6 SIMPLE STEPS TO MANAGE FINANCE!

-

 As a Banker, we all busy in achieving targets in liability products, Asset products, Third party products.

Ver busy! Exactly, No time at all for us. In the mean time we are not able to empower the customers and sell the wrong product which is not required by the customer. Next time when he will realize that the bank wala sold him wrong product, the relationship will turn into sour. The banker will loose the customer forever. Does the story seem to get connected with you? Yes, it's the story of every banker who does not do any homework and just sell the useless products of the insurance company only to achieve the target without understanding the requirement of the customers, features of the product, capability of the customers. So it becomes very important for the Banker to know what are the Six steps formula He/ She should always practice in his/ her life. when you practice in your life, you will exactly ask your customers to do investment in such financial products. Believe me, he will always be grateful for the 6 steps formula you make him adopt. So let's start the SIX STEPS formula of Financial Planning!

SIX STEPS formula of Financial Planning

1) SAVINGS
2) LOANS
3) INSURANCE
4) INVESTMENT PLAN
5) TAX PLAN
6) RETIREMENT PLAN

1)SAVINGS

You have to remember a Thumb Rule that The Monthly Expenses * 6  as an Emergency Funds should be kept in your Savings Account.
Let's say your monthly expenses of Rs 30,000 to run your household like paying electricity bill, water bill, kid's tuition fee, Grocery fee etc. So Rs 30,000*6= Rs 1,80,000 should always be there in your Savings account as an Emergency Fund. It should be equal to 6 months' earning. So that if any mishap happened or you lost your job then these savings will act like a cushion for your family. Within 6 months, you are able to find a job or you may start earning. So always remember this is your First Financial Step That is SAVINGS 
2) LOANS

First of all you have to find out in which loans you are paying high interest rate. There are two types of loans such as good loans or bad loans. As housing loans are good loans as these loans are cheap loans also having tax benefits, so do not prepay such loans.
If you are having personal loans in which you pay interest rate of 12%- 14% then before doing any investment in mutual fund or anywhere, first accumulate funds to clear the high interest paying loans.
So, this becomes your Second Step, Stopping all the Expensive EMI
3) INSURANCE

The first is Life Insurance and Second one is Medical Insurance.
Life Insurance should be done for the earning members of the house.
Suppose you are earning Rs 4,00,000 per annum then you have to take insurance of 20x times of that money.
So you have to take Rs 4,00,000*20= Rs 80,00,000 basic life cover only. You can take critical illness cover. But other than you, no need to do life insurance of any person who is not earning like your children. If you have any non earning members, don't take insurance for them.
Basic Life Insurance is way way very cheap. If your age is between 30-35, then the yearly premium would be Rs11,000Rs 12,000 .
Health Insurance -Everyone at home should have health insurance, you, your spouse,kids, your parents should have health insurance. At least 1,50,000-2,00,000 for everyone.
So take it as a thumb rule that per person should have around Rs 2,00,000 of health insurance.

4) INVESTMENT PLANS

In investment, you can choose Equity, Mutual Funds, You can also diversify in Sovereign Gold Bonds. Kindly note that Do not invest in physical golds. Rather invest in government backed Sovereign Gold Bonds. It is also advisable 'Do not invest in Digital Gold".

If you are earning Rs 50,000 then you need to invest Rs 10,000 in these four instruments like Mutual Funds, Stocks, Gold bond, Real estate. 

5)TAX PLANNING & RETIREMENT PLANNING

There is PPF, NPS are two instruments available for long-term retirement planning.

Sukanya Samridhi for Tax Savings if they have girl child.

PPF can be invested for 15 years. It can be used for tax benefits.

NPS is the best instrument for retirement planning.

So, as a banker if we are able to give right advise to the customers for their Financial Management, then they are able to manage their finances and will live life with dignity.

Reference:-

Pranjal Kamra

Comments

Post a Comment

Popular posts from this blog

HOW TO APPRAISE TERM LOAN PROPOSALS?

-
  (This post explains important ratios are to be examined while appraising a term loan project. The article also deals with how to compute break even point , how to calculate DSCR (Debt service Coverage ratio) for the period of repayment of the loan, how to arrive fixed asset coverage ratio and important financial indicators . The assessment of DPG/APG etc is done in the same method how term loan is assessed, as they are the substitution of the term loan.) Term loan appraisal covers the appraisal of the borrower and appraisal of the project. The characteristics of a term loan are that term loan commitments are to be of long term. The banks and financial institutions normally offer term loans repayable in 10-15 years and beyond that period in  exceptional cases like housing loans. The repayment would be made out of cash generated from business activities. Appraisal of the borrower covers the honesty and integrity of the borrower, the standing of the borrower, business capac...
Read more

WHAT ARE THE METHODS USED FOR WORKING CAPITAL APPRAISAL?

-
  (This post explains the definitions of   working capital ,  Operating cycle  and various methods of working capital appraisal viz.   Tandon’s first method, Tandon’s second method, Turnover method or Nayak committee norms, Cash budget method, Chore committee norms,  Maximum permissible bank finance, Minimum permissible bank finance and Important things to note in assessment of working capital assessments) Definitions of  (a)working capital , (b) Operating cycle : (a) Working capital means the sum of the funds invested at various current assets used in the operating cycle, by the industrial and trading establishments. (b) Operating cycle  means the length of time required to convert ‘Non-Cash current assets’, ( like raw material (RM), work in process (WIP), finished goods (FG), and receivables)  into  cash . Methods of Working capital appraisal: B anks in India have evolved their own method of lending as they have been given ...
Read more

Banking and Elite Class; Banking By PSBs

-
 Many discussions are on by many persons whose life will be impacted by the banking industry. Many who do not have any knowledge about the banking operations are also jumped to give his/ her opinions. This is particularly happen in INDIA. But Graduates join Banking industry through either IBPS or Walk-in. So both pattern has their uniqueness. One makes graduate guarantee basic plus da. But other form does not guarantee any pay structure rather showcase rosy pictures like ESOP, INCENTIVE. So both are having Pros & Cons. Now put HR things aside. Come straight to Customers. Customers for PSBs are all. But Elites are thinking Private Sector Banks are giving value. But it is actually illusion. As all banks are technology driven and also provide Credit cards. So basically there is no difference.           So, customers need to be trapped so that they will stick to an individual bank. It is the philosophy of every bank irrespective of bank types. But on o...
Read more