INDEX

Chapters Contents Pg. No

1 INTRODUCTION 1-22

2 LITERATURE REVIEW 23-27

3 OBJECTIVE 28-29

4 RESERCH METHODOLOGY 30-33

5 DATA ANALYSIS AND INTERPRETATION 34-45

6 FINDINGS 46-48

7 CONCLUSION 49-51

8 BIBLIOGRAPHY 52-57

9 ANNEXURE 58-61
 1. CHAPTER

INTRODUCTION

2
1.1 Definition of Personal Financial Planning

Financial Planning is the process of meeting one‘s life goals through the proper management of
personal finances.‖ ( Kapoor, 2008). Proper Personal Financial Planning leads to Financial
Satisfaction and Well– being. As Every person, family, or household has a unique needs and
financial position, their financial planning must also be carefully planned to meet specific
needs and goals.

According to Hallman and Rosenbloom, Personal Financial Planning is ―The development

and implementation of total coordinated plans for the achievement of one's overall financial
objectives. Individuals and families have many goals or objectives in life to fulfil. For the
same they will have to save, accumulate and grow their money. The common life goals of
individuals are: Education and Marriage of Children, Buying a house and a Comfortable
Retirement. Other short term goals may include funding vacations, purchasing a car and fulfil
debt (home loan, car loan), etc. For achievement of short term or long term goals, proper
management of Personal Finance is essential. Financial Planning is all about managing finances
of an individual or a family. It means Proper Management of Income, Expenses, Assets,
Liabilities, Insurance, Taxation and Estate, so that one can successfully achieve all their desired
goals and enjoy financial well-being and hence financial satisfaction.

1.2 Definition of Personal Financial Planning

Financial Planning is the process of meeting one‘s life goals through the proper management of
personal finances. (Kapoor, 2008). Proper Personal Financial Planning leads to Financial
Satisfaction and Well– being. As Every person, family, or household has a unique needs and
financial position,their financial planning must also be carefully planned to meet specific needs
and goals.
According to Hallman and Rosenbloom, Personal Financial Planning is The development and
implementation of total coordinated plans for the achievement of one's overall financial
objectives. Individuals and families have many goals or objectives in life to fulfil. For the
same they will have to save, accumulate and grow their money. The common life goals of

3
 individuals are: Education and Marriage of Children, Buying a house and a Comfortable
Retirement. Other short term goals may include funding vacations, purchasing a car and fulfil
debt (home loan, car loan), etc. For achievement of short term or long term goals, proper
management of Personal Finance is essential. Financial Planning is all about managing finances
of an individual or a family. It means Proper Management of Income, Expenses, Assets,
Liabilities, Insurance, Taxation and Estate, so that one can successfully achieve all their desired
goals and enjoy financial well-being and hence financial satisfaction.

 Longer life span and lack of social security

According to economic survey 2012-13, the average life expectancy which was around 60 years
in 1980-81, has increased to 64.6 (for males) and 67.6(for females in 2010-11). People live
longer now as compared to the earlier generations. Few generations ago, someone would start earning
by the time one reached the age of 20 years, work till the age of 58 years and live till around 65
years. In such a case, one earns for 38 years and lives off the retirement savings for the next 7 years.
In recent times, one starts working at 25 years of age. Retire at age of 60 years and life span of 80
years. So an individual works and earns for 35 years to support post retirement life of 20 years.
Government of India has withdrawn Pension Plans for government employees and introduced New
Pension Scheme (NPS), which is defined contribution plan.

• Proliferation of numerous products

Post 1991, after implementation of LPG, many new products and services have been introduced
by the Life Insurance Industry, Banking industry and other NBFCs. New financial products like
Mutual Funds, Derivatives, Commodities, Portfolio Management Schemes, Non-Convertible
Debentures and Unit Linked Insurance Plans have been introduced for the investors. It is
difficult for investors to select financial product to tailor their needs.

• Increasing income and savings levels

Indian Economy has been growing at a 6% - 9% rate of GDP growth driven mainly by

4
domestic consumption. According to data, average Gross Domestic Saving was Rs.1067.30
Billion in 1980-81 which has increased to 24819.31 in 2010-11 (RBI). Per Capita Personal
Disposable Income was Rs. 23712 in 2004-05 which has increased to Rs. 66281 in 2012-13
(CSO). The educated and urban middle class has experienced increase in income levels. At the
same time, unlike our counterparts in many of the developed countries, Asians, and especially
Indians believe in saving money. India has a considerable household savings ratio which is more
than 25%. Here again investors need guidance to channelize their savings.

• Increasing level of borrowings

In today‘s financial markets, there is an easy access to loans resulting in increased levels of
borrowings by people. If not managed carefully, this may lead to a serious mismatch in
earnings and repayment leading to problems in cash flow. Leveraging the low interest rates is
a critical aspect which needs to be explained to the borrowers.

• Inflation
Indians are wise savers but poor investors (Visa 2012). Indians save money into traditional
risk free products like Bank FD, Saving Bank Account, Insurance. This may not be sufficient
to overcome the impact of increase in inflation. Therefore, a well balanced Financial Plan is
required to protect the investors from the impact of inflation.

• Nuclear families & Change in Life Style

Traditional Indian social system of Joint families provided great safety net for most individuals
as it shared the resources and difficulties. Growing urbanisation during the past decades have led
to the birth of nuclear families. These smaller families have a need to plan better. They can no
longer depend on the support of the larger family since they might be geographically distant. So,
one needs a comprehensive financial plan to meet the contingencies and to attain the short
term and long term goals.

