Understanding Practices of Personal Financial Planning (PFP)

19 Pages Posted: 25 Jul 2016

See all articles by Sweety


L J Institute of Management studies

Amola Bhatt

L J Institute of Management Studies (LJIM)

Date Written: September 2, 2014


Rationale – Personal financial planning is a formal process of outlining one’s life goals and managing finances accordingly. Hence, it involves an efficient and effective allocation of one’s income and other resources, such that the needs, wants and desires of the individual are fulfilled. Financial literacy still being low in India, and a formal training on the same, still being in the nascent stage, there is a dearth of research in this area. The research aims to throw light on the financial planning process followed by individuals and whether it differs in males and females.

Purpose – The basic aim of this study is to gain an insight into the income allocation pattern of individuals and the various reasons for which investments are made. The study also tries to find out preferred investment avenues and whether males and females exhibit different preferences for the same. Finally, the researchers want to know whether a formal financial planning process is followed by individuals and how it differs based on gender differences.

Design/Methodology/Approach - The study was conducted in the Ahmedabad district of Gujarat, and a sample size of 196 respondents was selected on judgmental basis to meet the objective of the study. The response rate was 78% (n=150) which is considered to be acceptable for a research study. The sample size was equally split between males and females. The survey was carried out in June- July, 2013. Analysis has been done by using multivariate technique like Multivariate Analysis of Variance (MANOVA).

Findings - It is found that a major portion of the income is spent on consumption needs, followed by savings. The income allocation is almost equal between investment and maintenance of emergency funds. The major purpose of investment is to meet the children’ needs followed by saving for own house and tax saving. The most popular investment instrument is Fixed deposits, which to a certain extent shows that people try to use safer avenues for meeting their investment needs. For the remaining instruments, males and females differed as males preferred insurance policies, bullion and stock markets for placing their funds while females were interested in bullion and PPF more. Regarding the dimensions of personal finance planning process, there is a difference between males and females as far as satisfaction from current savings, maximizing tax efficiency in planning for investments and insurance coverage is concerned. However, there is no significant difference between males and females in the other three components, namely; framing of the financial objective, knowledge of investment avenues and planning and determining of retirement income.

Keywords: Personal Financial Planning, Income allocation, Investment purpose and preference

JEL Classification: D12, D14

Suggested Citation

Shah, Sweety and Bhatt, Amola, Understanding Practices of Personal Financial Planning (PFP) (September 2, 2014). International conference on “Role of Financial Industry in Accelerating Economic Growth” organised by Gujarat Technological University (GTU) - Centre for Financial Services, Ahmedabad, (September, 2014), Available at SSRN: https://ssrn.com/abstract=2813478

Sweety Shah (Contact Author)

L J Institute of Management studies ( email )

SG Highway
Near Nagdev Mandir
Ahmedabad, GA Gujarat 380058

Amola Bhatt

L J Institute of Management Studies (LJIM) ( email )

S. G. Highway
S. G. Highway
Ahmedabad, Gujarat 380015

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics