Personal Financial Planning-FIN533 (Shahril Anwar Nazrie Bin Roszaidi) 2020/2021 PDF

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PERSONAL FINANCIAL PLANNING (FIN533)FINANCIAL PLANNINGOF ENCIK ROSZAIDI’SFAMILYPREPARED BY:- SHAHRIL ANWAR NAZRIE BIN ROSZAIDI 2019218432Table of ContentsBIODATA OF THE FAMILYEncik Roszaidi’s FamilyCurrently, Encik Roszaidi Bin Bachok is working as an executive manager in Pos Malaysia Berhad, Johor ...

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PERSONAL FINANCIAL PLANNING (FIN533)

FINANCIAL PLANNING OF ENCIK ROSZAIDI’S FAMILY PREPARED BY:SHAHRIL ANWAR NAZRIE BIN ROSZAIDI

2019218432

Page 1

Table of Contents Acknowledgement .................................................................................................................................................................................................. 3 Biodata of the family............................................................................................................................................................................................. 4 Financial Information ........................................................................................................................................................................................... 6 Monthly Expenses in 2020................................................................................................................................................................................ 8 Balance sheet statement .................................................................................................................................................................................... 10 Cash Flow Statement .......................................................................................................................................................................................... 13 Ratios and Comments ......................................................................................................................................................................................... 16 Comment & Advice ............................................................................................................................................................................................. 19 References .................................................................................................................................................................................................................. 22

Page 2

ACKNOWLEDGEMENT First and foremost, praises and thanks to Allah for his showers of blessings throughout my assignment project to complete the task successfully. A lot of effort have been done and many people involved in contributing information that I need. I would like to express my deep and sincere gratitude to all of them who help me through this process until I am able to complete this assignment. I would like to express special gratitude to Puan Erimalida Binti Yazi, my lecturer of Personal Financial Planning (FIN533), for guiding and encourage me on completing the assignment. Without her guidance, I might not be able to do this assignment. Next, I would like to thanks Encik Roszaidi and family for their good coorperation with me and giving me the most valuable information in this assignment to me. Thank you.

Page 3

BIODATA OF THE FAMILY

Encik Roszaidi’s Family

Currently, Encik Roszaidi Bin Bachok is working as an executive manager in Pos Malaysia Berhad, Johor Bahru branch. He is 46 years old and married with Puan Rubiah Binti Shariff who are 2 years younger than him which is 44 years old. Her wife work as clerk in a logistic company which is Unify Shipping Service Sdn Bhd (UNISHIP) located in Johor Bahru. Encik Roszaidi earns RM4,500 monthly and Puan Rubiah earns RM3,800 monthly. They also pays EPF and income tax every month from their gross salary.

Page 4

Encik Roszaidi and Puan Rubiah have been married for almost 22 years and blessed with two childrens, a son and a daughter. His son named Shahril Anwar Nazrie is 20 years old and currently study in UITM Cawangan Sarawak Kampus Samarahan doing her degree major in Finance. His daughter Sofea Anessa Nazreen is 16 years old and still study in secondary school at SMK Tasek Utara 2. Encik Roszaidi owns a single-storey house at Taman Setia Indah and lives with his wife and children. His son supposedly stay at his college but due to COVID-19, he has to stay at home for online classes. Encik Roszaidi bought the house in 2003 and start lives there with his family in 2007 has stay for almost 13 years. Besides, he also owns three cars which are Toyota Harrier, Proton Waja and Perodua Kancil. He use Toyota Harrier as a family car and Proton Waja for daily uses such as going for work. Perodua Kancil was used by his wife for daily uses. In the nutshell, Encik Roszaidi and Puan Rubiah is my parents and I’m glad to be their financial planner.

