Video post on Basic Formula in Personal Finance

POSTED BY manish ON May 18, 2009 COMMENTS (55)

This is a Video post by me , where I have tried to teach some basic formula’s for starters who should know important calculations using which they can calculate important stuff like Maturity value of Investment when they make SIP payments , or one time payments .

I am getting some questions like “I want to invest 2k per month for 10 yrs in mutual funds , Can i generate 20 lacs” type of questions . Seems like many readers do not know how to apply and use simple formula’s to calculate these stuff when they calculate how to generate wealth for long term . Often you might have felt that you have to depend on others for calculations , because you don’t know it themselves .

I have made a video myself where I explain 3 important formula’s which everybody should know .

1. Compound Interest
2. Annuity
3. CAGR

Lot of you might have learned this school , but many have forgotten it . So in this video post I have explained it with examples . I hope that it will help beginners or new readers . I am also giving a Calculator below the video where you can do your own calculations , If it gives any error , please go to the link I provide and calculate it there . I will also put presentation here , so that people who have very low bandwidth can view the presentation at least.

Presentation

Important Calculations In Personal Finance

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Embedded Calculator (click here if this gives some error)

 

 

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55 replies on this article “Video post on Basic Formula in Personal Finance”

  1. Rohit says:

    Thank you very much for this starter kit, Manish.
    I am just getting started with reading about SIPs and Mutual Funds and its very comforting to see content that helps in the Indian context.

    1. Glad to know that Rohit ..

  2. Pavneet says:

    Hi,

    Manish, as i understood by reading most of the comments above that Komal Jeevan and other policies are neither giving good investment nor good risk cover and has to be stopped. Also Surredering them give a big loss and paid up can be a good option.

    Can you please suggest what is the process of Paid up a policy, do we need to inform the LIC for this or just stop paying the premium and it goes to Paid-Up automatically?

    Waiting for your answer thanks?

    Pavneet

    1. Yes, if you stop paying premiums, it automatically becomes paid up , but its better if you can send them a mail on this anyways !

  3. Chetan Ambi says:

    Old article. Yet must read for everyone to understand the basic formula of personal finance. Manish Rockzzz πŸ™‚

  4. Manish Sadhu says:

    Dear Manish,
    It is really nice to read your blog, which has so much of information. I am 33 year old just started working out of country after working 9 years in India. I have two kids Daughter/Son- 9/5 yrs. After reading your blog i realized that i made many wrong mistakes in taking many LIC policies. I will really appreciate if you can give me some inputs/suggestion on below
    -Monthly Income : 200,000
    -Monthly House Exp : 38,000 (Including house rent as I am staying in Bangalore)
    -Home Loan : 800,000 (Closing in July 2013)
    -Car Loan : 350,000 (Closing in March 2013)

    LIC Policies
    – Money Back – 10500 Yearly Premium ( Taken in 2004)
    – Komal Jeevn – 7000 yearly Premium ( Taken in 2006 for Daughter)
    – Jeven Saral – 49000 Yearly Premium (Taken in 2008)
    – Komal Jeevan – 41148 Yearly Premium( Taken in 2012 for Daughter)
    – Komal Jeevan – 38570 Yearly Premium ( Taken in 2012 for Son)
    I am planning to work for another 5 years outside country and would like to come back and settled. I need some fixed income from my saving but looking at this I don’t think so I may be.

    1. I think first you need to stop putting your money in these policies. They are not helping you in insurance as well as investments .

      1. Manish Sadhu says:

        Thank you for advise. Any suggestion on, better SIP to divert this investment.

        1. I would say pick few funds like DSPBR top 100 , HDFC Prudence !

  5. SAURABH says:

    Hi Manish,

    Really nice blog, very informative. I have taken a LIC jeevan saral (premium of 60000 per annum for 25 years) the agent told me that they invest in debt market and gave me a figure with a 10% returns, when i paid my premium this year(2nd year) I was told by some LIC official that the returns would be much lesser than what was told to me earlier. Can u share your view on this particular policy Jeevan Saral , should i continue it?

    Hoping for a informative reply as always

    Regards Saurabh.

    1. Saurabh

      All LIC policies mostly give returns on the range of 4-6% .. Just dont continue it if you want 10%+ return !

  6. Rajesh says:

    Dear manish. What is your opinion on LIC policies? Are these good or bad?

    1. Only you can decide that .Here are some of the points

      1. They provide below inflation returns
      2. They are not liquid at all, you loose a big sum if you want money back in initial years
      3. They are Safe though !

