FIN533 FAMILY FINANCIAL PLANNING PDF

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PERSONAL FINANCIAL PLANNINGFININDIVIDUAL ASSIGNMENT(FAMILY FINANCIAL PLANNING)Prepared by SITI ZULAIKHAPrepared for MISS NUR HANISAH BT MOHAMAD RAZALISUBMIT DATE: 18 DECEMBER 2020FAMILY BIODATAPuan Siti Asiah bt Abd Karim is a single mother and currently working as an automotiveengineering at a priv...

Description

PERSONAL FINANCIAL PLANNING FIN533 INDIVIDUAL ASSIGNMENT (FAMILY FINANCIAL PLANNING)

Prepared by

SITI ZULAIKHA

Prepared for

MISS NUR HANISAH BT MOHAMAD RAZALI

SUBMIT DATE: 18 DECEMBER 2020

FAMILY BIODATA

Puan Siti Asiah bt Abd Karim is a single mother and currently working as an automotive engineering at a private company in Kuala Lumpur. Puan Siti is a single working mother and she earns RM 7,500 monthly. She has five children. The first child Aisyah is a 22 years old and a student of UiTM Dungun studying in Degree of Finance. The second child is Arif, 21 years old student studying at Training Institute Ministry of Health of Malaysia in Diploma of Radiography. The third child is Farah who is 19 years old and she is a handicapped. The fourth child is Khadijah who is 16 years old and a secondary school student. The last child is Hanny who is 12 years old and a primary school student. Puan Siti is my neighbour and her first child is my classmate in secondary school. They stay in a terrace house and owned 2 cars which is Alza and Persona. She uses Alza as her transport to the workplace while her first daughter use Persona to pickup Khadijah and Hanny everyday from school. Aishah also attend her online distance learning (ODL) for her last semester at home. Although Puan Siti is a single mother, but she can manage to raise her children well.

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FINANCIAL INFORMATION

The following is her financial information for 2020: ITEM

AMOUNT(RM) 2 400 1 200 4 400 65 000 1 000 1 000 12 000 1 000 150 450 200 100 100 1 050 42 000 10 000 1 500 300 400 150 300 6 000 500 150 700

Bonus annually Annual car insurance Annual EPF contribution EPF balance as at 31 Dec 2019 Balance in saving account Housing loan monthly installment Investment in ASNB Annual dividend received ASTRO bill monthly ALZA monthly installment PERSONA monthly installment Child insurance monthly Tabung Haji monthly Annual life insurance ALZA market value PERSONA market value Cars annual maintenance Monthly electricity bill Monthly groceries Monthly telephone bill Monthly parents allowance Annual medical expenses for parents Zakat paid for the year 2020 Income tax monthly payment Bought a new wheelchair for handicapped child in March Purchase of smartphone in May 2020 University fees for Aisyah in January Cash donation to local approved charitable institution Deposited SSPN for Aisyah Monthly medical insurance for family Monthly tax deduction

1 000 10 000 2 400 4 000 800 1 200

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MONTHLY EXPENSES

Monthly Expenses Housing loan monthly installment ASTRO bill monthly ALZA monthly installment PERSONA monthly installment Child insurance Tabung Haji Electricity bill Groceries Telephone bills Parents allowance Annual zakat Annual medical expenses for parents Tax Medical insurance for family Donation Purchased smartphone Wheel chair Deposit SSPN for Aisyah University fees for Aisyah MONTHLY EXPENSES

JANUARY FEBRUARY MARCH RM RM RM 1000 1000 1000 150 150 150 450 450 450 200 200 200 100 100 100 100 100 100 300 300 300 400 400 400 150 150 150 300 300 300 500 1200 800

500

500

APRIL RM 1000 150 450 200 100 100 300 400 150 300

MAY RM 1000 150 450 200 100 100 300 400 150 300

JUN RM 1000 150 450 200 100 100 300 400 150 300

500

500

500

JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER RM RM RM RM RM RM 1000 1000 1000 1000 1000 1000 150 150 150 150 150 150 450 450 450 450 450 450 200 200 200 200 200 200 100 100 100 100 100 100 100 100 100 100 100 100 300 300 300 300 300 300 400 400 400 400 400 400 150 150 150 150 150 150 300 300 300 300 300 300 500 500 500 500 500 500 500

2400 1000 700 4000 10 000 5650

6050

4350

3650

4650

4

3650

7650

3650

3650

3650

3650

4150

BALANCE SHEET

Puan Siti Balance sheet as at 31 December 2020 RM Liquidity Asset Balance in saving account Total liquidity asset Lifestyle Assets ALZA market value PERSONA market value Smartphone Total lifestyle assets Investment Assets Tabung Haji(100x12) ASNB EPF balance Total investment assets Total assets

RM

Non-current liabilities 1 000 Car loan- ALZA(450x12) 1 000 -PERSONA(200x12) Housing loan(1000x12) 42 000 Total non-current liabilities 10 000 1 000 53 000 Total net worth

5 400 2 400 12 000 19 800

112 400

1 200 12 000 65 000 78 200 132 200 Total liabilities and net worth

5

132 200

CASH FLOW

Puan Siti Cash Flow Statement for the year ended 31 December 2020 RM Inflows : Salary(7500x12) Bonus(200x12) Dividend Total inflows

