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Financial planning - effect of cumulative & early saving

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Rajendra Saxena
Rajendra Saxena

Early saving when responsibilities are limited & its proper investment make a person financial secure & financial scured person have less worries in life

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FINANCIAL PLANNING A Presentation to IRSE Probationers RP Saxena SP/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 1 2 3 4 5 6 7 8 9 10 3.00 3.27 3.56 3.89 4.23 4.62 5.03 5.48 5.98 6.52 amt 7.10 7.74 8.44 9.20 10.03 10.93 11.91 12.98 14.15 15.42 amt 16.81 18.33 19.98 21.77 23.73 25.87 28.20 30.74 33.50 36.52 amt 39.80 43.39 47.29 51.55 56.19 61.24 66.75 72.76 79.31 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.........
Financial planning - effect of cumulative & early saving
BE HONEST … HOWEVER
 THANKS

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Financial planning - effect of cumulative & early saving

  • 1. FINANCIAL PLANNING A Presentation to IRSE Probationers RP Saxena SP/Engg
  • 2. 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 
  • 3. 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
  • 4. 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  
  • 5. -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
  • 6. 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)
  • 7. 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 
  • 8. 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%
  • 9. 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
  • 10. 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) 
  • 11. 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
  • 12. POWER OF CUMULATIVE yr amt 1 2 3 4 5 6 7 8 9 10 3.00 3.27 3.56 3.89 4.23 4.62 5.03 5.48 5.98 6.52 amt 7.10 7.74 8.44 9.20 10.03 10.93 11.91 12.98 14.15 15.42 amt 16.81 18.33 19.98 21.77 23.73 25.87 28.20 30.74 33.50 36.52 amt 39.80 43.39 47.29 51.55 56.19 61.24 66.75 72.76 79.31 86.45
  • 13. 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 
  • 14. 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.
  • 15. 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 !
  • 16. 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. 
  • 17.  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.”
  • 18. 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.........
  • 20. BE HONEST … HOWEVER