Financial Planning & It's Importance

Planning

In simple words, planning is deciding in advance what is to be done, when, where, how and by whom it is to be done. Planning bridges the gap from where we are to where we want to go. It includes the selection of objectives, policies, procedures and programmes from among alternatives. A plan is a predetermined course of action to achieve a specified goal. It is an intellectual process characterized by thinking before doing. It is an attempt on the part of manager to anticipate the future in order to achieve better performance. Planning is the primary function of management.

Different authors have given different definitions of planning from time to time. The main definitions of planning are as follows:

• According to Theo Haimann, “Planning is deciding in advance what is to be done. When a manager plans, he projects a course of action for further attempting to achieve a consistent co-ordinate structure of operations aimed at the desired results.
• According to Billy E. Goetz, “Planning is fundamentally choosing and a planning problem arises when an alternative course of action is discovered.”
• According to Koontz and O’ Donnell, “Planning is an intellectual process, conscious determination of course of action, the basing of decision on purpose, facts and considered estimates.”
• According to Allen, “A plan is a trap laid to capture the future.”

Financial Planning

Financial planning is the process of developing a personal road map for your financial well being. The inputs to the financial planning process are:

1)    Your income, assets, and liabilities

2)    Your financial goals, i.e., your current and future financial needs

3)    Your appetite for risk.

The output of the financial planning process is a personal financial plan that tells you how to use your money to achieve your goals, keeping in mind inflation, real returns, and taxes.

In short, financial planning is the process of systematically planning your finances towards achieving your short-term and long-term financial goals.

Importance of Financial Planning

 
Can you manage without financial planning?

Many people do, but they may find—often when it’s too late — that they don’t have the means to achieve their life goals.

For example, people today realize the importance of living life to the fullest. Consequently, many opt for early retirement from full time jobs, as compared to a few decades ago, when most people worked until the maximum retirement age of 58-60 years.

The average person can, today, expect to live a healthy life well into his or her seventies or eighties, which means that retirement life is almost as long as working life. Financially, it implies that savings (after taking into account inflation) should be enough, not just to maintain the same lifestyle for almost 25-30 years, with no new income, but also to take care of medical expenses, which are usually high the older a person gets. Planning for all this is a tall order for anyone. That’s why it’s critical for everyone to plan their finances from an early age.

The benefits of the financial planning are as under :

• Helps monitor cash flows and reduces unnecessary expenditure.
• Enables maintenance of an optimum balance between income and expenses.
• Helps boost savings and create wealth.
• Helps reduce tax liability.
• Maximizes returns from investments.
• Creates wealth and ensures better wealth management to achieve life goals.
• Financially secures retirement life.
• Reviews insurance needs and therefore also ensures that dependents are financially secure in the unfortunate event of death or disability.
• Lastly, it also ensures that a will is made.

RELIANCE MY GOLD PLAN

Reliance Gold along with World Gold Council as its Marketing Associate has launched the MY GOLD PLAN.

• Disciplined approach to accumulate gold & fulfills your objectives.
• Save in 24 Karat, 995 fineness gold & converts it in Gold Coins. Avoids issues like impurity & quality of gold supplied by the jewelers. (Fixed coin making chrgs all across India)
• Saving of min amt of Rs.1000/- pm & in multiples of Rs. 500/- thereafter is enough to accumulate through My Gold Plan.
• Flexibility to save in 12/24/36/48/60 months tenure (from 1^st Dec 2012 for 15 yrs too.)
• Additional subscription of Rs.1000/- & in multiples of Rs. 500/- thereafter.
• Lock in period – 6 mths. Exit load – 2.5% (applicable upto 12 months). 1.5% administration chrgs.
• 0.5% Safe Keeping chrgs – If not taken the delivery of Gold within 60 days after maturity.

Samridhi Plus is a closed ended Unit Link Insurance Plan (ULIP) with guaranteed highest NAV value of the first 100 months at maturity.

Samridhi Plus offers payment of fund value at the end of the policy term based on the Highest Net Asset Value (NAV) over the first 100 months of the policy or NAV as applicable at the end of the policy term whichever is higher. The policyholder can choose the level of cover within the limits, depending on his/her age.

Plan Parameters:

Entry age : 8-65 years

Maturity age : 18-75 years

Policy Term : 10 yrs

Premium paying term (PPT) : 5yrs or single premium

Minimum Premium:

Yearly Premium : Rs.15000/-

Half Yearly : Rs.8,000/-

Quarterly: Rs.4,000/-

ECS : Monthly Rs.1500/-

Single Premium: Rs. 30,000/-

Sum Assured:

For age below 45 years:
Min.10 times of the annualized premium

Max. 20 times of the annualized premium

For age 45 years and above:
Min.7 times of the annualized premium

Max. 10 times of the annualized premium

Single Premium:

For age below 45 years:
Min:1.25 times the single premium

Max: 5 times of the single premium

For age 45 years and above:
Min. : 1.10 times of the single premium

Max.: 1.25 times of the single premium

Top-up:
No Top-up shall be allowed under the plan.