5
1.3 Components of Personal Financial Plan (PFP)

According to Garman and Forgue (1988) & CPFA – NISM (2009), Personal Financial Plan is
the balance of following components:

 Planning Personal Finances

 Managing Personal Finances
 Managing Expenditure
 Protecting Income & Assets
 Managing Tax Planning
 Planning Investments
 Retirement Planning
 Estate Planning

1.4 Process of PFP

According to Gitman & Joehenk ( 1990) The financial planning process is a logical, six-step
procedure. The steps involved are listed below:

 determining your current financial situation

 developing financial goals
 identifying alternative courses of action
 evaluating alternatives
 creating and implementing a financial action plan, and
 re-evaluating and revising the plan.

1.5 Definitions and Concept of Financial Literacy

Various researchers and organizations have provided different definitions of financial

literacy. Some of the definitions are discussed here. Financial Literacy is a combination
of

6
awareness, knowledge, skill, attitude and behaviour necessary to make sound financial

7
decisions and ultimately achieve individual financial well-being. (OECD INFE, 2011). Financial
Literacy is concerned with the understandings of basic financial concepts, principles, skills and
ability to understand key financial products to make good financial choices. (Jariwala H., 2013).
According to PACFL, ―Financial Literacy is the ability to use knowledge and skills to manage
financial resources effectively for a lifetime of financial well-being‖. Lusardi & Mitchell (2007)
have defined it as the most basic economic concepts needed to make sensible savings and
investment decisions. ANZ Bank (2008) has defined it as the ability to make informed
judgements and to take effective decisions regarding the use and management of money.

8
1.6 Need of Financial Literacy

Need of financial literacy is increasing significantly with deregulation and globalization

of financial markets. More choices are available for investment avenues with easy access
to credit cards and personal loan. According to one survey ―Indians are wise saver but
poor investors.‖ Saving rate in the country is increasing year by year and on the other
hand increase in spending on consumption and change of life style have led to increase in
personal and household debt levels. Countries like India with almost nil social security
system provided by government, corpus saved by investors are not sufficient enough to
meet the expenses and maintain same life style post retirement. The one reason for the
same is, thoughthere are many diversified options available for investors to invest their
money, Indian investors still prefer safe options like Bank FD, Post office schemes.
Returns generated by these instruments do not beat the increasing rate of inflation. So
investors‘ financial well- being is hampered. So it is required that investors should not
only be aware about financial market and its different components and be more informed
about economic variables impacting their financial decisions, they should be able to plan
their finances carefully, keeping into mind their own financial goals and objectives. Beal
and Delpachitra (2003) had stated that, ―the need for financial literacy has grown
rapidly over the last decade because financial markets have been deregulated and credit
has become easier to obtain, as financial institutions compete strongly with each other for
market share.‖ Financial literacy is important because well informed, well-educated
consumers should make better decisions for their families; increase their economic
security and well- being; contribute to vital thriving communities; and foster community
economic development‖.(Hogarth, 2002)

9
 Personal Financial Planning

1.1 Personal Financial Planning Process

Personal Financial Planning is the management of Personal Finance of Households. It includes

management of Debt, i.e., Personal Loan, Credit Card etc., Money Management, maintaining
liquidity for emergency; obtain short term & long term goals through proper investments
(keeping into mind the taxation, i.e., Tax Planning), managing risk of life with Insurance,
Planning for safe/comfortable retirement and proper planning of transference of one‘s assets after
the death. Steps for Personal Financial Planning are listed below:

(1) Determine your current financial position.

(2) Identify financial goals.

(3) Evaluate all the alternatives available.

(4) Create financial plan and make it into action.

(5) Revaluate it periodically and revise, if necessary.

1.2 This step includes preparing a personal Personal Financial Planning

Process

This step includes preparing a personal Personal Financial Planning Process

Personal Financial Planning is the management of Personal Finance of Households. It
includes management of Debt, i.e., Personal Loan, Credit Card etc., Money Management,
maintaining liquidity for emergency; obtain short term & long term goals through proper
investments (keeping into mind the taxation, i.e., Tax Planning), managing risk of life
with Insurance, Planning for safe/comfortable retirement and proper planning of
transference of one‘s assets after the death. Steps for Personal Financial Planning are
listed below:

10
(6) Determine your current financial position.

(7) Identify financial goals.

(8) Evaluate all the alternatives available.

(9) Create financial plan and make it into action.

(10) Revaluate it periodically and revise, if necessary.

financial budget. One will list down all their income and expenses, savings, investments
and debts. This will create a base to prepare your financial plan.

Step 2: Identify financial goals

Next step involves identifying financial goals of the life. One should remember that
goals should be realistic and quantifiable in terms of money. Also attach timelines to
the goals. Some of the major and minor goals in an individual‘s life are listed below.

Major Long Term Goals in Life can be

• Children‘s Education, Children‘s Marriage, Purchasing a House, An
Independent Retirement

Short Term Goals in Life can be

• Vacations, Purchasing a Car, Purchasing electronic gadgets, paying off the loans.

Step 3: Evaluate all the alternatives available

Taking into consideration one‘s current financial position and objectives to attain; one
needs to decide the allocation of money in to various alternatives available. There are
different investment vehicles available in Indian Capital Market, like equity shares, FD,
Bonds, Mutual Funds, Futures & Options, etc. One can choose the investment vehicle
according to once objective, tenure of investment and risk profile of the individual. One
should also consider opportunity cost of selecting a particular alternative. Opportunity cost is
what you give up bymaking another choice.

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Step 4: Create financial plan and make it into action
Next step is to prepare a written Financial Plan. Here, the allocation of money will have
to be spelled and written clearly. To implement financial plan, one can take help of
Investment brokers, agents or certified financial planners to purchase stocks, mutual
funds, insurance etc.