      NOw you can decide if it fits your requirements or not – https://www.jagoinvestor.com/2011/08/lic-policies.html

  7. I would also like you to enlighten all of us about MMFs. I have read somewhere they are very good for short term investors but didn’t find any similar article on your blog.

  8. Hi Manish,

    I don’t have enough words to say thanks to you for this wonderful eye opener initiative. I already have started investing in ppf and begin long term planning.

    I have worked for 2 years after completing my engineering from 2008-2010. Then opted for 2 years full time MBA and now started working again. I am also planning to avail your services in the near future but since i am just a beginner and my salary is also not that much good so I am planning to delay it till next 1 year. By that time, PPF and FDs are good instruments.

    Keep up the good work. God Bless you. Thanks

    1. Good to hear that πŸ™‚ , Keep reading !

  9. RAMA KRISHNA TANKU says:

    Hi, Manish

    This blog is very informative. Thanks for all your work. At present i joined sbi and covered under new pension scheme. It is a market related scheme and no gaurantee on return and moreover the maturity amt is also taxable. What if the amt invested in the market does’nt gives expected returns compare to fixed deposits which gives on an average 8- 10%. Nps should be optional and govt cannot compel us to join such a scheme. It is our money and our right where to invest and where not. If Govt is not giving gaurantee of minimum return, then govt has no right to rub the shcheme on us. Can we go to court?

    1. its like thats the term and condition of working in PSU , take it or leave it .

  10. shashank says:

    Hi Manish

    I’m really impressed how you elaborate such things simple things so nicely.
    A good and must read for people new to investments.

    Please continue posting such useful information in clear and succinct way.

    regards
    shashank

    1. Thanks Shashank !

  11. Naveen says:

    Dear sanjay

    I am confused now a days please help me. i m working with a bank as scale I & getting 27000/m (under old pension scheme). Now i have selected in another bank as Scale-ii 32000/m (new pension scheme). for long term benefit (approx 30 yr) weather i should continue or join new job? i am not much aware about new pension scheme. please reply soon.

    1. Naveen

      I am sure that the pension account would be transferrable ., right ?

      Manish

  12. Prajacta Jadahhav says:

    Hey Manish,

    Thanks. Very informative and kind of a refresher for me. Been out of finance for some time and this sort of helped…

    Please keep up the good work…

    Best Regards, Prajacta

    1. Prajacta

      Good to know that you are getting in touch with finance once again , but this one is personal finance πŸ™‚

  13. Shobha says:

    This one is great article. Almost all of us learn these formulas in Colleges and then forget it. Thanks for puting it here. Its helping me plan my investments clearly.

    Great job Manish.

    Regards
    Shobha

    1. Shobha

      Thanks πŸ™‚ . Keep watching and spreading the message

  14. neha says:

    awesome

    1. Thanks for liking it .. what else can be improved in this ? I know its more better quality , but I am human and I am learning

      Manish

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  16. kalpesh says:

    Hi manish,
    I have became fan of yours within a short period of time,Manish I would like to have the calculater/formula to calculate the “rate of return” in case of mutual fund SIP.

    Thanks a lot in advance.

    kalpesh

    1. Kalpesh

      You should rather use the normal SIP calculator and see at what percentage it satisfies , you have to do back testing , or use IRR .

      Manish

      1. Jigar says:

        I had taken jeevan saral policy with 400pm age 19.will i get around 1lac,7 after 10years,15year or they are making fool.

        1. Jigar

          LIC never makes people fool as a company , its only agents who missell . Another thing is that there is never a fixed sum assured . its always Sum assured + Bonus which you get , if agent gave you some figure it would be based on some assumptions only . So check out your policy details .

          Manish

  17. Govind says:

    Hi Manish,
    I’m wonderng if you could enlighen us on the different charges incured in MFs. I’m read few articles on this what I understood that per SEBI, currently no charges on MFs. I’m wondering how MF indutry will run if no charges. Are there any hidden charges not known to investor.
    Also would like to get ur view on ICICI prulife ACE ULIP. This seems to be very low cost ULIP as per my analysis. I’m thinking seriously to take this 1.

    Thx for valuable advice as u always provide.

    Regards, Govind

  18. Viju says:

    Manish, I have become a great fan of yours in just 10 days. Recently one of my LIC policy matured and thats when I started realising that I haven’t invested much and am feeling very guilty. Right now I have 3 LIC policies worth 3 lacs, SIP in SBI MF Contra Divident of 5k per month and 2 PPF which I started in my daughters names with 70k each. Apart from this 2 reliance Policies with an annual premium of 25k and 30k respectively for which the premium paying period is 10 years. Just wanted to know that for my children’s education and for a peaceful retired life how much should i invest. Am 37 years old and my kids r of 10 & 7 years old. i earn around 40k per month and my wife earns around 30k. we hav a housing loan of 18lacs (pending) and car loan of 3 lacs as liability. our monthly expense apart from our liability including fuel is around 15k. kindly guide.

