PERSONAL FINANCIAL PLANNING
FIN533
INDIVIDUAL ASSIGNMENT
Prepared by:
NURUL FATIHAH BINTI MOHD BAHARI
2019219618
BA2432P
Prepared for:
MISS NUR HANISAH BINTI MOHAMAD RAZALI
Date of Submission:
17th December 2020
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PERSONAL FINANCIAL PLANNING
FIN
INDIVIDUAL ASSIGNMENT
Prepared by:
NURUL FATIHAH BINTI MOHD BAHARI
BA2432P
Prepared for:
MISS NUR HANISAH BINTI MOHAMAD RAZALI
Date of Submission:
17 th^ December 2020
TABLE OF CONTENT
a) Biodata of the family
b) Monthly Expenses
c) Balance Sheet
d) Cash Flow
e) Ratios
f) Income Tax
g) Comment and advices
h) References
he bought a motorcycle which is a Yamaha Y15 and there is still loan balance left that need to
be paid.
Last but not least, the relationship between myself and Mr. Mohd Bahari is that he is my
own father. Though he is my father, it is not easy to convince him to participate in my
assignment project. Thus, I am so glad that he accepted my request to interview him about his
financial status and become his financial planner.
b) MONTHLY EXPENSES
January February Mac April May June July August September October November December
c) BALANCE SHEET
Assets RM RM Liabilities RM RM Liquid Assets Current Liabilities Cash in hand 2 000 Credit card 3 000 Balance in saving account 6 000 Total Current Liabilities 3 000 Total Liquid Assets 8000 Non-Current Liabilities Lifestyle Assets Double storey house loan balance at Selangor 186 400 Double storey house at Selangor(market value) 530 000 Honda City loan balance 60 200 Computer 2 300 Yamaha Y15 loan balance 3 740 Furniture 340 Total Non-Current Liabilities 250 340 Honda city (market value) 59 800 Perodua Myvi (market value) 26 800 Total liabilities 253 340 Toyota Innova (market value) 42 300 Smartphone 1300 Net worth 708 760 Yamaha Y15 (market value) 8 100 Yamaha LC (market value) 4 300 Clothing 700 Internet monthly payment 2 160 678 100 Investment Assests Double storey house at Pahang (market value) 276 000 Total Assets 962 100 Total Liabilities and Net Worth 962 100
Mr. Mohd Bahari Balance Sheet as at 31 December 2020
Table c) shows Mr. Mohd Bahari Balance Sheet as at 31 December 2020. Under the
assets, Mr. Mohd Bahari have total RM8 000 for his liquid asset. According to James Chen of
Investopedia, liquid assets means an asset that can easily be converted into cash within a short
amount of time. In this balance sheet, it shows that Mr. Mohd Bahari have some money in his
saving account that can be use if emergency occur. Next, the total for lifestyle assets of Mr.
Mohd Bahari is RM678 100. All vehicles that he owns are used by his family members. Mr.
Mohd Bahari car, Honda City is used by his first son for his work as a Grab driver. Second car
that he had, Perodua Myvi are used by his wife and daughter for any function. Third car is
Toyota Innova, Mr. Mohd Bahari will use this car when he and his family went to any vacation
around Malaysia or when he going back to his hometown at Pahang. Since he owns two
motorcycle, he gives one of his motorcycle which is Yamaha LC to his 18 years old son. The
motorcycle is used by his son in order to go to the work at Subang Jaya. Last vehicle that he
owns is Yamaha Y15 where Mr. Mohd Bahari used for himself to commute from his work at
TNB Shah Alam.
In the balance sheet above, it shows that Mr. Mohd Bahari also own two house which
both are double storey house at different state which is one at Pahang and another one at
Selangor. These house that he owns fall under different category of assets because of different
reason. First house that he bought is a double storey house at Pahang and it is for investment.
According to James Chen of Investopedia, investment means an asset acquired with the goal
of generating income. When an individual purchases a good as an investment, the intent is not
to consume the good but rather to use it in the future to create wealth. In this case, Mr. Mohd
Bahari bought the house in order to generate income and used the income for his own good.
On 2017, he settled all of his house loan balance in Pahang. Next, on 2013, Mr. Mohd Bahari
bought a double storey house for his family in order to provide a more comfortable house
compared to his old house which is a one storey house.
