Personal Financial Planning Notes
Subject Overview
Personal Financial Planning is one of the Accounting & Finance specialisation electives — shifting from corporate finance to how an individual actually plans their own money. You'll cover the financial planning process and investor profiling, investment fundamentals across banking products, insurance, equity, mutual funds and debt instruments, then personal taxation and KYC/
Subject at a glance
4
Units
35
Topics
6
Credits
4
Infographics
Unit-wise Syllabus
4 units — open any unit for detailed topic-wise notes, diagrams and important exam questions
- Time value of money
- need and principles of personal financial planning
- the financial planning process
- personal financial statements
- income and expenditure statement
- balance sheet
- budgeting
- ratio analysis
- investor life cycle and risk profiling
- 1Set goals
Short and long term
- 2Gather data
Income, expenses, assets, debts
- 3Analyse
Net worth and cash flow
- 4Make the plan
Saving, investing, insurance
- 5Implement and review
Revisit every year
Study guide
Personal financial planning helps individuals reach their life goals with money. You study the time value of money, the need and principles of planning, the planning process, personal financial statements, budgeting, ratio analysis, the investor life cycle and risk profiling. Prepare a simple personal balance sheet and budget for yourself as practice.
- Savings and investment
- debt and equity
- banking deposit and loan products
- credit score and credit information reports
- insurance products (life, health, personal accident)
- equity investment via NSE/BSE
- demat accounts
- derivatives
- mutual funds
- SIPs
- debt market instruments
- Equity and equity funds
Highest return potential, highest risk
- Hybrid and debt funds
Moderate
- Bonds and deposits
Lower risk, steady return
- Savings account and cash
Safest, lowest return
Study guide
This unit covers saving versus investing, debt and equity, banking deposit and loan products, credit scores and credit reports, insurance (life, health, personal accident), equity investing through NSE and BSE, demat accounts, derivatives, mutual funds, SIPs and debt market instruments. Learn how an SIP works and why starting early matters.
- Introduction to personal income tax planning
- tax avoidance vs. evasion vs. planning
- income tax deductions
- gift tax
- wealth tax
- KYC norms
- Anti-Money Laundering standards
- PAN
Tax planning
Yes, within the law's intent
Investing in eligible schemes for deductions
Tax avoidance
Uses loopholes; may be challenged
Artificial arrangements
Tax evasion
No, illegal
Hiding income
Study guide
You study personal tax planning, the difference between tax avoidance, evasion and planning, income tax deductions, gift tax and wealth tax, KYC norms, anti-money laundering standards and the PAN. Be able to explain the difference between tax planning and tax evasion; it is a common question.
- Real estate documentation and verification
- buying vs. renting
- tax implications
- need and process of retirement planning
- estimation of retirement expenses
- estate planning tools — will and power of attorney
- ethics in personal financial planning
- 1Estimate expenses
Today's costs
- 2Adjust for inflation
Future costs at retirement
- 3Calculate corpus
Amount needed
- 4Choose instruments
PPF, NPS, mutual funds
- 5Invest regularly and review
Study guide
The last unit covers real estate documentation and verification, buying versus renting, tax implications, retirement planning, estimating retirement expenses and estate planning tools such as a will and power of attorney, along with ethics in financial planning. Practise a simple retirement corpus calculation with inflation.
Why Personal Financial Planning Matters
Personal finance is one of the most useful life skills you will learn, and it is the basis for careers as a financial planner, wealth manager or banker. Knowing how to budget, invest and insure yourself puts you ahead of most of your peers.
How to Prepare for Personal Financial Planning
- Apply each concept to your own finances: budget, goals, SIP and insurance needs.
- Learn the types of mutual funds and the risk level of each.
- Use online calculators to understand the effect of compounding and inflation.
Personal Financial Planning: Frequently Asked Questions
What is an SIP?
A Systematic Investment Plan lets you invest a fixed amount regularly in a mutual fund, which averages your purchase cost and builds a savings habit.
What is the difference between tax planning and tax evasion?
Tax planning legally reduces tax using allowed deductions and exemptions, while tax evasion is illegal concealment of income or information to avoid tax.