Page 5

FINANCIAL INFORMATION Details Monthly salary-Encik Roszaidi Monthly salary-Puan Rubiah Cash on hand-Encik Roszaidi Cash on hand-Puan Rubiah Savings account balance Market value of Toyota Harrier Market value of Proton Waja Market value of Perodua Kancil Market value of single-storey house Household furniture Laptop Clothing Credit Card Electricity and water bills per month Food and household supplies Transportation cost per month Purchase smartphone on credit on February 2020 Car maintenance Car insurance and road tax Clothing expenses School children expenses per month Children expenses 1st child pocket money Textbooks expenses University fees Annual Zakat

RM 4,500 3,800 500 300 25,000 42,000 8,000 4,000 320,000 5,000 1,500 4,000 9,000 100 400 320 4,800 1,600 3250 500 100 200 500 200 1,500 500

Page 6

Savings at Tabung Haji Personal life insurance (monthly) Donation (monthly) EPF (monthly) Income tax (monthly) Telephone bills (monthly) Dining Out (monthly) Monthly installment on smartphone Personal loan balance

14,000 110 50 1,046 187 290 300 200 13,724

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MONTHLY EXPENSES IN 2020 Monthly January February March Expenses RM RM RM Electricity and 100 100 100 water bill Telephone bill 290 290 290 Food and household 400 400 400 supplies Transportation 320 320 320 cost Car insurance 910 2340 and road tax Car maintenance Dining out 300 300 300 Clothing 100 expenses School 100 100 100 children expenses Children 200 200 200 expenses 1st child 500 500 500 pocket money

April RM

May RM

June RM

July RM

August September October November December RM RM RM RM RM

100

100

100

100

100

100

100

100

100

290

290

290

290

290

290

290

290

290

400

400

400

400

400

400

400

400

400

320

320

320

320

320

320

320

320

320

-

-

-

-

-

-

-

-

-

400

-

-

-

1,000

-

-

-

200

300

300

300

300

300

300

300

300

300

-

200

-

-

50

-

-

150

-

-

-

-

-

100

100

100

-

-

200

200

200

200

200

200

200

200

200

500

500

500

500

500

500

500

500

500

Page 8

Textbooks expenses University fees Monthly installment on smartphone Personal life insurance (Encik Roszaidi) Donation Annual Zakat Income tax EPF Monthly installment on personal loan

-

-

-

-

-

-

750

-

-

-

-

200

200

200

200

110

110

110

110

50 187 1046

50 187 1046

50 187 1046

50 187 1046

391.32

391.32

391.32

-

100

-

-

-

-

750

-

-

-

200

200

200

200

200

110

110

110

110

110

110

50 187 1046

50 187 1046

50 187 1046

50 187 1046

50 187 1046

50 500 187 1046

391.32

391.32

391.32

391.32

391.32

100

-

-

-

200

200

110

110

50 187 1046

50 187 1046

391.32 391.32 391.32 391.32

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BALANCE SHEET STATEMENT Assets Liquid Assets Savings account Cash on hand-Encik Roszaidi Cash on hand-Puan Rubiah Total Liquid Assets Lifestyle Assets Market Value of Single-storey house Market Value of Toyota Harrier Market Value of Proton Waja Market Value of Perodua Kancil Household furnitutre Laptop Clothing Purchase Smartphone on February 2020 Total Lifestyle Assets Investment Assets Savings at Tabung Haji account balance Total Investment Assets Total Assets

RM 25,000 500 300

Encik Roszaidi Balance Sheet as at 31 December 2020 RM Liabilities Current Liabilities Credit Card Smartphone outstanding balance Total Current Liabilities 25,800

