A PROJECT REPORT

ON

“PERSONAL FINANCIAL PLANNING”

Submitted to

SAI INTERNATIONAL COLLEGE OF COMMERCE

AND
ECONOMICS
In partial fulfilment of B. Com 6th Semester

Submitted
by
SOURAV SINGH
University Roll No- 1803010190520024
Under the guidance of

CMA Prabhat Kumar Sahoo

Assistant professor

SAI International College of Commerce & Economics

Bhubaneswar
2021
 DECLARATION

I Sourav Singh continuing B. Com 6th Semester at SAI INTERNATIONAL COLLEGE OF

COMMERCE AND ECONOMICS, BHUBANESWAR, hereby declare that the project
work titled Personal Financial Planning is an authentic work developed by me for the
fulfilment of the award for the degree of Bachelor of Commerce.

SOURAV SINGH

(1803010190520024)

6th Semester B. Com

2
 GUIDE CERTIFICATE

This is to certify that (Sourav Singh) of B. Com (Hons) 6th Semester bearing College Roll.
No. BC18-026 and Utkal University Roll No.: 1803010190520024 has successfully
completed the project work titled Personal Financial Planning for partial fulfilment of
requirement for the completion of B. Com (Hons) Degree.

This project report is the record of authentic work carried out by him/her during the period
from 20th April, 2021 to 25th June 2021.

He/ She has worked under my guidance.

Signature of Internal Guide Signature of the External

Name:

Designation: Marks awarded:

Date:

3
 ACKNOWLEDGEMENT

I sincerely offer my gratitude to my guide (CMA PRABHAT KUMAR SAHOO) without

whose constant support and guidance, this project would not have been completed.

It’s my proud privilege to express my deep reverence to all the faculty members for their
useful suggestion, encouragement, and continuous support, which helped me to accomplish
the project.

And above all, I am thankful to my parents for their constant love support while writing the
project.

Date- SOURAV SINGH

(1803010190520024)

4
 CONTENTS

Contents Page No.

Chapter-I Introduction 6-8

Chapter-II Review of Literature 9-10

Chapter-III Research Methodology 11

Chapter-IV Data analysis and Interpretation 12-36

Chapter-V Conclusion 37

Bibliography 38

Questionnaire 39-42

5
 CHAPTER-I

INTRODUCTION

“FAILING TO PLAN IS PLANNING TO FAIL”

Planning (also called forethought) is the process of thinking about and organising the
activities required to achieve a desired goal. It involves the creation and maintenance of a
plan, such as psychological aspects that require conceptual skills (Wikipedia). Planning is
doing something for the future in a systematic way. In a general sense, if you want to go to a
hill station say Ooty next month end, you have to chalk out various steps that are required to
undertake that trip successfully. We may have to decide how to go, who all would
accompany, where to stay at Ooty, places to be seen, things to be bought and the amount that
would be required. This is planning for the trip.

Financial planning is planning which deals with money. In the hill station trip example, we
did not consider only money aspect but all other related things. Financial planning normally
restricts to the financial aspect. Financial planning is done both by the individuals for their
own future life (PFP) and businesspeople to know about the funds required for a future period
and the sources of funds available. Whether an individual is in college getting ready to
graduate, at the peak of his or her career, or close to retirement, everyone needs to think about
their financial future. Everyone makes financial decisions every day. Few people consider
how to make better decisions to achieve a higher level of personal economic satisfaction.

Personal Financial Planning (Wealth Management) Personal financial planning refers to the
proper planning and implementation of well-coordinated plans to achieve financial
objectives. The savings and investment made today should match the future goals.

6
 Taking conscientious and systematic steps towards fulfilling one’s financial goals.
 The process of meeting life’s goals through proper management of finances. Life
goals can include buying a home, saving for child’s education or planning for
retirement.
 Personal finance involves much more than managing and investing money. It also
includes making all the pieces of your financial life fit together; it means lifting
yourself out of financial illiteracy. Like planning a vacation, managing your personal
finances means forming a plan for making the best use of your limited time and
money.

Every human being is interested in leading a ‘Happy Life’ as long as he lives. Happy
life would mean having some goals to be achieved and possessing sufficient money
to attain those goals. PFP helps one to lead a happy life by planning one’s goals,
process required to achieve the goals, the timing of the investments and the class of
assets (here, assets denote the type of financial instruments where one has to invest
the money like Bank FDs, Shares, National Savings Certificates, Real Estate etc.) to
be invested in.

