Mansoor Danish – How to grow your money – Financial Planning for Beginners

Mansoor Danish
AI: Summary © The importance of financial planning for managing one's finances is discussed, emphasizing the need for planning ahead to achieve long term goals such as savings from retirement expenses and wealth creation. The speaker emphasizes the need for financial planning in order to avoid inflation and rising prices, and offers guidance on how to achieve these goals.
AI: Transcript ©
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Okay, Assalamualaikum warahmatullahi wabarakatuh Hi everybody, insha Allah. In today's session, we will be talking about a very, very important aspect of investments. And that is financial planning. Now, at the outset, I wish to thank all of you for the excellent response the feedback that I received on the savings habit. If you recall, approximately six months back, we started a strategy by which we were inviting all of you to start saving at least 10% to 25% of your monthly income in pure savings, we did not speak about any investment plans, we just want you to build in the habit of saving money. Now, what happens most most of us is that as soon as we get a salary, we already have

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an expensive plan. So in fact, much before we get our salary we've already planned out as soon as I get my salary, where all I'm going to spend it with the investment strategies that we thought of the saving habit strategy that we thought of. The idea was, instead of trying to plan your expenses, first, you first try to serve yourself, the serve yourself strategy is that you start saving for yourself first. And under this, we said anything between 10 to 25% is welcomed in the long run, you need to push yourself and try and save at least 25% of your money in pure savings. Where we invest this money is absolutely secondary. Many people think about investments, etc. Without even getting

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into a savings habit. It's unless and until you are able to become strict with your saving habit, it becomes really difficult to sustain yourself in a long term investment plan. At the same time, I also do not deny that investment is a forced saving habit. But the problem is that that should not be the only approach to savings money, one should have other strategies in place as well. Now that we have covered the six months timeframe, and I'm hoping that many of you would have saved approximately 10% each every month, so you must be having 60% of your salary in a month. In your account right now. What are we gonna do with this money? Many of you have been writing to me and

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asking me what happens next. Now we're waiting for your next advice. So here is it. The first advice that I have today is the most important step before investment. And that is financial planning, as it is very famously said that if you do not have a planning, if you fail to plan, you plan to fail. And we wish to safeguard ourselves from that failure. And that's why we are talking about financial planning. Now, what is financial planning, it's a process by which you manage your money, you manage manage your finances, in order to meet some of your goals, some of your dreams, some of your needs that may come up in the future. So the idea of financial planning is that whatever money you have

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saved, whatever finances that you have, you start saving them and then planning as to what you wish to do with this money. You know, what happens most of the time is people sit across with investment advisors, and they only want to know where should I invest my money. And then they go in four different investment avenues. And I'll be very honest, being an ex banker myself, I know how it can be in the investment field in the investment field, some of the investment advisors because of the sales target that they have, they might try to push you a product which you don't really need, which may not really meet your need. So the whole idea is let us ascertain what my needs are. So how does

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financial planning help us? Well, before we come to that, let us understand how does financial planning work? And then we'll talk about why we should do financial planning. Firstly, we ascertain where we are today. You need to know what are your financial positions today? What kind of money you are drawing in terms of your salary? Or if you are a businessman? Approximately what's your monthly income? What's your monthly revenue or rather not revenue, but the net revenue less expenses? What is the net income that you're taking back home every month on an average? You need to ascertain your income you need to know what is the inflow which comes into your account every month, having

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ascertained your income now you must look into what are your responsibilities? What I have commitments, what are your expenditure you need to spend at home you need to spend for food you need to spend for clothing you need to spend for sure

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Shelter you need to spend for education of your children you need to spend for your family, your parents, you need to look after some medical bills. Some of you might have taken certain loans, you need to pay off your loans. So all of these are commitments, you need to check out what are your expenses now your responsibilities and commitments, the net of income less your responsibilities and commitments and expenses is your savings. Now, from your savings will be your investable surplus, you know, a portion of your savings, you might just want to not touch that money because of emergency needs, which can come up at any point of time, maybe about 15% or 10 or 15% of that

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savings can be set aside every month for emergency need, which can come up at any point in a month. The balance is your investable surplus. Now, this money is available for investments every month. However, before we plan on what we should do with this money, where we should put this money, we have to go back and see what are my goals. So we're not going to be talking today about investment plans. But we are going to talk about financial plan. Now how does financial planning help you? Let's listen, one of the things that we have today. And we have to accept it as a reality is inflation. The prices are rising. I mean, let's take an example of the spin which is in my hand,

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this pen may have a price today in the market, maybe this will cost say 5000 rupees in the market today, if I have to buy this pen at after a year. And if the inflation in the market, let's say 10% approximately the price of this pen may rise by another 10% which means this will cost me 5500 after one year. So there is inflation in the market. If I don't plan my goals properly, if I keep everything at today's value, and if I start planning my children's education expenses, 10 years down the line, my retirement goals 20 years down the line, my medical expenses or long term plan, for example, going for Hajj, maybe somebody of you might want to go for a vacation with your family. If