Accident Benefit:

Accident Benefit is availabe at extra Rs.0.50 per thousand Sum Assured

Premium Allocation Charge:
For Single premium policies: 3.3%

Allocation Charge for Regular premium
1st Yr- 6%
2nd-5th year- 4.50%

Other Charges:
i) Policy Administration charge: Rs. 30/- per month during the first policy year and Rs 30/- per month escalating at 3% p.a. thereafter, throughout the term of the policy.
ii) Fund Management Charges (FMC): 0.90% p.a
iii) Guarantee Charge: 0.40% p.a

Benefits payable on death:

The nominee will get Sum Assured or Policyholder’s Fund Value whichever is higher

Maturity Benefit:
Highest NAV Fund Value Or Maturity Fund Value Whichever is higher.

For more details pls contact VCare Financial Solutions : 9869629086 or write to us on vcarefinsol@gmail.com

IFCI Tax Saving Long Term Infrastructure Bonds– SERIES II

Issuer	IFCI Limited ("the Issuer")
Offering	2,00,000 Unsecured, Redeemable, Non-Convertible Bonds of Rs. 5,000/- each aggregating to Rs. 100 Crore with a green-shoe option to retain over-subscription for issuance of additional Infrastructure Bonds
Type	Private Placement basis
Instrument	Unsecured, Redeemable, Non-Convertible Bonds Series II having benefits under section 80 CCF of the Income Tax, 1961 for long term Infrastructure Bonds
Rating	BWR AA- by BRICKWORK RATINGS INDIA PVT LIMITED
Eligible Investors	Resident Indian Individual (Major) and HUF through Karta of the HUF
Security	Unsecured
Face Value	Rs. 5,000/- per bond
Issue Price	At par (Rs. 5,000/- per bond)
Minimum Subscription	1 Bond and in multiples of 1 Bond thereafter,
Tenure	10 years, with or without buyback option after five years
Options for Subscription	The Bonds are offered under the following 4 options- • Option I - Non-cumulative and Buyback after 5 years • Option II - Cumulative and Buyback after 5 years • Option III - Non-cumulative and no Buyback • Option IV - Cumulative and no Buyback
Redemption / Maturity	At par at the end of 10 years from the deemed date of allotment. For Cumulative Option, at par with cumulated interest thereon.
Coupon rate	• Option I & II - 8% p.a. • Option III & IV - 8.25% p.a. Option II and Option IV will have cumulative payment at the end of the Buyback period or 10 years, as per the option opted by the Investor.
Listing	Proposed to be listed on BSE
Trustee	Axis Trustee Services Limited
Depository	National Securities Depository Ltd. and Central Depository Services (India) Ltd.
Registrars	Beetal Financial & Computer Services (P) Ltd.
Mode of Payment	Interest payment will be made through ECS/At Par Cheques/Demand Drafts
Issuance	Demat form. But, investors interested for physical form may provide a cancelled cheque, self-certified copies of PAN Card and residential proof
Trading	Demat mode only following expiry of lock-in period
Issue Open Date	November 16, 2010
Issue Close Date	December 31, 2010 • The issuer would have the right to pre-close the issue or extend the closing date by giving 1 day notice to the Arrangers
Deemed Date of Allotment	January 31, 2011
Buyback dates	January 31 every year commencing from year 2016 till year 2020.

Pramerica Dynamic Fund with DART (Dynamic Asset Rebalancing Tool)

Pramerica Mutual Fund has introduced its open-ended dynamic asset offering - Pramerica Dynamic Fund - using a proprietary tool, Pramerica Dynamic Asset Rebalancing Tool (Pramerica Dart).

The scheme will invest in debt and equity instruments. The allocation to equity and debt will be determined by Pramerica DART.

The tool takes into account three key factors that influence the markets - fundamentals, volatility and liquidity and comes out with a score that tells how much of equity should be held in the portfolio. This can range from 100-30% in equity depending on market valuations. Fund managers will actively manage the portfolio within the limits prescribed by the model.

The fund aims to achieve long-term capital appreciation by investing in an actively-managed diversified portfolio comprising equity and debt instruments.

The fund will invest 30-100% in equity and the fixed income exposure is capped at 70% of the assets. The fund benchmark comprises 50% of Nifty and 50% of Crisil MIP Index.

The fund will be managed by Ravi Gopalakrishnan and Mahendra Jajoo.

There is no entry load. To curb traffic, there is an exit load of 1% if you decide to redeem before completing one year in the scheme after allotment of units. NFO closes on December 3, 2010 before it reopens on December 13, 2010.

Minimum investment : Rs. 5000/-

Why should you invest in this fund?
The fund aims at generating equity comparable returns with reduced volatility through active diversification between equity and debt in a disciplined manner.