Thus, after calculate all of his liquid assets, lifestyle assets and investment assets, the
total of assets that Mr. Mohd Bahari owns is RM962 100.
d) CASH FLOW
- Honda City monthly instalment RM RM RM RM RM RM RM RM RM RM RM RM
- Housing loan monthly payment
- Yamaha Y15 monthly instalment
- Utilities per month
- Internet monthly payment
- Telephone bill monthly instalment
- Monthly parents allowance
- Medical treatment for parents
- Second child monthly allowance (degree)
- Fourth child monthly allowance (primary school)
- Clothing
- Purchased a computer on November
- Purchased a smartphone January
- Monthly groceries
- Annual car insurance
- Annual car maintenance
- EPF (8000x12%)
- SOCSO
- Annual zakat
- Income Tax (8000x8%)
- Family vacation
- Furniture
- Dining per month
- Donation
- Visa credit card payment
- Total Monthly Expenses
- Salary (8000x12) Income RM
- Bonus (8000x2)
- Rent received (800x12)
- Total Income
- Housing loan monthly payment (1300x12) Less: Expenses
- Honda City monthly instalment (800x12)
- Yamaha Y15 monthly instalment (280x12)
- Internet monthly payment [(150x6)+(210x6)]
- SOCSO (23X12)
- Monthly parents allowance (400x12)
- Medical treatment for parents (300+300)
- Second child monthly allowance (degree) [(400x3)+(200x9)]
- Fourth child monthly allowance (primary school) [(100x3)+(50x9)]
- Clothing (500+200)
- Purchased a computer on November
- Purchased a smartphone September
- Utilities per month [(350x3)+(400x7)+(420x2)]
- Telephone bill monthly installment (60X12)
- Monthly groceries [(800X4)+(1000x8)]
- Annual car insurance
- Annual car maintenance
- EPF (960x12)
- Annual zakat
- Income Tax (640x12)
- Family vacation (5000+2000)
- Furniture
- Dining per month [(500x6)+(300x6)]
- Donation
- Visa credit card payment
- Contribution to saving Total Expenses (94 396)
- Cash Flow Statement for year ended 31 December Mr. Mohd Bahari
Table d) shows Mr. Mohd Bahari cash flow statement for the year ended 31 December
- According to Chizoba Morah of Investopedia, personal cash flow statement measures
individual cash that they earn and cash that they spend to determine either their have a positive
or negative net cash flow.
According to cash flow statement of Mr. Mohd Bahari, he received his income in three
method. First, salary which he received it every month. Second, bonus. Bonus is a payment
where Mr. Mohd Bahari will received at the end of the year and usually his employer will pay
his bonus equal to his two-month salary. Third, Mr. Mohd Bahari received his income from his
double storey house that he rented to a friend of him at Pahang. Every month, his friend which
is the tenant will pay RM800 to Mr. Mohd Bahari. Thus, after sum up all the income that Mr.
Mohd Bahari received in the year 2020, the total is RM121 600.
In order to determine either Mr. Mohd Bahari cash flow statement positive or negative, all
expenses will be added. After all the expenses of Mr. Mohd Bahari added, the total of expenses
is RM94 396. Then, the total income of Mr. Mohd Bahari will be minus with the total expenses
of Mr. Mohd Bahari, and will get contribution of saving amounted RM27 204.
- Debt Ratio = 𝑇𝑜𝑡𝑎𝑙 𝑇𝑜𝑡𝑎𝑙^ 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑎𝑠𝑠𝑒𝑡𝑠
= 253962 340100 x 100
= 26.33%
A good debt ratio should not be more than 30%. According to Mr. Mohd Bahari debt
ratio, it shows that it is 26.33% where it means that the debt ratio of Mr. Mohd Bahari is in a
good condition. Thus, it means that Mr. Mohd Bahari can easily get a new loan in the future.
- Debt Service Coverage Ratio = (^) 𝐷𝑒𝑏𝑡𝑇𝑎𝑘𝑒 𝑠𝑒𝑟𝑣𝑖𝑐𝑒^ ℎ𝑜𝑚𝑒 𝑐^ ℎ𝑝𝑎𝑦𝑎𝑟𝑔𝑒𝑠
= (^) ( 15600 (^96 000 + 9600 −^8 952 + 3360 ) )
= 3.05 times
An ideal debt service coverage ratio is 1.2 and above. According to Mr. Mohd Bahari
debt service ratio, it is 3.05 which it is in a good condition. Thus, it means that Mr. Mohd
Bahari is able to pay his new debt obligations without drawing on outside sources.
f) INCOME TAX
Income RM Salary 96 000 Bonus 16 000 Rent received 9 600 Aggregate Income 121 600
Less: Donation - Total Aggregate Income 121 400
Less: Tax Relief Self 9 000 Wife 4 000 Children: Second child (degree) 8 000 Fourth child (primary school) 2 000 Lifestyle (smartphone, computer and internet) 2 500 Parent allowances (mother) 1 500 Medical treatment for parent 600 SOCSO 250 EPF 4 000 Total Tax Relief (31 850) Chargable Income 89 550 Income Tax Computation: Tax Rate: First RM70 000 4 600 Next RM19 550 x 21% 4 105. Total Income Tax: 8 705. Less: Rebate Zakat - Tax Payable 8 505. Less: Monthly tax deduction 7 680 Balance Tax Payable 825.