Step 5: Revaluate it periodically and revise, if necessary

Financial planning is a dynamic process that does not end when you take a particular
action. One need to regularly assess their plan and check whether it is aligned with
objectives or not. Changing personal, social, and economic factors may require more
frequent assessments.

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 1.3 Components of PFP in details

1.3.1 Money Management

Money management is the day-to-day financial activities needed to manage personal

economic resources, while working toward long-term financial security.(Kapoor J.,
2008). Money Management includes:

 Storing and maintaining personal financial records and documents.

One can prepare home file. In that, one can maintain the records which are often required and
can be referred when needed. For example, employment records, tax returns, financial services
records, investment statements, copy of insurance policies, bills of consumer purchase, statement
of loans etc. Some documents can be kept at Safe deposit lockers, e.g., Birth Certificate, Marriage
Certificate, Mortgage Papers, Wills, Insurance policy, Certificate of investments. One can also keep
computerized records of personal budget, bank statements, investment statements, tax returns, etc.

 Creating a personal balanced sheet and cash flow statements

Personal balanced sheet will include: List of Assets one has, like, liquid assets, real
estate, investment assets; Liabilities one has, like, Personal loans, credit card, debts,
Home loans etc. Net worth is difference of one‘s assets and liabilities. Personal balanced
sheet determines your current financial position. Cash flow statements will record inflow
of income through various sources like salary, dividends etc. and outflow of income like
fixed and variable expenses.

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 1.3.2 Creating a personal budget

Budget is a plan for spending in the future, such as for the next month, next
quarter or next year. Budgeting helps a person to live within their income, reach
their financial goals, prepare for financial emergencies, and develop positive
attitude towards financial management. Effective budget will help one to achieve
their financial goals. Steps to prepare personal financial budget:

1. One can list all their future financial goals.

2. Estimate Income from all the sources.
3. Calculate the amount required for emergency purpose, periodic expenses and
financial goals.
4. Calculate the amount required for fixed expenses like home loan installments
and variable expenses like normal household expenses.
5. Set budget for savings.
6. Compare budgeted amount of inflow and outflow with actual amount, and
determine variance. Take necessary corrective actions in spending pattern to
reduce the variance.

1.3.4 Insurance Planning

Insurance Planning is determining the amount of insurance cover required by the

individual to cover the risk associated with one ‘s life, medical emergencies and assets.
In case of pre-mature death of the primary earner of the family, the family ‘s income will
stop. In that case, the family will need some source of money which can generate income
to cover the expenses and liabilities for the rest of their life. One can purchase Life
Insurance policy to protect their family in the event of death of primary earner. One need
to calculate amount required for Insurance Coverage.

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1.3.5 Pension Plans

Pension Plans or annuities are Plans used for Retirement benefits. An individual can
invest as a lump sum amount or periodical amount till age of retirement. Maturity
amount can be taken as a monthly payment (annuity) from the accumulated funds. One
can also withdraw one third of total accumulated amount once the person has retired.
There are two types of Annuities: Immediate and Deferred. In Immediate Annuity Plan,
one pays premium in Lump sum mode and retirement benefits starts soon after the
retirement. In Deferred Annuity Policy, insurer regularly pays premiums to Insurance
Company till the vesting age or date. Annuity starts after the age of retirement.

1.3.6 Debt Instruments

Investing money in debt instrument is like one lends their money. One may get stipulated
interest periodically on the capital invested. The capital is returned after the designated
period. Capital is relatively protected than equity instruments; returns are normally
lower than equity. Different debt instruments are: Small Saving Schemes, Government
and Corporate Debt Securities, Bank Fixed Deposits.

1.3.6 Retirement Planning

Changing Family structure from Join to Nuclear, increase in life expectancy and absence of
robust Social Security system have increased the importance of Retirement Planning. Retirement
Planning is determining how much amount will be required to fund the expenses during the
retirement years and how that amount can be accumulated during the pre- retirement tenure.
Ideally, one should start retirement planning with the starting of their first job. One can invest
their money in employer initiated schemes like Employee Provident Fund (EPF), gratuity,
superannuation, etc. Apart from that, there are other alternatives available like; PPF Account,
NPS, Pension & Annuity Plans, and Reverse Mortgage etc. in which one can invest as a part of
Retirement Planning.
According to CPFA- NISM (2012) there are two methods to calculate Retirement Corpus.
They are Expense Protection method and Income Replacement Method. In Expense protection
method, one lists down his/ her total monthly or annually expenses, then, those amounts are
adjusted for inflation. Amount which then arrives, indicates the corpus required

15
 by person post retirement, which will be generating regular income equal to calculated
expenses. Income Replacement Method calculates person‘s income just before retirement.

1.3.7 Estate Planning

The next stage in Personal Financial Planning is Estate Planning. Estate can be defined
as all assets a person owns. Basic objective behind estate planning is to protect, preserve
and manage one‘s assets during and post one‘s life. Estate of the estate owner should be
passed on to estate owner‘s intended beneficiaries. (C. Jayaram, 2007). For the purpose
of Estate Planning, one can create their will or they can take route of trusts also.

1.3.8 National Pension System (NPS)

NPS is a Defined Contribution Scheme and it is regulated by PFRDA (Pension Fund

Regulatory and Development Authority). The investment in NPS is to be maintained
until theage of sixty. On retirement, a part of the corpus can be withdrawn as lump sum,
and the balance would be paid as annuity. Government of India has started this scheme in
2004 for Government Employees. From 2009, it was made available to all citizens of age
group 18 60 Years, except individuals who are covered under Provident Fund and
Miscellaneous Provisions Act, 1952, Government employees who have joined services
before Jan ‘2004, Employees of Armed forces. It offers various investment options and
choice of fund managers to their investors. Investors also have flexibility to switch over
from one fund manager to another. Returns on this scheme are not definite; it is market
linked product so return varies with performance of underlying assets. Amount invested
under this scheme get exemption from income tax under Sec 80 C.