420,000 42,000 8,000 4,000 5,000 1,500 4,000 4,800

RM

RM

9,000 2,600 11,600

Non-current Liabilities Personal loan balance

13,724

Total Non-Current Liabilities

13,724

Total Liabilities Net Worth Total Liabilities and Net Worth

25,324 504,276 529,600

489,300

14,000 14,000 529,600

Page 10

Based on the balance sheet as at 31 December 2020, Encik Roszaidi and family’s total assets is quite high amounted RM528,800. The liquid assets of the family amounted RM25,500. The lifestyle assets are the highest amount under assets which in RM489,300 consist of a single-storey house and three cars own by Encik Roszaidi and he has fully paid and settled the payment of loan for the house and all his three cars. Encik Roszaidi bought the house in 2003 and start living there in 2007 until now with the market value of RM420,000 today. The purchase price of the house is RM167,800 in 2003 which is located at Johor Bahru. He used Toyota Harrier as a family car and usually used Proton Waja for daily use. Another car which is Perodua Kancil used by his wife for daily use. The laptop owned by this family was used by Encik Roszaidi’s son for his online classes since he can’t stay at college and has to stay at home due to COVID-19. The household furniture is amounted RM5,000 as Puan Rubiah like to buy stuff for house. The clothing value owned by this family is RM4,000. Encik Roszaidi bought a smartphone for his son in February 2020 since his phone was broken and he need a new phone for daily use. He also has savings at Tabung Haji for his son’s university fees and for emergency purposes.

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The current liabilities of Encik Roszaidi are only card credit and his son’s smartphone outstanding balance since he bought the devices on credit because it was a package where the devices are include with internet plan. The non-current liabilities is of Encik Roszaidi He does not have any outstanding balance on house or cars loan as he has fully paid the loan for his house and cars. He only has personal loan which he borrow on April 2019 and has outstanding balance amounted RM13,724. The following table shows the details of the balance of the loan:-

Personal Loan (RM) Loan

20,000

Interest Rate

6.5

Total Loan

23,479.38

Tenure/Month

5 Years/60 Months

Annual Installment

4,695.84

Outstanding Month

39 Months

Outstanding Balance

13,724

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CASH FLOW STATEMENT Encik Roszaidi Cash Flow Statement for the year ended 31 December 2020 Income:Salary (8300x12)

RM 99600

(-)Expenses Monthly installment on personal loan

391.32

Monthly installment on smartphone purchased (200x11)

2200

Electricity and water bill (100x12)

1200

Telephone bill (290x12)

3480

Food and household supplies (400x12)

4800

Dining out (300x12)

3600

Transportation cost (320x12)

3840

Clothing expenses

500

School children expenses (100x12)

1200

Child expenses (200x12)

2400

st

1 child pocket money (500x12)

6000

Textbooks expenses

200

University fees

1500

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Car insurance and road tax

3250

Car maintenance

1600

Personal life insurance (110x12)

1320

Donation (50x12)

600

Income tax (187x12)

2244

EPF (1046x12)

12552

Annual Zakat

500

Total Expenses

53377.32

Net Income (Contribute to savings)

46222.68

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The total income of this family is only from Encik Roszaidi and her wife’s salary which is RM99,600 for the year 2020. The table below show the details of the annual expenses of Encik Roszaidi’s family for the year 2020:-

Annual Expenses Encik Roszaidi's Family Annual Zakat EPF (1046x12) Income tax (187x12) Donation (50x12) Personal life insurance (110x12) Car maintenance Car insurance and road tax University fees Textbooks expenses 1st child pocket money (500x12) Child expenses (200x12) School children expenses (100x12) Clothing expenses Transportation cost (320x12) Dining out (300x12) Food and household supplies (400x12) Telephone bill (290x12) Electricity and water bill (100x12) Monthly installment on smartphone purchased (200x11) Monthly installment on personal loan 0

2000

4000

6000

8000

10000

12000

14000

Page 15

RATIOS AND COMMENTS

Liquid assets to take-homepay ratio 30.42%

Debt ratio 4.78%

Ratios

Debt service coverage ratio 18.06 times

Current ratio 2.22 times

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Asset Liquidity i. Liquid assets to take-home-pay ratio =

𝐿𝑖𝑞𝑢𝑖𝑑 𝑎𝑠𝑠𝑒𝑡𝑠 𝑇𝑎𝑘𝑒−ℎ𝑜𝑚𝑒−𝑝𝑎𝑦 25,800

=99,600−2244−12552 =30.42% The ratio implies liquidity position for the family or individual. The family is on the safe side of liquidity condition since the liquid assets to take-home-pay is 30.42% which is higher than ideal ratio of 25% to 50% range.