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you're planning for all of these five years or 10 years down the line, but you're only ascertaining it at today's value and you're not accounting for inflation, you are going to be in for a financial shock 10 years down the line of business down the line, you will realize that while you have saved the money, but you will not be able to meet your goals, because now the prices have risen. So the idea of financial planning is to account for inflation. And when we do financial planning, our calculators account for the inflation in the market. The second is ascertaining your long term goals, your midterm goals and your short term goals. Now, anything in excess of five years to me is

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a long term goal, it can change some advisors may advise you differently, some may say seven years, some may say 10 years, but the way I look at it, anything in excess of five years is considerably long term. So any need which will come up after five years, maybe it could be educational expenses of your child, it could be retirement expenses, wealth creation, maybe you want to set up a business of your own, you are today working as an IT professional or you're working in a salary job, and maybe 1015 years down the line, you wish to save enough money to start a venture of your own. For that you need to save money regularly, and ascertain what will be the future value of starting the

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business 15 years from now, or 10 years from now, approximately. So asset in these long term goals that you have, maybe you plan to go for Hajj, seven years from now, what would be the approximate cost of doing your hedge seven years from now keeping in mind the inflation in the market. All of these are the long term goals defined in terms of the period which is greater than five years. Then you have the midterm period, which I say is anything between one year to five years anything which you need beyond one year, maybe beyond 18 months, I would say to 60 months, this is a period of midterm need. Here you will have any need which will mature in less than five years. And then you

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have those needs, which is going to come up anytime soon. Maybe within the next 12 months, you will need some some money. Maybe you're planning to go for HUD four months from now. So that's a financial need which is short term going to come up in four months. So all of these needs of yours have to be broken down in terms of the tenure into short term, midterm and long term. Having done that, we also need to understand that

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They can be emergencies in the family, they can be medical emergencies in the family, maybe you might need to travel immediately to meet somebody who is ailing at your home. So for all of these, you need to set aside some amount of money. If you don't, if you don't save that money on a monthly basis, we will get this money from when the need comes up. And then we see some of the people will go to the market and take interest based loans. And I'm not against loans per se, but I'm against interest based loans. I don't believe that one shouldn't be engaging in interest based loan one, from an Islamic perspective as we know that it is absolutely prohibited. And from a more moral

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perspective as well. No society can progress if it engages in interest based loans. It's really a debt trap. But that's a different topic altogether. Let's come back to what we are discussing. If you don't have a proper plan planning in place, whenever the need comes up three years or five years down the line, you will be with no money. And then you will be running from pillar to post trying to get money for through loans through interest based institution, which by the way, if you are a Muslim, it is not permitted.

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We spoke about the needs, the long term needs could be anything could be Hajj, could be vacation, maybe you want to upgrade your car, you just have a new car now, maybe three years or five years down the line you wish to upgrade your car. So you start saving some amount of money for meeting that expenses whenever that will be to you. In law along with all of this, you also would have a retirement need 1520 years down the line. And personally, I don't believe anyone should be retiring in life. You need to keep working till the last day of your life as long as Almighty God has given you the ability, the strength to perform your daily tasks. However, if you're working in a salaried

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job, you will retire at one point of time. So you need to generate enough surplus so that you can start a private venture of yours. Maybe you can set up a business of yours or consultancy service of yours. For all of that you will need some money and that money needs to be planned. From today, you need to start planning today because if you plan today, you need to only invest a small amount to meet a large, long term goal because of the compounding effect. We'll talk about all of that in a separate video. So this is why we are engaging in financial planning. The idea is to beat inflation in the market, the prices are rising. So you need to know what will be my long term value the future

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value. You need to know what your needs are, unless and until you know your need. How are you going to invest? You know, it's like playing a football match and you don't know where the goalpost is. So the football keeps running from one end to the other. But there is no goal. He doesn't know where he has to shoot the ball.

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The Financial Planning helps you identify your goal post. So this is how financial planning is going to help you inshallah Darla, I'm going to open this up for any questions that you may have, please post it in the comment box and I will be more than grateful to come back and answer each of your questions. inshallah, in the future, we will talk more about what the long term goals are, how do we work out all of these the mid term the short term goals, we'll talk about retirement plans we mentioned about compounding. We'll talk about all of these inshallah, in the long term as well. Well with that we will conclude this session today. Let me know your feedback about how this video was

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and if it can bring about certain change in you. If any of you are interested to do your own financial planning. I've shared my website on this video itself. So if you can check the video title, you'll find my email address my website address, you can get in touch with me to get your financial planning done today. With that will conclude the video thank you so much for taking the time out and watching was Salam alaykum warahmatullahi wabarakatuh

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