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1.3.9 Mutual Funds

Mutual Fund is a financial intermediary, which mobilise money from investors to various
avenues like equity, Bonds, G –Sec etc., in line with the investment objectives of the
scheme. Through mutual funds, one can invest in different class of assets. The fund
mobilized through Mutual Funds is handled by professional fund managers and they are
parked in diversified assets. The investor gets units of full amount they have invested.
There is much transperacy in the process and no hidden charges. One can transfer
their money from one scheme to another scheme also. And Mutual Fund units can be
redeemed easily so it provides reasonable liquidity too.

Different types of Mutual Funds are described below.

Debt Fund
Index Fund

Value Fund
Equity Fund
Growth
Fund
Money Market/ Liquid Fund

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1.3.10 Real Estate

The rapid rise in the price of the property in recent years, have made the real estate as
one of the most lucrative investment avenue. The benefits of investing in real estate can
be appreciation of capital, rental income, safety etc. Investment in Real estate can take
following modes:
a) Residential Property.
b) Commercial property.
c) Industrial real estate
d) Agricultural land.
e) Semi urban land.
f) Time share in a ho

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 1.3.11 Reverse Mortgage

A reverse mortgage is a kind of Home loan. Any senior citizen having own house can avail
it.Basically working of Reverse Mortgage is opposite to Home Loan. Loan Amount is
divided in small monthly / quarterly / yearly instalments and paid to the lender by Bank.
The loan is typically settled after the death of the owner/co-owners. Some additional
features of NPS are discussed below:
1. The maximum tenure of the loan is 20 years.
2. Normally the owner of the property and spouse are borrowers in this scheme. If
one of the borrowers dies, then other may continue to avail the instalments.
3. The maximum monthly payments under the scheme is Rs.50, 000/-.
4. Settlement of loan after tenure will be done in two ways. If legal heirs settle the full
amount of loan then property will be transferred to them, and if they don ‘t, then
Bank will sell the house property mortgaged will settle the loan amount and if any
amount is remaining then it will be passed on to legal heirs.
5. Facility of early repayment of loan is also available. Normally senior citizens who don‘t
have steady inflow of income post retirement can opt for the same. Apart from these
schemes, plans discussed earlier like annuity, Pension Funds area also used for Retirement
Planning purpose.

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1.3.11 Financial Planning Strategies based on Life Cycle Stage

Financial Planning of an individual depends upon his/her financial goals – short term &
long term, number of dependents, stage of Lifecycle, risk appetite and many more. It is
assumed that persons in the similar stage of life cycle have almost common financial
goals. Life cycle of the individual can be divided in following four segments. Stage of
the life cycle determines their future goals and risk taking capabilities. Depending on
these factors, their financial planning strategy can be determined.

1.3.12 Young Unmarried Investor

1.3.13 Young Couple with small children

1.3.14 Mature Couple with grown up children

1.3.15 Post Retirement Stage

Young Unmarried Investor

Any one, who is young and single may have goal of wealth creation with long term
investment horizon. He needs to give more importance on capital appreciation because
he has to fund for all future responsibilities along with planning for healthy retirement.
As the person is not married, he may not have much of the family responsibilities and his
risk takingcapability can be on peak at this stage. So one‘s focus can be the pay- offs for
any loans which he has and start investing aggressively into Equity and very small
portion into fixed income asset class. If there are no dependants, then taking Insurance
cannot be of paramount Importance. Also one can start investing into PPF, NPS, Annuity
Plans or other Retirement Planning tool for Comfortable Retirement. It is advisable that
one should start Retirement Planning from the first job itself.

20
Young Couple with small children
Any one, who is married and has small children has long term focus and capital growth is
of utmost importance for him. A person in this stage, may start thinking about buying his
home. As the person has dependants on him, he may start taking good Life insurance
policies, which may give protection to his dependants in case of any eventuality. One
should take health insurance of own and family members. Investment should be done
majorly into Blue Chip equity stocks which are not too volatile or they may take root of
Mutual Funds to get advantage of diversification and Professional management, as also
they can save tax by investing into ELSS. Contributions towards Fixed Income Securities
should also be increased to balance their portfolio.

Mature Couple with grown up children

A person in their mid-aged with grown up children have responsibilities towards higher
education of their children or marriages. As their responsibilities are higher with years to
retirement are less, they will have low risk appetite and objective will be maximum
wealth creation before retirement. Portfolio should be revised in a manner to have exact
balance between equity and fixed income securities. One can invest in balanced fund of
Mutual Funds which is combination of Equity and Fixed Income Securities. Also as a
part of Estate Planning, one can create a legal will or can create a trust to transfer the
asset to their intendedbeneficiaries in event of death.

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Post Retirement Stage

In this stage, a person may not have a salaried income, at the same time, their children
are independent and settled. His responsibility towards his children has decreased. One
needs to have fixed flow of income to fund their routine household expense, healthcare
expense and expenses towards leisure. Capital preservation with fixed flow of Income is
their prime importance. A little holding in equity with higher exposure in fixed income
securities like bond, Post office MIS, Post Office Senior Citizen Schemes are desirable.
One can also take route of Reverse Mortgage for fund their post retirement expenses.

Every individual has different risk appetite and different goals, according to their own
life conditions. Therefore, the strategy and asset allocation will change accordingly. One
may take help of Certified Financial Planners and Advisors to create a balanced Financial
Plan.

