Financial Planning & Investment Navigator

Financial Planning & Investment Navigator

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TrueNorth Labs Private Limited is a SEBI registered Investment Advisor (RIA No - INA000007614)

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  • 1. What is financial planning?

    Financial planning is the activity to understand cash flows throughout one’s life. It comprises of projecting income and assets into the future and comparing them with the expected outflows. Once completed, it forms the basis of saving and investing your money.

  • 2. Why is there no mention of retirement corpus in your financial planning?

    finpin incorporates retirement corpus when it projects your outflows like essentials, lifestyle etc till your life age while calculating your SCAP. Typically, other methods of financial planning estimate your retirement corpus incorrectly as they ignore the lifestyle aspect of retired life. As you approach retirement expenses on retirement increase. Hence, the correct way to estimate retirement corpus is to use lifestyle expenses at the time of retirement and not todays lifestyle expenses. finpin knows this concept and correctly incorporates post retirement lifestyle expenses. In fact, finpin gives you option to select your lifestyle expense level post retirement to be used in SCAP.

  • 3. How are my savings being used in your calculation?

    EZZY and XE stage allows you to increase SCAP upto 110% of your SC. This effect is to incorporate the effect of extra money created because of saving. The final report will tell you a more precise measure of extra spending that saving has created for you over your lifetime.

  • 4. What is Spend Capital?

    Your wealth is not just what you own today like FD, stocks, Real estate etc but also what you will earn in the future. And when you are young and far from retirement your total wealth is far more than what you own today. Finpin calls this SPEND CAPITAL, your true total wealth. While this is ignored by all advisors, visualizing one’s spend capital is a critical aspect of your life’s money journey. It’s the pitcher that will fill all your glasses of expenses. Finpin will guide you to calculate that amount for you.

    Your Spend Capital at any point in time is the sum 4 capital values – Income Capital, Asset Capital, RE capital & Inheritance. Asset Capital, RE and inheritance is simply the value of your existing assets and any inheritance.

  • 5. What is Income Capital?

    Income Capital is the current value of all your future income till retirement and it forms a substantial part of SC for people in early years of their working life. It is calculated by projecting your income till retirement age and then calculating its present value. This is different than the sum of all you future salary as the calculation incorporates the time value of money.

  • 6. What is present value?

    Finpin extensively relies on the present value/today’s value of future cash flows. Money value is not constant in time. The value of money reduces in future and hence the need of planning arises. Eg 1 lakh given to you today vis a vis 1 lakh given to you 3 years from today are very different. The future 1 lakh is valued less than today’s 1 lakh. Also, inflows and outflows in different period in time cannot be compared. They need to be converted to todays’ value to compare. That is what finpin does when SC and SCAP are matched.

  • 7. In the SC screen in EZZY stage, I see the growth rate of my income. How is it calculated?

    In EZZY stage, finpin uses certain default values of income growth basis the age of the user. The average growth for all years from till retirement is shown on the screen. User can change these values in the XE stage.

  • 8. What is Current Assets?

    These are the current financial assets that you own today. This is excludes your real estate and your valuables like jewellery, cars, antiques etc

  • 9. What is Real Estate?

    This is the current market value of your real estates.

  • 10. What is Inheritance?

    Inheritance is the todays’ value of any asset including FDs, stocks, Mutual funds, property, etc that one would inherit from their parents/grandparents/siblings etc over the course of lifetime.

  • 11. What is SCAP?

    SCAP stands for spend capital allocation pie. Finpin has created a simple way to categorize all outflows. There are total 9 categories and every outflow can be classified into one of them. These are tax, essentials, lifestyle, responsibilities, real estate, charity, legacy, interest and protection. These categories cover all the possible outflows of money throughout one life.

  • 12. What is tax?

    Tax measures the income tax that will be due over your lifetime. It is calculated basis the current income tax slabs. It is currently calculated for salary income only. Tax on other areas like investments, other income is not incorporated in the current version.

  • 13. What is essentials?

    These are the basic necessities that are required to sustain a household. These are grocery, utilities, travel, basic medicals. These do not include discretionary expenses on possessions like vehicles, jewellery, shopping, gifts, gadgets etc or experiences like eating out, entertainment, holidays, home improvement etc

  • 14. What is responsibilities?

    These are expenses that are related to financial obligations like children education, marriage, parents medical, other financial support is provided to friends or family.

  • 15. What is lifestyle ?

    These consist of all discretionary expenses on possessions and experiences. These include but are not limited to vehicles, jewellery, shopping, gifts, gadgets, eating out, entertainment, holidays, home improvement etc

  • 16. What is legacy?

    This denotes the amount that is required to be allocated to be passed on to your next generation as inheritance after your life age. Its take as todays value.

  • 17. What is interest?

    This denotes all cashflow that will go as interest over your lifetime. The major component of this goes when you purchase real estate on loan. The other form is interest paid on personal loans, credit card loans, car loans etc.

  • 18. What is protection?

    This is the outflow on all your insurance policies including life insurance, health insurance, car insurance etc.

  • 19. What is charity?

    This is the amount you want to give away in charity.