In India, the knowledge of personal finance is very poor at all ages. This subject is
not offered in the higher secondary education or under graduate courses. Children are
not aware of such a concept and whatever they learn is from observing what their
parents do. PFP is offered as an elective at some PG (MBA) courses. It is sincerely
felt by the authors, and hence, it is a request to all the educational authorities to
introduce some basics of PFP to the young children before they pass out of the
school. This would definitely help in increased fiscal responsibility being taken by
the young citizens of India and also result in wise spending and improved savings
and investment for the economy

7
Personal Finance RoadMap Diagram

CHAPTER-II

8
 What is personal financial planning?

Personal financial planning is an activity that involves all the individual financial
decisions, which includes budgeting, saving, insurance, mortgages. When a person plans his
personal finance, he needs to take a range of financial products and other personal factors into
consideration. Personal finance has a huge influence on one’s life.

Personal financial planning refers to the proper planning and implementation of well-
coordinated plans to achieve financial objectives. The savings and investment made today
should match the future goals.

 Taking conscientious and systematic steps towards fulfilling one’s financial goals.
 The process of meeting life’s goals through proper management of finances. Life
goals can include buying a home, saving for child’s education or planning for
retirement.
 Personal finance involves much more than managing and investing money. It also
includes making all the pieces of your financial life fit together; it means lifting
yourself out of financial illiteracy. Like planning a vacation, managing your personal
finances means forming a plan for making the best use of your limited time and
money.

9
 FINANCIAL PLANNING PROCESS

Setting your Financial Goals

1

Developing Financial Plan

2

Implementation of the Plan

3

Monitoring of the Plan

4

If needed, take Corrective Action

5

Redefine and revise plan

6

10
 CHAPTER-III

Research Methodology: -

 Qualitative Analysis
 Statistical Techniques
 Theoretical Analysis
 Conclusion Oriented
 Quantitative Analysis

11
 CHAPTER-IV

Data Analysis and Interpretation

What do you feel about your ability to manage your own finances?

Not sure at all

13%

Very Sure
40%

Somewhat Sure
47%

From the above chart it is clear that maximum people don’t have proper knowledge regarding
managing their own finances.

Personal Financial Planning helps in following ways: –

 Seeing the Future with a Clear Vision: When we have a goal to be achieved, we
will be clear about the future, and through financial planning, we would be able to
follow the steps needed to achieve the goal. Without a financial plan, it would be like
groping in the dark and everyday crisis management.

12
  Ensuring Financial Discipline: Proper planning helps one to limit his/her expenses
within the budget. It also ensures that planning is done for the various events in one’s
life and the money required for meeting them.

 Giving the Person a Direction: Planning sets forth the future vision of the
individual. It helps him to attain various goals in his life. Planning helps in finding out
the risk appetite (risk bearing capacity) of each individual, and on the basis of the risk
appetite, suitable investments can be recommended.

 Helping in Tax Reduction: It also helps in planning the taxes one has to pay on his
income. By proper planning, one can reduce his tax burden.

 Safeguarding Self and Family against Financial Crises in the Event of Death or
Disability: As already understood, financial planning takes into account not only the
individual’s needs but also his entire family members. Financial planning in the form
of obtaining insurance protects the family in times of distress (death or disability)

Have you taken any professional advice on managingyour own

finances?

NO 26

YES 4

0 5 10 15 20 25 30
No. of persons

Column1

13
Key aspects to manage personal finances without any professional advice: -

 Savings: You need to keep money aside as savings to cover any sudden

financial need. 

 Investing: Investing is important to grow money so that you can achieve what

you aspire. 

 Financial protection: Now, financial protection through insurance ensures you

and your family are able to sail through during the hard times.
 
 Tax planning: With proper tax planning, i.e., making adequate
expenditure/investment, you can bring down your taxable income, eventually
saving a lot of money every year. 

 Retirement planning: Finally, retirement planning is crucial to ensure that you

have a big bank balance meant solely for your needs during the twilight years. 