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 2. CHAPTER
Literature Review
 2.1 Prelude

A review of prior literature is an essential feature of any academic research. An

effective review lays foundation for advanced research. It facilitates new theory
development and uncovers the areas where research is needed (Jane, 2002). The
chapter has been divided in two parts. In the First Part, the literature on Financial
Literacy and Personal Financial Planning has been discussed and in the Second one,
Literature related to components of Personal Financial Planning has been reported.

2.1 Literature Review – Financial Literacy & Overall Personal FinancialPlanning

The section is divided in three major parts. First part is related to importance of Financial
Literacy and Personal Financial Planning, Second Part is related to researches done on the
same across the world. Third part is related to research done in India.

2.1.1 Importance of Financial Literacy and Financial Planning

According to Hung A. et. al., there is a positive impact of financial literacy on financial
attitude, behaviour and financial well-being. Financially literate people do better at budgeting,
saving money and spending, handling mortgages, participating in other financial markets, do
better at retirement planning and successfully accumulate wealth. Higher financial literacy leads
to greater financial well-being and less financial concerns.)
Andreas Oehler & Christina Werner ( 2008) has stated that financial literacy is important
in life stages when some important decisions are made, and financial education at this stage
may alter the behavior related to Retirement Planning & Saving.
Lusardi A. (2009) in her paper stated that Financial Literacy has positive causal impact on
wealth holdings and saving behaviour. From this research, it has been found that financial
literacy increases the awareness for importance of savings and planning for retirement.

Nag R. (2007) in his speech delivered at CITI- FT Financial Education summit at Delhi has
stated that Financial Literacy allows people to increase and manage their earnings and so they
can better manage their life events like education , retirement, loss of job , illness etc.

There are many studies done which establishes link between financial literacy and Positive
Financial Behaviour. Borden L. (2008) stated that there is a causal link from financial
knowledge to healthy attitudes about money which in turn influences the behaviour.
Martin M. (2007) has discussed variables which influence Financial Behaviour. They are
Financial Knowledge, Attitude, Income, and Financial Safety.

Gallery N, Newton C.& Palm C ( 2010) had presented the model on variables which
influences Financial Well Being. It is evident from model that Financial Well- Being is
dependent on Personal Financial Behaviour which in turn depends upon Financial Literacy.
2.2 Literature Review Related to various Components of
PersonalFinancial Planning

In this section, Literature review related to different components of Personal Financial Planning
i.e. Money Management, Insurance Management, Investment Management, Retirement Planning
and Estate Planning has been discussed.

2.2.1 Money Management

Kidwell, B., Brinberg, D., & Turrisi, R. (2003) in their research paper attepmted to found
out determinants of money management behavior. Study was conducted on 250 students of
Northwestern University, USA. Regression Analysis was used to analyze the data. From the
results, it was evident that factors which influence money management behavior are:
cognitive, affective, past behavior and perceived budgetary control. Attitude, past behavior and
perceived ability were positively related with behavior while Affect was negatively related to
behavior. Joji Alex. N , P.T. Raveendran ( 2007) have done single cross sectional study on
credit card holders to find whether there is any compulsive buying behaviour possessed by them
, and whether there are any chances of default lead by personality trait of individuals. The study
revealed that respondents moderately agree that they are enhanced credit card users but they
rarely indicate compulsive buying behaviour, which was a positive sign.
Wang, L. et. al. (2011) had done study on Chinese credit card holders to study consumer
credit card behavior in correlation with demographics, attitude, personality and credit
cardfeatures. Study revealed that credit card features and demographic variables have little
explaining power on credit card behavior compared to attitude of card holders and personality
variables. Interesting finding was that some features of credit card have easily led to illusion
of income, which affected consumer credit card behavior Ajmi Jasim ( 2008 ) investigated
the determinants of risk tolerance of individual investors. Study concluded that men with higher
level of education, wealth and having less financial commitment are more likely to take risk.
Manish Sitlani, Geeta Sharma, Bhoomi Sitlani (2010) found that there exists a direct relation
between demographic factors (like age, gender, profession, qualification, marital status of
occupants) and investment choice of Investors. Study revealed that credit card features and
demographic variables have little explaining power on credit card behavior compared to attitude
of card holders and personality variables. Interesting finding was that some features of credit
card have easily led to illusion of income, which affected consumer credit card behavior.
3. CHAPTER
OBJECTIVES
3.1 Research Methodology Objectives of the Study

 To assess the financial literacy among residents of Thane.

 To study and to analyze the awareness of Personal Financial
Planning among residents of Thane.
 To study and to analyze the attitude regarding Personal
Financial Planning among residents of Thane.
 To identify the factors influencing personal financial planning behavior.
 To examine the need of Financial Planner by investors.
 4. CHAPTER
Research Methodology
4.1 Sample Design

A sample design is the roadmap or framework which serves as the basis for selecting
sample for survey. It will include Sampling Unit, Sampling Technique and Sample
Size.

4.2.1 Sampling unit

Main objective of the research is to assess level of financial literacy, awareness related
to PFP in THANE. Sampling Unit of the research is salaried employees of Government,
Public Sectorand Private Sector.

4.2.2 Sampling Technique

Sampling technique can be broadly classified as Non Probability and Probability

Sampling. Non Probability technique of selecting sample has been used for the
study. Samples were divided in quota according to their job types: Public sector
employees, private sector employees and Government employees. Hence, Quota
sampling technique has been used under non probability method.
 4.2 Data Sources

4.2.1 Secondary Data

Secondary Data are the data already collected and published. For the study, secondary
data were collected from various Books, journals, thesis, periodicals, magazines,
newspapers and Websites

4.2.2 Primary Data

Primary data are the data originated by researcher to meet certain objectives. For the
study primary data has been collected through structured questionnaire. Questionnaires
were filled by respondents through one to one approach.

