THE FUTURE OF YOUR NETWORTH
Talking Points
 Future
 You !!!!
 Networth
Song…take away’s……..
 Hard work, no savings
 Dreams – marry a wealthy spouse
 Gamble – take risks, lottery…
 Aspire for money / wealth
 In a rich mans world – money is
sunny & funny
Assessing / Measuring Your
Financial Health
 Financial literacy
 Determine where your money goes
 Create your own ‘wealth’ definition
 Prioritize, estimate your goals & needs
 Make up for lost time
Way to Wealth
 A part of all you earn is yours to keep
 Men of action are favored by the Goddess of good
luck
 We cannot afford to be without adequate planning
 Where there is determination, the way can be found
 Time matters ….not timing
Money
 Is a medium of exchange.
 Financial goals are stated in monetary terms
 Need to consider utility, or amount of
satisfaction derived from purchases, as well
as cost.
 May be closely linked to personal
psychological concepts.
 May play key role in personal relationships.
Networth Determinants
List all of your assets (financial and tangible assets) with their market
values.
 Cash (in the bank, short term deposits, liquid funds, etc)
 Investments (mutual funds, insurance, equity, gold, fixed deposits,
bonds etc.)
 Property (land at market prices, buildings, the resale value of your
home etc.)
 Automobile (the resale value of your car)
 Personal Effects (resale value of jewelry, household items, etc.)
 Other assets
Your goal should be to continually increase your assets.
Networth Determinants
Next, you can look at your liabilities, which should be everything you owe.
Here are some common liability categories:
 Remaining home loan balance
 Car loans
 Student loans
 Any other personal loans
 Credit card balances
 Margin Loans
 Fixed commitments
What's Important ?
Budget ?
Or
Savings Plan ?
Rewards of Sound Financial
Planning
 Maintain and improve standard of living.
 Control spending in order to live well today &
tomorrow
 Accumulate wealth.
Average Propensity to Consume
The percentage of each AED of income
that is spent, on average, for current
needs rather than saved.
 What is your average propensity to
consume?
Income spent on current needs
Total income
Personal Financial Planning
Process
Taking conscientious and systematic steps toward
fulfilling your financial goals……….
1. Define financial goals
2. Develop plans
1. Define financial goals
2. Develop plans
3. Implement plans
4. Saving Plans
FINANCIAL ACTIONS
•Basic asset
decisions
•Credit decisions
•Insurance decisions
•Investment decisions
•Retirement and
estate decisions
1. Define financial goals
2. Develop plans
3. Implement plans
4. Saving Plans
Prepare financial statements
5. Evaluate results
6. Revise plans
FINANCIAL ACTIONS
•Basic asset
decisions
•Credit decisions
•Insurance decisions
•Investment decisions
•Retirement and
estate decisions
How To Achieve Your Financial
Goals
 Be specific in defining goals and focus on
results.
 Make goals realistically attainable.
 Involve family members and enlist their
cooperation.
 Prioritize goals and set a definite time frame.
Putting Target Dates
on Financial Goals
 Short-term goals—to be accomplished within
the next year.
 Intermediate-term goals—to be accomplished in
the next 2-5 years.
 Long-term goals—to be accomplished in time
periods greater than 5 years.
Personal Financial Planning Lifecycle
Income
Income Stream
Retirement/
Estate
Taxation
Family Commitments
Savings / Investments
Liability / Insurance
Asset Acquisition
10
20
30
40
Age
50
60
70
80
Investment Avenues
 Bank Deposit
 Bonds
 Stocks
 Mutual Funds / ETF’s
 Insurance (incl asset protection)
 Gold
 Property / Land
 Derivatives / Alternatives
Growth of $1,000 at 8 % interest:
$50,000
$40,000
$30,000
21,725
$20,000
10,063
$10,000
2,159
4,661
$0
0
10
20
Years
30
40
Growth of $1000 at 10% interest:
45,259
$50,000
$40,000
$30,000
21,725
17,449
$20,000
6,727
$10,000
2,594
Years
$0
0
10
20
30
40
Compound interest is the eighth wonder of the world.
He who understands it, …..earns it. He who doesn’t …..pays it.
…..Albert Einstein
The Time Value of Money
 Increases in an amount of money
as a result of interest earned.
 Saving today means more money tomorrow.
Spending means lost interest.
 4 types of time value calculations




Future value of a single amount
Future value of a series of deposits (annuity)
Present value of a single amount
Present value of a series of deposits
Future Value of a Lump
Sum Example
Future Value (FV)–Value of an asset at the
end of a particular time period.
?
Example: Value of
$1,000 in 4 years at 8%
interest
Exhibit 1-A
FVF (8%, 4 years) =
1.360
1,000 x 1.3605 = $1,360
Future Value of an Annuity
Example
FV of an Annuity (FVOA)- What principal
will grow to over time if a series of regular
deposits are made.
?
Example: $2,000 annual
deposits at 8% interest for 40
years from age 22 to 62 =
$518,120
Exhibit 1-B
FVOA (8%, 40 years) =
259.060
$2,000 x 259.060
Financial Planning Calculators
SIP Calculator
Financial Planning Sheet
"The gratification of wealth is not found in mere
possession but in its wise application."
This is the future of your Net Worth
Thank
You