14
 Where would you like to invest your money?
20
18
18

16

14 13 13

12
No. of persons

10
10

6
4
4

0
1

GOLD ESTATE POSTAL DEPOSITS RD,PPF,FD MUTUAL FUNDS

 In India people purchase gold as wear apparels/ ornaments instead of purchasing it for
investment purpose.

 In daily life, when people say real estate, they mostly mean houses or apartments.
People invest in real estate mainly for getting a home to live.
People also purchase commercial properties with the goal of renting it out to make
extra income. The rent provides the investor with a steady cash flow and is expected
to keep pace with inflation over time.

 Post office RD is basically a monthly investment for a fixed period of 5 years with an

interest rate of 5.8% per annum (compounded quarterly). On completion of the fixed
tenure of five years, RD account with Rs. 10,000 invested every month will fetch you
Rs. 3,256.48.

15
 RDs or recurring deposits are an investment tool which allows investors to make
regular monthly investments and save money for the long term. Investors can choose
the tenure of the deposit and the minimum monthly payment they wish to make
according to their convenience.

PPF account holders can invest maximum of ₹ 1.5 lakh in a financial year.  Public
Provident Fund — also known as PPF — is a popular investment scheme which
offers an investment avenue with decent returns coupled with income tax benefits. 

PPF account holders can invest a maximum of ₹ 1.5 lakh each financial year.

A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which

provides investors a higher rate of interest than a regular savings account, until the
given maturity date. The tenure of an FD can vary from 7, 15 or 45 days to 1.5 years
and can be as high as 10 years.

 A mutual fund is composed of many different types of investment. Investors do not

directly own the stock and bonds within the fund, but they own shares of the fund
they hold. Therefore, mutual funds grant investors to have accesses to various kinds
of stocks and bonds than they could afford themselves. The diversification of mutual
funds can lower the investment risk.

There are four main types of funds:

• Equity funds – invest in stocks.

• Bond funds - invest in bonds.
• Money-market funds - invest in short-term debt, including some Treasury bonds
and CDs.
• Asset-allocation funds - invest in some combination of stocks and bonds.

16
 Rating of LIC & other similar investments like LIC

LIC
41%

Other than LIC

59%

Other than LIC LIC

Reasons why maximum people don’t want to invest in LIC: -

 It doesn’t compensate all types of losses which caused baisness to insured by

insurance company.
 It takes more time to provide financial compensation because of lengthy legal
formalities.
 Although insurance encourages savings, it doesn’t provide the facilities that are
provided by bank.
 It intensionally tries to compensate as less as possibleto the sufferer with the aim of
maximizing profit rather than maximising well being of the insured.
 Sometimes, the total amount of premium might be higher than the policy amount
receivable on maturity.

17
 Following are some reasons to invest in LIC : -

 Life insurance provides an infusion of cash for dealing with the adverse financial
consequences of the insured’s death.
 Death benefits are generally income tax free to the beneficiary.
 Policy loans are income tax free.

How would you save money from your salary for payment of
income tax?
20
19

18

16

14

12
No, of people

10
10

2
1
0
0
Category 1

MONTHLY QUARTERLY ANNUALLY OTHERS

18
Smart income tax saving tips :-

a) Save upto 1.5 Lakhs under section 80C

 Buy a term insurance with a sum assured equal to 15-20 times of your
annual income.
 Claim children’s tuition fee for decuction under 80C
 Allocate atleast 20% of your annual income to market-linked
investment options.

b) Invest atleast 10% of your annual income in a pension fund, like

 National Pension Scheme
 Pension fund from Max Life Insurance

c) Save upto 1 Lakh more under section 80D

 Buy a mediclaim health insurance cover

Have you set any financial goals?

30%

70%

YES NO

19
Need for financial goals: -

 Keeps You Accountable. This is the most important reason for me to set financial

goals.
 Shows Your Progress. If you set goals, you will slowly start to see your progress,
which in turn, will build up your momentum.
 Gives You a Finish Line.

SMART Financial Goals: -

SPECIFIC
S State what is to be done with the money

MEASURABLE
M Write the exact amount

ATTAINABLE
Create a step by step plan outlining exactly how the goal can be
A reached

REALISTIC
Think through trade offs and opportunity costs to analyze the
R consequences of your goal.

TIME BOUND
T Specifically state when the goal will be reached

20
What is retirement planning?

Retirement planning means preparing for a steady stream of money after retirement. It entails
setting aside funds and investing specifically with that goal in mind. Your retirement strategy
will depend on your final goal, income, and your age.

