           

             

Public Provident Fund

                Publc Provident Fund

PPF Account is a favourite tax saving option in our country. Deposits made in PPF accounts up to prescribed limits are eligible for relief under section 80C of Income Tax Act. PPF accounts are EEE means Exempt, Exempt, Exempt from every tax. The maximum amount can be deposits up to 1.5 lac per annum in a maximum of 12 installments in a financial year. The maturity period of the PPF account is 15 years, but actually It is 16 financial year. The nomination facility is available.

  

     Features of Public Provident Fund

Interest rates keep on changing as per market interest rates. The interest is compounded annually. A PPF account cannot be transfered from one person to another. A depositor can avail of loan facility in the third financial year from the financial year in which the account was opened. Premature closure of a PPF account is not permissible except in the case of death of the depositor. A depositor can make partial withdrawl once every year from his PPF account after expiry of five years.

According to me PPF account is not the best option for long term purpose. Instead of investing in PPF account I would suggest to invest in ELSS because  it also provides relief under section 80C of Income Tax Act. The return given by ELSS is far more than the return given by the PPF account till maturity.

RICH DAD POOR DAD

This book RICH DAD POOR DAD is all about financial literacy and it's importance. A person can be highly professional, skilled as well as financially illiterate. It tells you how to be rich, how to handle your money. 

The simple formula to become rich is you need to buy only one thing in your life i.e. ASSETS but what people always buy is LIABILITIES. Generally, the expenses of a normal person is directly proportional to it's earned income. They buy LIABILITIES and pays the EMI which I think is the biggest and a only barrier to be rich.

Several Rules To Become Financially Literate & Rich.

1. Rich don't work for money they work to learn. Don't let your pay check decides your growth, earnings in your life. Don't get trap in that RAT RACE. Don't only run for higher salaries, job security, promotions instead of that work to learn so that you can make money. Don't earn it make it.

2. Financial Literacy is amongst the most important things to learn. It tells you the importance of investment, management of money, priorities your choices at various stages of your life & career.

3. Don't try to own  things try to have controll over them. The main difference between rich and poor is poor buys the things and rich controll the things. They use it not purchase it.