RM

90 000 2 400 1 000 93 400

Outflows : Annual EPF contribution Monthly ASTRO bill(150x12) ALZA monthly installment(450x12) PERSONA monthly installment(200x12) Monthly Child insurance(100x12) Annual Life insurance Cars annual maintenance Monthly Electricity bill(300x12) Monthly groceries bill(400x12) Monthly telephone bill(150x12) Monthly parents allowance(300x12) Annual medical expenses Monthly medical insurance(800x12) Annual Zakat payment Donation Wheelchair SSPN for Aisyah Monthly Tax deduction(1200x12) Smartphone Housing loan monthly installment(1000x12) Total outflows Surplus/ Deficit

4 400 1 800 5 400 2 400 1 200 1050 1500 3 600 4 800 1 800 3 600 6000 9 600 500 2 400 700 4 000 14 400 1 000 12 000 82 150 11 250

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RATIO

Liquid asset to take home pay ratio

Current ratio

Debt ratio

Debt service coverage ratio

1) Assets Liquidity I.

Liquid assets to take home pay ratio = Liquid assets take-home pay =

1000 7 500 – 150

= 13.61%

•

Regarding this ratio, a person must have liquid assets equal to three to six months’ worth of take-home pay to be on the safe side. Thus, in this situation, Puan Siti’s liquidity condition is only 13.61% and it is not good.

II.

Current ratio = liquid assets current liabilities = 1000 0 =0

•

The current ratio should be more than 1 to maintain liquidity. Thus, this family has a low liquidity position.

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2) Level of debt I.

•

Debt ratio = Total liabilities Total assets = 19 800 132 200 = 14.98%

Puan Siti’ s family debt ratio is good because as she is working in a private sector, this ratio should be no more than 30%. This means that they may not face any difficulties in getting new loans since the family’s ability to pay debts is good.

II.

Debt service coverage ratio = Take-home pay debt service charges =

7 350 0+0+0

=0

•

The higher the ratio, the better because it means that Puan Siti can make payment. But, in Puan Siti situation, this ratio shows that Puan Siti has zero debt service coverage ratio.

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INCOME TAX Puan Siti Income Tax Payable for the year ended 31 December 2020 RM Salary Bonus Dividend Aggregate income (-) donation Assessable income

RM 90 000 2 400 1 000 93 400 (2 400) 91 000

(-) reliefs Self-relief Child relief : - Aisyah - Arif - Farah - Khadijah - Hanny EPF + Life insurance (4400+1050) Parents allowance Medical insurance SSPN Lifestyle relief: - Smartphone- 1000 - Telephone bill- 1800 Wheelchair for handicapped child Total Relief Chargeable income

9 000 8 000 8 000 6 000 2 000 2 000 5 450 3 000 3 000 4 000 2 500 700 (53 650) 37 350

Income tax computation On first 35 000 On next 2 350x8% Total income tax (-) rebates: Zakat Tax payable (-) monthly tax deduction Balance tax payable

600 188 788 (500) 288 (14 400) (14 112)

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COMMENTS & ADVICES

Based on the balance sheet statement, Puan Siti has a good amount which is her total assets (RM132 200) is more than her total liabilities (RM19 800). She also has some investment assets for her family future planning. As we can see at the balance sheet, Puan Siti make a good decision as she do not have any current liabilities. So, Puan Siti can save more on her money and has less debt. Thus, it can be less burden for Puan Siti as she need to raise her children with her own money. Next, her cash flow statement shows a positive amount as her total inflows is more than total outflows. Puan Siti also got bonus for every month and thus, it can cover all her monthly expenses. Thus, her total inflows are RM93 400 for the year ended 31 December 2020. Besides, it is also a good decision for Puan Siti to prepare early for their family life insurance. This is because, the main purpose of life insurance is to provide income replacement to our beneficiaries when we pass away, it is also an excellent financial planning tool to engage with as it can be for our retirement fund or our children’s education needs in the future. In Puan Siti case, I advise that she need to prepare for education insurance for her children, so that it will be easier if something happen in the future. Education insurance may involve a huge financial sacrifice, but it will be the greatest gift to the children. In investment planning, we need to invest to make money to improve our welfare, for financial security, to have funds for emergencies, to reach financial goals and for a secured retirement. Puan Siti make a good decision which is she had divided some of her money and put it as an investment asset in Tabung Haji, ASNB and others. This is because there is investment risk that may affect from time to time. This is including inflation risk, interest rate risk and others. So, Puan Siti can use her investment asset if there is emergency in the future.

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Puan Siti’s Family Future Planning: 1. Puan Siti invest in Public Mutual in estimation of RM50,000 for the investment. 2. Puan Siti apply for retirement scheme for RM400 per month. 3. Open SSPN account for Arif amounting to RM1000 4. Puan Siti apply on Credit Card 5. Discussion make for division on parent allowances of Puan Siti’s parents with her siblings 6. Aisyah start a part time business and get at least total sales RM500 per month 7. Open a current account for Aisyah’s business use 8. Aisyah plan on buying house for property investment at the age of 27.

As a conclusion, Puan Siti has a good financial planning and she plan to make more investment in the future for the sake of her children. Besides, she also makes a good decision in every purchase that she made which is she also not apply for credit card as it will burden her in the future.

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