Why do you need retirement planning?

Growing old can be expensive. Although frivolous expenses might reduce, medical bills are
only likely to rise. Add to that the burden of inflation, and not having enough money to
sustain future expenses can cause stress and worry. The purpose of having a retirement
investment plan is to ensure financial stability in your later years without depending on
others.

Top reasons to have a retirement plan

Here are four reasons why every individual must have a retirement fund:

1. Lack of a social retirement benefit

India has yet to implement a robust social security system with retirement benefits for
its senior citizens. Although pensions and employee provident funds do exist, they
may not be sufficient to cover all expenses. This is why creating a diversified
retirement fund with fixed income and mutual fund investments becomes crucial.

21
 2. Financial independence
For generations, older Indians have depended on their children for retirement support.
Lately, youngsters are leading more independent lives. Often, they are unable to
support their parents financially. Even if they can do it, being responsible for yourself
will give you more independence to live life on your own terms because you will not
be answerable to anyone else.

3. Rising costs
As an investor, you will need to account for rising costs. Inflation is a vital element to
consider when planning your retirement. If you are unable to keep up with rising
costs, you may have to compromise on your standard of living.

4. Medical emergencies
Healthcare costs are pivotal to understanding the importance of retirement planning.
While retail expenses continue to rise steadily, healthcare inflation is growing at
alarming rate. While other financial goals may be negotiable, health cannot be
compromised.  

When should you start retirement planning?

The sooner, the better. Although youth in their 20s might not worry about retirement, starting
early does give one more leeway. If you have missed that bus, you can start where you are.

A good retirement plan should be segregated into investment, accumulation, and withdrawal
phases. Until your early 50s, you should focus on investing and building your corpus. As you
near retirement, you should be able to shift the money to safer avenues so that you can
depend on dipping into it after retirement.

22
Importance of insurance for retirement

Although many people do not consider insurance an essential part of retirement planning, it is
a vital and indispensable component. Life insurance is a cover for a surviving spouse. If you
are no longer around, your spouse may struggle financially on their own.

Summary

Planning for retirement must be a non-negotiable part of everyone’s financial strategy. The
future may be uncertain, but it can help to be prepared. Diversify your retirement corpus by
investing in mutual funds, fixed-income securities, and other government-backed securities.
Start as soon as you can so that your later years are relaxed.

In your opinion having credit card is...

1 8

18

0 2 4 6 8 10 12 14 16 18 20
No. of person

GOOD BAD NOT SURE

23
What is a credit card?

A credit card is a thin rectangular piece of plastic or metal card issued by financial

institutions, which lets you borrow funds from a pre-approved limit to pay for your
purchases. The limit is decided by the institution issuing the card based on your credit score
and history.

Benefits of Credit Cards:

1. Easy access to credit:

The biggest advantage of a credit card is its easy access to credit. Credit cards function on a
deferred payment basis, which means you get to use your card now and pay for your
purchases later. The money used does not go out of your account, thus not denting your bank
balance every time you swipe.

2. Building a line of credit

Credit cards offer you the chance to build up a line of credit. This is very important as it
allows banks to view an active credit history, based on your card repayments and card usage.
Banks and financial institutions often look to credit card usage as a way to gauge a potential
loan applicant’s creditworthiness, making your credit card important for a future loans or
rental applications.

3. EMI facility

If you plan on making a large purchase and don’t want to sink your savings into it, you can
choose to put it on your credit card as a way to defer payment. In addition to this, you can
also choose to pay off your purchase in equated monthly instalments, ensuring you aren’t
paying a lump sum for it and denting your bank balance. Paying through EMI is cheaper than

24
taking out a personal loan to pay for a purchase, such as a television or an expensive
refrigerator.

4. Incentives and offers

Most credit cards come packed with offers and incentives to use your card. These range from
cash back to rewards point accumulation each time you swipe your card, which can later be
redeemed as air miles or used towards paying your outstanding card dues. Lenders also offer
discounts on purchases made through a credit card, such as on flight tickets, holidays or large
purchases, helping you save.