4.3 Planning of Data Collection

For the purpose of collecting data, employees of different government bodies, Public
Sector Units and Private Sector were contacted with convenience sampling and with
referrals methods. Government employees selected for the study were employees of
different municipal corporations, GIDC Class I & II officers, Custom & Excise officers,
Public School teachers. Public Sector employees were selected from various PSUs like
ONGC, Public Sector Banks etc. Data of Private Sector employees were collected from
different industries like Banking, IT, Heavy Engineering, Education, FMCG etc.
 Limitations of the Study

Following are limitations and constraints of the present research.

 The present study was confined to the state of Maharashtra. Sample Size was
100 and only salaried employees were considered for the research purpose. So,
Findings of the present study can‘t be generalized for the entire Nation.
 The study was all about the Financial Planning of the respondents, there may
be the possibility of biasness in the responses given by them.
 There were abundant literatures available in the area of Financial Literacy and
Awarenessof Investment Avenues. But there was absence of studies specifically
in the area of Awareness of overall PFP, Attitude and Factors influencing PFP.
There was absence of some model or developed scale in the particular area. If
some published research study had been available, it would have helped the
current study to gauge still better results.
 Some of the findings of the study suggest that there may be chance of lack of
understanding of some of the concepts by respondents.
 5. CHAPTER
DATA ANLYSIS AND INTERPERATATION
Q1. Age of the Respondents
Cumulative
Frequency Percent Percent
20-35 13 13 13
36-58 76 76 76
Valid 59 and above 11 11 11
Total 100 100.0 100

Age

20-3536-58 59 And Above

Q2. Gender
Cumulative
Frequency Percent Percent
Male 58 58 58
Valid Female 42 42 42
Total 100 100.0 100

Gender

Male Female
Q3. Education

Cumulative
Frequency Percent Percent
High school 8 8 18.0
Graduation 15 15 70.5
Valid Post Graduation 77 77 100.0
Total 100 100.0

It can be seen from Table that about 15 % of the respondents were

Graduates, 77 % of the respondents were Post Graduate and 8% of the
respondents were High School pass.

Education

High School Graduation Post Grauation

Q4. Experience
Cumulative
Frequency Percent Percent
Less Than 5 Years 22 22 22
5-15 years 6 6 6
Valid 16-25 Years 61 61 61
25 and Above 11 11 100.0
Total 100 100

Table shows that 6 % respondents had 5 – 15 years of experience,

around 61% respondents had 16 -25 years of experience, around 11%
respondents had experience of 25 years and above and 22%
respondents had less than 5 years of experience.

Experience

0 to 5 05 to 15 16 to 25 25 And Above
Q5. Income
Cumulative
Frequency Percent Percent
Less Than 5 Lakhs 22 22 22
5-10 Lakh 10 10 10

Valid 10-15 lakhs 26 26 26

More Than 15 lakh 42 42 100.0
Total 600 100.0

From one can observe that 10% of the respondents had income between
5 – 10 Lakhs, 26% of the respondents had income between 10 -15
Lakhs, 22% of the respondents had income less than 5 Lakhs and 42%
of the respondents had income more than 15 Lakhs.

Income

Less Then 5 5 lac to10 lac 10 lac to 15 lac More Than 15 lac
Q6. Marital Status.
Cumulative
Frequency Percent Percent
Married 36 36 36
Unmarried 50 50 86

Valid Widow/Widower 2 3 88
Divorcee 12 12 100
Total 100 100.0

Table shows that 36 % of the respondents were married, 50%

respondents were unmarried, 2% were widow/ widower and 12 % were
divorcee.

Marital Status

Married Unmarried Widow/Widower

Q7. Monthly Saving In Percentage
Cumulative
Frequency Percent Percent
Less Than 10 % 29 29 29
10-30 % 45 45 71
Valid More Than 30 % 26 26 100.0
Total 100 100.0

From Table it is noteworthy that 45% of the respondents could save 10 –

30% of the income, 29% respondents have savings of less than 10% of
the income and 26% of the respondents could save more than 30% of
their income.

Saving

Less than 10% 10-30% More Than 30%

Q8. Literacy regarding basics of Financial
Planning.

Cumulative
Frequency Percent Percent
False 20 20.0 20.0
Valid True 80 80.0 100.0
Total 100 100.0

The question is asked to check basic awareness regarding Financial

Planning. It is generally observed that people conceptualize Financial
Planning as investing only into insurance. Whereas, a Balanced Financial
Plan is composed of Insurance, Investments, Debt, Retirement, Taxation
and Estate Planning. From Table it is evident that 80 % of the
respondents have given correct answer for the same while 20% of the
respondents gave incorrect answers.

Basics of Financial
Planning

False TRUE
 Q9. Literacy regarding basics of Risk &
Returns Relationships

Cumulative
Frequency Percent Percent
False 20 20.0 20.0
Valid True 80 80.0 100.0
Total 100 100.0

Any investment opportunity which claims higher returns usually carries

lower risk. From Table 4.15, it is evident that 80% of the respondents
have given correct answerfor the same. 20 % of the respondents failed to
give correct answer.

Literacy regarding basics of Risk & Returns

Relationships

FALSE TRUE 3rd Qtr

Q10. Awareness of Tax Saving Scheme.
Cumulative
Frequency Percent Percent
Unaware 20 20 20.0
Moderately Aware 8 8 8.0
Valid Completely Aware 72 72 100.0
Total 00 100.0

The Table shows the frequency and its percentage regarding the
awareness about the Tax Saving Schemes. 72% of the respondents are
completely aware about the Tax Saving Schemes. 8% of the respondents
are moderately aware regarding the Tax Saving Schemes and remaining
20% of the respondents are not aware about Tax SavingSchemes.