    1. Viju

      You should rather get out of your ULIP’s and Endowments and start building portfolio using MF , ETF and other tools , for child education refer to : https://www.jagoinvestor.com/2010/01/5-easy-steps-to-do-your-childs-education-planning.html

      Manish

      1. Viju says:

        Manish
        I can say with certainity that I have read almost all ur articles by now including the one suggested by u here. I have another query. All my investmens including the ULIP’s are for long term. If quity is doing well on long term, why not switch 100% of my units into equity than balancing with equity and debt??!!! Hope am not wrong in my understanding!!! Kindly clarify. Trust me, I must have suggested a lot of my friends about ur Blog, its really informative and useful and pretty simple as well.. Keep going….

        1. Viju

          the problem is you cant time the market .. you will make mistakes and once you move everything to equity .. it can fall back .

          Manish

  19. P.Mallick says:

    Manish,
    What is your opinion about the various Pension schemes currently available in the market? Can we entirely rely upon them for the retirement planning?
    An agent from a notable investment company presented a projected sheet where he calculated the returns assuming 12% yearly interest. The final amount calculated on this basis was fairly impressive. But later on as I was going through the yearly returns of some of the available Pension funds, I found that the actual yearly returns were quite lower in most of the cases (even as low as 4% in a particular year). I dont have much knowledge in this field and I’m not very good in these calculations either, so I am seeking your help. Could you please shed some light on this?

    P.Mallick

    1. manish says:

      P Mallick

      You should have asked him following questions

      1. What is the allocation of assets they are going to invest in ? Debt Vs Equity ?
      2. How much is guaranteed ?
      3. Is this a ULPP product ? If yes ,then its same like ULIP .

      The problem with any pension product is that the moment you take it , its are bind with them, the amount you get at maturity , onyl 1/3 of that will be provided lumpsum and rest will be used as pension .

      You can do all your investment yourself using SIP , PPF , ETF’s and at the end use the money to buy some annuity (Product which gives you pension) .

      12% is a good return and pretty much acheivable .. but for that you dont need anyone help .. Without much help and time , you can acheive this , but you need extreme amount of dicsipline .

      Start investing in PPF (30%) and in SIP in mutual funds (70%) . Keep doing this for years and at the end , you will end up with more than 12% (with that small risk of equity)

      manish

  20. Prasanta Kumar Das says:

    Thak you for those great blogs, i ahve learned so many things and starting toplan my finance now. I am 34 years old, My monthly income is 40000, and have a total loan of 400000.. I have Jeevan anand of 5 lacs with primum 11000(half yearly) and 1 lac jeevan sathi (3000 half yearly), I have DSP black rock (2000/pm), reliance tax saver (1000/pm), reliance growth (1000/pm), sbi magnum tax gain (1000/m), I want to take a term insurance and more over I am feeling guilty by taking endowmwnt plans from LIC after reading your blogs. The term insurances are just one and half year old. should I stop these and take large term insurance. what should i do. please reply

    Prasanta Kumar das

    1. manish says:

      You better take sufficient cover using term insurance and try to surrender those Endowment policies .

      Manish

  21. manish says:

    Prashant ,, If your expenses are 40k per month , then your retirement corpus comes exactly 4 crores πŸ™‚ . For that you have to invest 13k per month for next 29 yrs and have to get 12% return , this is easy πŸ™‚ , only thing which you need to give is your commitment and discipline . You can divide this like this

    Invest 10k into 3-4 diversified equity funds through SIP
    Invest 3k in PPF per month .

    As you start getting close to your retirement , make sure you start decreasing your Equity allocation and increase your Debt Allocation .

    You also need to plan for your Child education like this . Find out how much you need , Find out how much you need to save per month and then make sure most of it goes to Equity as its a long term goal .

    Reply if you need more detailed explaination .
    Manish

  22. prashant shinde says:

    your website is really very informative and eyeopening to me. my current expenses in total are 40000.i can save upto 30000/month. for retirement i need around 4 cr at age of 60.but i m unable to make saving in proportion of my retirement requirement.my current age is 31.i had lic of 22 lacs.one is jeevan anand(12 lac) and other is jeevan sathi(10 lac).i m having ppf account since 4 years. but it wont be sufficient after 30 years at 8 % interest.i m interested to know how should i divide my savings so that my retirement corpus will be 4cr.and also i have one son .for his education also i want to save.

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