5.Flexible credit

Credit cards come with an interest-free period, which is a period of time during which your
outstanding credit is not charged interest. Ranging between 45-60 days, you can avail free,
short-term credit if you pay off the entire balance due by your credit card bill payment date.
Thus, you can benefit from a credit advance without having to pay the charges associated
with having an outstanding balance on your credit card.

6. Record of expenses

A credit card records each purchase made through the card, with a detailed list sent with your
monthly credit card statement. This can be used to determine and track your spending and
purchases, which could be useful when chalking out a budget or for tax purposes. Lenders
also provide instant alerts each time you swipe your card, detailing the amount of credit still
available as well as the current outstanding on your card.

7. Purchase protection

Credit cards offer additional protection in the form of insurance for card purchases that might
be lost, damaged or stolen. The credit card statement can be used to vouch for the veracity of
a claim, if you wish to file one.

25
Disadvantages of Credit Cards:

1. Minimum due trap

The biggest con of a credit card is the minimum due amount that is displayed at the top of a
bill statement. A number of credit card holders are deceived into thinking the minimum
amount is the total due they are obliged to pay, when in fact it is the least amount that the
company expects you to pay to continue receiving credit facilities.

This results in customers assuming their bill is low and spending even more, accruing interest
on their outstanding, which could build up to a large and unmanageable sum over time.

2. Hidden costs

Credit cards appear to be simple and straightforward at the outset, but have a number of
hidden charges that could rack up the expenses overall. Credit cards have a number of taxes
and fees, such as late payment fees, joining fees, renewal fees and processing fees. Missing a
card payment could result in a penalty and repeated late payments could even result in the
reduction of your credit limit, which would have a negative impact on your credit score and
future credit prospects.

3. Ease of overuse

With revolving credit, since your bank balance stays the same, it might be tempting to put all
your purchases on your card, making you unaware of how much you owe. This could lead to
you overspending and owing more than you can pay back, beginning the cycle of debt and
high interest rates on your future payments.

4. High interest rate

26
If you do not clear your dues by your billing due date, the amount is carried forward and
interest is charged on it. This interest is accrued over a period of time on purchases that are
made after the interest-free period.

Credit card interest rates are quite high, with the average rate being 3% per month, which
would amount to 36% per annum.

5.Credit card fraud

Though not very common, there are chances you might be victim of credit card fraud. With
advances in technology, it is possible to clone a card and gain access to confidential
information through which another individual or entity can make purchases on your card.
Check your statements carefully for purchases that look suspicious and inform the bank
immediately if you suspect card fraud. Banks usually waive off charges if the fraud is proven,
so you will not have to pay for purchases charged by the thief.

Which of the below insurances do you have?

25

21
20
18
17

15
no. of persons

10

0
Category 1

LIFE HEALTH VEHICLE DISABILITY LONG TERM CARE

27
What is life insurance?

Life Insurance is defined as a contract between the policy holder and

the insurance company, where the life insurance company pays a specific sum to the insured
individual's family upon his death. As death is the only certain thing in life, apart from taxes,
it pays to insure it well in advance.

What is health insurance?

Health insurance is a type of insurance that covers medical expenses that arise due to an
illness. These expenses could be related to hospitalisation costs, cost of medicines or doctor
consultation fees.

What is Motor Insurance?

Motor Insurance is a type of insurance policy which covers your vehicles from potential
risks financially. Policyholder's car or two- wheeler is provided financial security against
damages arising out of accidents and other threats. In India, motor insurance is mandatory.

Types motor Insurance Policies -

 Third Party Car Insurance Policy

 Own Damage Car Insurance Policy
 Comprehensive Car Insurance Policy

28
What is disability insurance?

 Disability insurance can replace a portion of your lost income if you are unable to work due
to sickness or injury. It includes paid sick leave, short-term disability benefits, and long-
term disability benefits.

What is covered? The most basic versions cover temporary and permanent
total disability due to accident.

What is a long-term care insurance?

Long term care insurance helps individuals pay for a variety of services. Most of these
services do not include medical care. Coverage may include the cost of staying in a nursing
home or assisted living facility, adult day care or in-home care. This includes nursing care,
physical, occupational or speech therapy and help with day-to-day activities.

A long-term care insurance policy pays for the cost of care due to a chronic illness, a
disability, or injury. It also provides an individual with the assistance they may require as a
result of the general effects of aging. Primarily, though, long-term care insurance is designed
to help pay for the costs of custodial and personal care, versus strictly medical care.