Awareness of Tax Saving

Scheme

Unware Moderately Completely 4th

Q11. Other Post Office Schemes.

Cumulative
Frequency Percent Percent
Moderately Aware 16 16.0 36.0

Valid Completely Aware 84 84.0 100.0

Total 100 100.0

The Table shows the frequency and its percentage regarding the
awareness about the Other Post Office Schemes. 84% of the
respondents are completely aware about the Other Post Office
Schemes. 16% of the respondents are moderately aware regarding it.

Other Post Office Schemes

Moderately Completely 0 4th Qtr

6. CHAP
TER
FINDINGS
Introduction

This Chapter discusses Objective-wise major findings of the study based on the
analysis ofdata collected from 100 respondents across Thane

Overall Financial Literacy:

 It has been observed from the frequency analysis that, respondents possessed
Fair knowledge of basic financial literacy. There were more incorrect answers
than correct for only two questions pertaining to advanced financial literacy,
 Median of Respondents‘ financial literacy score comes to 6 out of 8. With the
help of median score, it has been found that 47 % of the respondents are
financially illiterate and53% of the respondents are financially literate.

Age

Gender

Income Financial
Literacy
Experience

Marital Status

Job Type
Findings related to Awareness of different Investment Avenues

 70% of the respondents are completely aware about the Savings Account. 15 %
of the respondents are moderately aware regarding the Savings Account and
remaining 15 % ofthe respondents are not aware about savings account.
 70 % of the respondents are completely aware about the Fixed Deposit. 10 % of
the respondents are moderately aware regarding the Fixed Deposit and
remaining 20 % of therespondents are not aware about Fixed Deposit.
 37 % of the respondents are completely aware about the Equity Shares. 23 % of
the respondents are moderately aware regarding the Equity Shares and
remaining 40 % of therespondents are not aware about Equity Shares.
 54 % of the respondents are completely aware about the Bonds. 23 % of the
respondents are moderately aware regarding the Bonds and remaining 23 % of
the respondents are notaware about Bonds.
 17 % of the respondents are completely aware about the Derivatives. 23 % of
the respondents are moderately aware regarding the Derivatives and remaining
60 % of the respondents are not aware about Derivatives.
 62 % of the respondents are completely aware about the Mutual Funds. 18 % of
the respondents are moderately aware regarding the Mutual Funds and
remaining 20 % of therespondents are not aware about Mutual Funds.
7. CHAPTER
CONCLUSION
Conclusion

Strengthening of any economy depends upon the financial well-being of the

residents of the country. Past researches show that financial well-being of an
individual depends upon their financial behaviour, which in turn depends upon
attitude towards personal financial planning and the Financial Literacy of an
individual. Balanced Personal Financial Plan also plays vitalrole for Financial Well
Being of an individual. Many studies have been done in the area of financial
literacy in Indian context but very few studies have been conducted on Overall
Personal Financial Planning, especially in the state of Maharashtra. The present
study had focusedon Financial Literacy, Awareness of overall PFP and Attitude of
the respondents towards PFP.

100 Salaried employees from four major cities of Maharashtra had been selected
for the purposeof the study. Study revealed that Respondents possess fair financial
literacy. This shows that respondents are quite informed and aware about financial
terms, concepts and its working. Awareness related to traditional Investment
Avenues like FD, Saving Bank Account, Post Office Schemes and PPF is quite
high. Still awareness of new age Investment Avenues like Derivatives, Non-
Conventional Avenues - Precious Coins, Paintings is still very low among
respondents, so they are not able to reap advantages associated with these products.
Interesting finding of the research is: though awareness of all the components of
PFP is not that high, attitude towards PFP is positive among the respondents. They
understand the importance of balanced Financial Plan and they feel that they
require an expert to help them in sketching a Financial Plan. Overall, the study has
created a base for the future detailed research to be done in the field of Personal
Finance.
 Implications of the Study

 The current study suggests that Respondents possess Basic Financial Literacy.
Respondents are lacking awareness regarding new investment avenues,
Retirement Planning and Estate Planning. So, SEBI, RBI and Other
Government Agencies, Banks & Other financial Institutions may focus on
increasing literacy regarding advanced financialconcepts.

 Study will help financial planners and Investment Advisors, to better

understand attitude of investors regarding Personal Financial Planning and
Factors which may influence the decision for PFP.

 Study provides comprehensive idea about Personal Financial Planning concept,

Process and the different components of the same. Study also provides idea about
how to plan finances through different stages of life cycle. So, it can be used as a
ready reckoner by normal investor for understanding concepts of PFP

Scope of the Future Research

 As present study was confined to state of Maharashra , scope of the study can be
extended towards other states.
 The present study has focused only on salaried employees. The same can also be
extended towards responses of Businessmen and Professionals.
Linkages between Financial Literacy and Awareness of different Investment Avenues
have been established in the present study. Further linkages can be established between
Financial Literacy and Attitude. Past Researches suggest that Financial Well-being
depends upon the Financial Attitude of the respondents. So further studies can be done
toestablish the linkage between Financial Attitude and Financial Well-being of the
respondents
8. CHAPTER
BIBLIGRAPHY
Journals / Thesis / Surveys

 Agarwal, S., Amromin, G., Ben-David, I., Chomsisengphet, S., & Evanoff,
D. D. (2015). Financial literacy and financial planning: Evidence from
India. Journal of Housing Economics, 27, 4-21.