The fund will employ Pramerica DART, the proprietary tool which aims at optimising returns through a prudent asset allocation model.

For any queries pls feel free to contact us on 9869629086 or do write to us on vcarefinsol@gmail.com

VCare Team

LIC has launched a new plan “Wealth Plus" on 9th of February,2010.

Wealth Plus (Plan no 801) is an unit linked plan having a term of 8 years and with a Payment term of 3 years or Single premium. This plan will be available for three months from 9th february. Your money will be invested in the money market till the Plan closes for sale, which is three months after February 9th. There after only it will be invested in the equity market, which implies that the risk is only medium.

People in the age range of 10 to 65 can avail this plan by paying a minimum premium of 40,000 under single premium mode or Rs. 20,000 annually for three years. Maximum premium has no restrictions.

Your risk is covered for a minimum of 1.25 times of the premium you pay under single premium mode. The maximum risk cover one can avail under single premium for age less than 40 is 5 times the premium, while it is 2.5 times if age is below 50 and 1.25 times for ages above 50. Under the regular premium mode the minimum risk cover is 5 times and the maximum cover is 10 times the annual premium for ages below 50.

This plan guarantees to pay you the higher of the Highest NAV reached in the first 7 years of its term or the 8 th year NAV. But this guarantee of highest NAV can only be availed if you complete the term of the policy and of course, a charge is levied for this guarantee at the rate of 0.35% of the fund value.

The plan comes with an extended life cover for a period of 2 years after end of the term. You can surrender the plan even within three years, but the amount will be only paid after three years from date of the policy as per IRDA restrictions and there are no surrender charges.

Instead of charging higher premium for risk cover based on age every year, This plan charges only a level premium based on age at entry. But in the case of revival of a lapsed policy , the age at date of revival is used to arrive at the risk cover premium. Revival can be done only within 2 years from date of lapse and Rs. 500 is charged for revival.

The plan has an inbuilt feature of partial withdrawals wherein, withdrawals can be after three years from commencement of your plan and the maximum withdrawal is restricted to twice in a year. Other condition to be satisfied to make a partial withdrawals is that there should be a minimum of one annual premium left in the fund, and the minimum amount to be withdrawn must not be less than Rs.2000.

Loan is not granted in this plan as one can avail the same via partial withdrawals. The plan also does not provide for payments of Top up premiums.

As maturity benefit you are offered the highest NAV for your units in the fund,if you complete the term of 8 years under the plan.

Death benefit equals the sum assured plus the fund value during the term of the policy. For death during the first two years of the plan, and also after the term of the policy during the extended risk cover period the sum assured is only paid as the benefit.

As maturity benefit you are offered the highest NAV for your units in the fund, if you complete the term of 8 years under the plan.

You can avail an accident rider benefit, by paying @ Rs.0.50 per thousand risk cover.

LIC's Jeevan Nischay policy review

Life Insurance Corporation (LIC) of India has launched one more new guaranteed single premium plan called Jeevan Nischay. This plan is very much in line with last year’s Jeevan Aastha. This new policy will be sold to ‘existing‘ customers of LIC and will be sold for a limited period until end of March 2010. Yes, you got it right – this plan will be sold to only those who have an existing insurance policy with LIC.

Just as in the case of Jeevan Aashta, Jeevan Nischay is a single premium bond, as the protection it offers is only involving the basic cover. It will be a good instrument for guaranteed returns if not the efficient insurance, given the turbulent market conditions in the current economy. The specimen Maturity Sum Assured per Rs. 1000/- single premium is given below for some ages and terms:

Age at Entry	Jeevan Nischay Policy Term
	5 years	7 years	10 years
20	1257	1410	1718
30	1256	1409	1715
40	1249	1400	1699
50	1226	1369	1645

As you can infer from the above table, an investment of Rs 1 lakh would mature into Rs 1.7 lakh after 10 years for those below 40 years at the time of availing policy. Other salient features of this policy include:

• Minimum age at entry should be 18 years with 50 years being the upper limit.
• The policy terms are five, seven and 10 years (See the table above).
• The Minimum Single Premium is priced Rs.10,000 with Maximum Single Premium being Rs.10,00,000.
• If premium amount is Rs. 25,000 or higher, the policyholder would receive a higher maturity sum assured due to available incentive.
• Loan facility available under this policy.
• Policy can be surrendered after one year of commencement of the policy.
• If the policyholder is not satisfied with the terms and conditions of the policy, can opt for refund within 15 days from the policy purchase date.
• On death during the first policy year, five times the single premium is payable.

For more detailed information on the policy visit this illustration or refer to lic’s policy home. You may also be interested in knowing about the previous policies by LIC such as Jeevan Varsha and Jeevan Aastha.

For more details contact us on 9869629086

Disclaimer : This information is based on the details as available on LIC site at the time of writing this article. Please contact LIC agent / Development officer/ Regional office for official and accurate details.