Who Needs Long-Term Care?

It is difficult to predict how much or what type of long-term care a person might need.
Several things increase the risk of needing long-term care.

 Age- The risk generally increases as people get older.

 Gender- Women are at higher risk than men, primarily because they often live
longer.
 Marital status- Single people are more likely than married people to need care from a
paid provider.

29
  Lifestyle- Poor diet and exercise habits can increase a person's risk.
 Health and family history- These factors also affect risk.

In India, as per the Motor Vehicles Act, it is mandatory that all vehicles that operate in any

public space must have a motor vehicle insurance cover. Policyholders must have at least
'third part liability' motor insurance cover even when opting for the basic insurance plans.

That’s why vehicle insurance is more frequently purchased in comparison to other insurance
policies.

Will you have the option of taking a lump-sum pension instead of

an annuity at retirement?

Lump sum Pension Payment

27%

Annuity Pension Payment

73%

30
Pension Annuity
An annuity plan provides a steady stream of income for life after you make a lump sum
investment.

You have the flexibility to choose from a wide range of pay out options to suit your specific
retirement needs. Also, you can avail tax benefits under section 80CCC and commutation
under section 10(10A) of the Income Tax Act, 1961.

What benefits do you get?

 A guaranteed flow of income throughout your life, for your everyday and medical
expenses. The income does not depend on financial market conditions.
 You need not worry about outliving your financial resources
 If your spouse depends on you financially, you can choose to provide a lifetime
income for him or her.
 You need not make tough investment decisions or manage your portfolio.
 You can arrange for a return of your premiums paid to your nominee after an
unfortunate event.

Drawbacks:

 If you face an unexpected major expense, you cannot get advances from the annuity
plan. You may have to resort to expensive loans.
 Annuities are considered as incomes and are taxable.

Lump Sum Payments

31
A lump sum pension is a one-time payment from your retirement plan. It provides a large
sum of money, which you can use to fulfil your immediate retirement needs like; starting a
new business or going on a world tour with your loved ones.

What benefits do you get?

 A large sum of money to fulfil your post-retirement dreams.

 Helps you to ease the financial burden of responsibilities like your child’s education
or marriage, even if you have retired.
 If you have large debts, the lump sum amount can help you repay your dues.
 Your financial dependents can receive the remaining money, after an unfortunate
event.

Drawbacks:

 If you fail to maintain a disciplined budget, you may spend your money too fast and
run out of funds too soon.
 Your investment needs careful asset management. If you put your money in
conservative investments, you may not be able to keep pace with inflation.

Conclusion for Pension

Pension payments last throughout your life and can also continue for your surviving spouse.
And lump sum pays outs give the flexibility to invest where you choose and spend as per
your needs.

Before making a selection, you can consider factors like:

 Your health conditions

 Your investment skills and tolerance for market risks
 Your monthly expenses

32
  Existing savings and other income sources like house-rent, a pension from employers
 Outstanding debts

If you have other savings, you may not need a lump sum. However, if you want your
investments to increase, you can use a lump sum to fund them further. On the other hand, an
annuity plan will help you with your everyday expenses, keeping you financially
independent. Hence, the final decision depends on your personal preferences, current
financial circumstances, and retirement goals.

Better SAFETY or Better RETURN for money?

Better SAFETY
40%

Better RETURN
60%

Better RETURN Better SAFETY

Better SAFETY vs Better RETURN

33
So, the most important thing to decide on where to invest is to prepare a comprehensive
financial plan. The financial plan will help you to identify your financial goals like higher
study for self, getting married, buying a car, going for foreign travel, buying a house, fund
required for education of children, fund for marriage of son/daughter, building retirement
corpus etc. There may be other financial needs depending on requirements and ambitions.

Once the goals are identified, you have to categorise them in short-term, medium-term and
long-term goals and quantify them by taking into consideration the present cost, duration to
realise the goals and effect of inflation to determine how much funds you need in how many
years to meet each life goal.

Shorter the duration of a life-goal, lower will be the effect of inflation and lower will be the
capacity to take risks. So, for short-term goals, you have to depend on fixed-income
instruments. On the other hand, longer is the duration of a life-goal, higher will be the effect
of inflation, which will magnify the financial need at the time of occurrence of the event, but
higher will be the capacity to take risks. So, to meet long-term goals, you may depend on
equity investments that would beat the rate of inflation comprehensively to meet the higher
requirements of funds.