 Aggarwal, M., & Gupta, M. (2014). Awareness of financial literacy among

college students. Journal of Management Sciences and Technology, 2(1), 1-
13.

 Agarwalla, S. K., Barua, S., Jacob, J., & Varma, J. R. (2012). A survey of
financial literacy among students, young employees and the retired in India.
Retrieved February, 26, 2013.

 Al-Ajmi, J. Y. (2008). Risk tolerance of individual investors in an

emergingmarket. International Research Journal of Finance and Economics,
17(1), 15-26.

 Altaf, N. (2014). Measuring the level of financial literacy among

management graduates. Abhinav National Monthly Refereed Journal of
Research in Commerce & Management,3(6).
 Ali, A., Rahman, M. S., & Bakar, A. (2013). Financial Literacy and
Satisfaction in Malaysia: A Pilot Study. International Journal of Trade,
Economics and Finance, 4(5), 319.

 Altintas, K. M. (2011). The dynamics of financial literacy within the

framework of personal finance: An analyses among Turkish University
Students. African Journal ofBusiness Management, 5(26), 10483.
Arrondel, L., Debbich, M., & Savignac, F. (2014). Financial literacy and
financial planning in France. Numeracy: Vol. 6 : Iss. 2 , Article 8.

 Atkinson, A., & Messy, F. (2012). Measuring Financial Literacy: Results of

the OECD/International Network on Financial Education. OECD Working
Papers on Finance, Insurance and Private Pensions, (15).

 Agarwal, S., Amromin, G., Ben-David, I., Chomsisengphet, S., & Evanoff, D.
D. (2015). Financial literacy and financial planning: Evidence from India.
Journal of Housing Economics, 27, 4-21.

 Aggarwal, M., & Gupta, M. (2014). Awareness of financial literacy among

college students. Journal of Management Sciences and Technology, 2(1), 1-13.

 Agarwalla, S. K., Barua, S., Jacob, J., & Varma, J. R. (2012). A survey of
financial literacy among students, young employees and the retired in India.
Retrieved February, 26, 2013.
 Al-Ajmi, J. Y. (2008). Risk tolerance of individual investors in an emergingmarket.
International Research Journal of Finance and Economics, 17(1), 15-26.

 Altaf, N. (2014). Measuring the level of financial literacy among management

graduates. Abhinav National Monthly Refereed Journal of Research in Commerce
& Management,3(6).

 Ali, A., Rahman, M. S., & Bakar, A. (2013). Financial Literacy and Satisfaction
in Malaysia: A Pilot Study. International Journal of Trade, Economics and Finance,
4(5), 319.

 Altintas, K. M. (2011). The dynamics of financial literacy within the framework

of personal finance: An analyses among Turkish University Students. African
Journal ofBusiness Management, 5(26), 10483.
 Arrondel, L., Debbich, M., & Savignac, F. (2014). Financial literacy and financial
planning in France. Numeracy: Vol. 6 : Iss. 2 , Article 8.

 Atkinson, A., & Messy, F. (2012). Measuring Financial Literacy: Results of the
OECD/International Network on Financial Education. OECD Working Papers on
Finance, Insurance and Private Pensions, (15).
Books

 Aggarwal, Y.P.(2008). Statistics of Education.( 2nd Edition) Delhi: Sterling.

 CPFA – NISM Handbook (2009).
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 Gitman Lawrence J. and Michael D. Johenk. Fundamentals of
Investing, FourthEdition, Harper and Row Publishers, New York,
1990.
 Hallman, G.V., & Rosenbloom, J.S. (1987). Personal Financial
Planning (4th ed.).New York: McGraw Hill Book Company
 Kapoor, J. R., Dlabay, L. R., & Hughes, R. J. (2009). Personal
finance. Boston, MA:McGraw-Hill Irwin.
 Kothari, C. R. (2004). Research methodology: Methods and
techniques. New AgeInternational.
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 Malhotra and Dash (2009), ―Marketing Research – An
Applied Orientation‖, 5th Edition, Pearson Education Inc.
Websites

 https://nse-india.com/content/ncfm/Revised_workbook_SMBM.pdf
 https://www.indiapost.gov.in/Financial/Pages/.../Post-Office-Saving-Schemes.aspx
 http://www.fpsbindia.org/Scripts/FinancialPlanning
 https://www.valueresearchonline.com/funds/
 http://investor.sebi.gov.in/sebiweb/investors/financial_literacy.jsp
 https://www.rbi.org.in/scripts/FS_Overview.aspx?fn=2754
 http://indiabudget.nic.in/es2012-13/estat1.pdf. Retrieved December 13, 2013

 http://mospi.nic.in/central-statistics-office-cso-0
9. CHAP
TER
ANNEXURE
Q1. Age of the

Respondents. 20-35.

36-68.

59 and Above

Q2. Gender

Male

Female

Q3. Education

High School

Graduation

Post

Graduation

Q4. How much year of Experience in job

Less than 5year

5-15 year

16-25 year

25- Above

Q5. Which in Income Slab you

lie. Less than 5 lac.

5-10 lac.

10-15 lac.

More than 15 lac.

Q6. Marital
Status.

Married.

Unmarried.

Widow/Widawer

Divorcee

Q7. Monthly Saving In

Percentage. Less than 10%

10-20%

More than 30%

Q8. Literacy regarding basics of Financial Planning.

True
False

Q9. Literacy regarding basics of Risk and Returns Relationship.

True
False

Q10. Awareness of Tax Saving Scheme.

Unaware

Moderately

Completely
Q11. Awareness About Other Post Offce Scheme.

Moderately

Completely