Mr. Mohd Bahari Income Tax Assessment for the year 2020
g) COMMENT AND ADVICE
In conclusion, based on balance sheet of Mr. Mohd Bahari, his net worth figure is positive.
It means that he owns more than he owes. Next, referring to the cash flow of Mr. Mohd Bahari,
his income is greater than his expenses for the year of 2020. After the income minus by the
expenses, the figures show that Mr. Mohd Bahari is contributing to saving. It means that Mr.
Mohd Bahari can make some saving from that amount of money. Then, after calculate all four
ratios, it shows that three out of four ratios are in a good figure. It means that Mr. Mohd Bahari
financial position is in a good condition. Lastly, as for the income tax, Mr. Mohd Bahari need
to pay some of money which I believe Mr. Mohd Bahari able to pay it without any problem.
Financial planning is very important to each individual. First, insurance planning.
According to Mr. Mohd Bahari financial statement, there is no health insurance is taken under
the name of Mr. Mohd Bahari currently. This is because of Mr. Mohd Bahari medical bill is
supported by his employer, Tenaga Nasional Berhad (TNB). Then, there is also no health
insurance taken under the name of his wife and his child. This is also because of his employer
supported the wife medical bill and his two-child who are still studying. Thus, Mr. Mohd
Bahari did not take any health insurance for his family. Mr. Mohd Bahari also did not take
education insurance for the kids. However, it can be a bad situation if Mr. Mohd Bahari
dismissed from his current job because Mr. Mohd Bahari did not make any backup plan by
taking other health insurance. Therefore, my advices to Mr. Mohd Bahari are first he should
take a health insurance under the name of his last child because currently he is currently 8 years
old. He is still young and the future of him is unpredictable. So, it is important to make an early
preparation for his future. Second, Mr. Mohd Bahari can take an education insurance for his
last child. Just like health insurance purpose, since his last child is still young, it is better to
make a preparation before anything bad occur. Lastly, my advice to Mr. Mohd Bahari insurance
planning, he should take a health insurance for the sake of himself and his wife. The future is
unpredictable, he could be fired from his current job or facing a sudden and permanent
disability. Thus, it is a good move if he takes a health insurance from now.
Second, investment planning. Investment is made in order to gain more income and it is
very important for each individual to make an investment for the sake of their own future.
Currently, Mr. Mohd Bahari make an investment using the house that he bought at his
hometown. Back then, he purchased the house amounted RM 143 000. Currently, the house
price become RM276 000. There is difference amounted RM 133 000 which Mr. Mohd Bahari
earn from the house investment. Mr. Mohd Bahari decide to rent it with amount RM800 per
month following to its location that is in rural area. In my opinion, it is a good investment of
Mr. Mohd Bahari by purchased a house in his youth days. However, my advice to Mr. Mohd
Bahari for his investment is that he can try to invest in another way such as Tabung Haji
Investment, Amanah Saham Bumiputera (ASB) and many more.
Third, retirement planning. It is important to have retirement planning because once an
individual retire they will no longer receive a salary. In order to sustain a stable income once
they retire, they need to save for the future. Since Mr. Mohd Bahari is a private sector worker,
he only had Employee Provident Fund (EPF) which it will be not sufficient to cover his living
expenses in the future. My advice for this situation, Mr. Mohd Bahari should take a retirement
insurance plan provided by any insurance company. As for example, PRU Retirement Growth
by Prudential Insurance Malaysia. It provides a retirement insurance that can be bought start
from the age of 30 until 60. The insured can decide how long they want to subscribe the
insurance plan and at what age they want to receive the money back. Since Mr. Mohd Bahari
is 50 years old, the best decision he can make is that he purchased the retirement insurance for
10 years until he is 60 years old and at the age of 61 years-old, the insurer will pay it back
according to amount that he paid.
Last but not least, estate planning. According to Julia Kagan of Investopedia, estate
planning involves determining how an individual’s assets will be preserved, managed, and
distributed after death. It also takes into account the management of an individual’s properties
and financial obligations in the event that they become incapacitated. Currently, most of Mr.
Mohd Bahari assets is under his name and some of the assets under his wife’s name. Mr. Mohd
Bahari had named his wife as beneficiaries of his assets and still deciding some of his assets
will be used for charitable cause. My advice for Mr. Mohd Bahari for this situation is that he
should appoint an estate-planning lawyer in order to create a good estate plan for himself and
others. It is also important to appoint an estate-planning lawyer so there will be no issue occur
soon because the wills is legal.