So, depending on your income, you have to decide how much to invest to meet each financial
goals individually, by taking minimum possible risk.

For short-term term goals, you have no option, but to choose the best available fixed-income
instrument, depending on the rate of interest, protection of capital invested and liquidity. But
for long-term goals, you have the option to choose fixed-income or equity, depending on how
much you may spare to invest to meet the requirement.

So, for long-term financial goals, you have to choose between fixed-income and equity
instruments, depending on your investment capacity.

Hence, an investment avenue may be very safe, but may not be good for you to meet long-
term financial need, unless it is able to fulfil the financial goal. On the other hand, an equity
fund may be consistent to give 20 per cent long-term return, but it will not be good for you to
meet a short-term financial goal.

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So, remember, there is no best investment, but the best investment is the one that suits
your financial need.

Seven Principles of Good Personal Financial Planning

1. Make Saving a Habit: The first principle is that we should make savings a habit. Savings
should not be at random on months when the expenses are lesser than income. We know the
saying “Habits die hard”. Good habits are welcome and it should be practised. If savings
become a habit, then it would help in building the long-term corpus and help in meeting the
various financial goals.

2. Maintain a Personal Diary: It is always good to have record of events in the form of a
diary. It is suggested that we have two diaries, one to record the events at the office and the
other to record that of family/domestic life. Maintain a diary of due dates of various deposit
and investments (month wise) and see it before the beginning of the month and take
appropriate action.

3. Prepare a Budget: Budget helps in knowing in advance the income and expenses that are
to be received in the ensuing period. This helps in planning the source of funds for months
when a deficit is anticipated or to reduce the discretionary expenses in the months where the
deficit might occur.

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 4. Have Separate Files for Various Important Items: We should maintain file for
important documents pertaining to family. A separate file should be kept for income tax,
house property, bills and receipts of assets purchased, statement of account of Savings
Accounts, demat account statements, all guarantee/warranty cards of assets acquired etc.

5.Diversify Your Investments: Do not invest all your money in any one type of asset say
bank deposits, shares and securities, real estate, gold, etc. It is good to have investment in all
class of assets so that the risk is spread. Remember the proverb “Do not put all eggs in one
basket”.

6. Enjoy ‘Present’: Yesterday is History, Tomorrow is a Mystery and Today is the ‘Present’.
Too much of tightening of expenses at the cost of health or enjoyment (moderate level) is not
good. After all, whatever we earn during our lifetime, we should also enjoy and only keep
some balance for our kith and kin.

7.Help Others When You Can: Doing charities (whatever little one can) is like individual’s
social responsibility. Lot of organizations have been celebrating a month in a year as ‘Joy of
Giving’. Participate in them or do your own way like giving donations for studies of a poor
student.

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 CHAPTER-V

Conclusion

This thesis has introduced the idea of personal financial management for the financial
outsiders. The paper has gone through the introduction of personal finance management and
its process, some basic banking concepts and market indicators that have the strongest impact
on individual’s life, introduction of most common derivatives for private investment, and real
estate investment. The studies were conducted via methods, such as books, internet sources
and mysterious customer visits and calls.

From the thesis study, it has been found that individual investors should have an investment
portfolio that includes a wide range of investment to even out risk so that they can achieve a
steady growth in personal wealth. In brief, personal investors should start saving as early
possible, plan and monitor the expenses, build an investment portfolio base on the risk they
can endure, and in the end, diversify the investment. Besides the financial investment, real
estate investment plays a crucial part in personal financial life. It secures the fundamental
human needs – shelters – and it also may bring value to personal wealth.

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There is a saying “no pain no gain” which gives a perfect definition of personal finance.
Here “pain” can mean two things: loss and effort. The financial market is always full of risks
that investors need to be aware of, and do not let the present profit to cloud their judgement.
Individuals must work hard to develop their financial skills and experience so that they can
accumulate the wealth they desire.

Bibliography

 Personal Financial Planning (Wealth Management) by Himalaya Publications

 Personal Financial Planning by ICICI Bank

 Handbook Of Personal Financial Planning by Rubbing Mao

 Questionnaire survey

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QUESTIONNAIRE

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