𝐿𝑖𝑞𝑢𝑖𝑑 𝑎𝑠𝑠𝑒𝑡𝑠

ii. Current ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 =

25,800 11,600

= 2.22 times The ideal ratio for current ratio is more than 1 in order to maintain liquid. In this family, the current ratio is more than 1 which is 2.22. This means that the family has a high liquidity position and has ability to pay their short-term debts. Since the short-term debts in this family is not high, its mean their position is secured enough.

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Level of Debts i.

Debt Ratio =

𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 25,324

= 529,600 = 4.78% The ideal ratio for debt ratio should be not more than 40%. This family debt ratio is very low with 4.78%. This indicates a low debt and safe position to meet their obligation in the future.

ii.

Debt service coverage ratio = =

𝑇𝑎𝑘𝑒−ℎ𝑜𝑚𝑒−𝑝𝑎𝑦 𝐷𝑒𝑏𝑡 𝑠𝑒𝑟𝑣𝑖𝑐𝑒𝑠 𝑐ℎ𝑎𝑟𝑔𝑒𝑠

99,600−2244−12552 4695.84

=18.06 times The debt service coverage ratio for Encik Roszaidi’s family show that they earns RM18.06 in take-home-pay for RM1.00 of required debt repayment and interest. This ratio is good since the higher the ratio means the better because Encik Roszaidi’s family has ability to meet their current debt obligation.

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COMMENT & ADVICE Based on the balance sheet, Encik Roszaidi’s family has stable financial position as the family has a contribution to savings. Besides, the assets own by the family are quite high where it is enough to cover the liabilities which the total assets are RM529,600 and the total assets are only RM25,234. Encik Roszaidi only made savings at Tabung Haji as investment and to be used for emergency. In the future, it is good for Encik Roszaidi to start invests more in the future to gain more income. The net worth of the family are quite high too amounted RM504,276 and has low liabilities which means it represents true measurement of his wealth and stable financial. There are only two things under current liabilities for Encik Roszaidi’s family which are credit card with amount of RM9,000 and smartphone outstanding balance with amount of RM2,600. Credit card is a must nowadays as they can be use for other applications besides of as a tool to buy things. However, credit card can be major debt traps if a person did not control their usage of credit card to buy things. On the other hand, Encik Roszaidi show focus more on savings and investment in the future to secure safe position in financial since COVID-19 really affects the currency which is keep getting weaken.

Regarding to the cash flow statement, Encik Roszaidi and family has a contribution to savings with amount of RM46,222.68 because they earned high income that surpass the total expenses in which amounted RM99,600 and RM53,377.32 respectively. From the expenses made by the family, it shows that Encik Roszaidi spent more on car expenses as he owned three cars. The car expenses that need to be pay by him are car insurance, road tax, car maintenance and transportation cost yearly. However, the highest expenses is EPF since both Encik Roszaidi and Puan Rubiah are working which means they pay EPF from their gross salary that amounted RM12552 in total. Besides, Encik Roszaidi’s children are still studying and it makes him to spend on children expenses such as school expenses and pocket money for his son. However, due to COVID-19, there are few months that Encik Roszaidi did not spend on school expenses as his daughter does not need to go school. In the future, it is good for Encik Roszaidi if he could cut out the expenses when his children have

Page 19

finish studying which it can help Encik Roszaidi and her wife to get more contribution on savings. This way can help them to just use their income to buy things instead of relying on credit card. Since Encik Roszaidi still has personal loan balance to pay, cutting certain expenses could help him focus on paying the loan faster or more than the minimum payment. The more savings Encik Roszaidi and family have, the better for them to increase their emergency funds and retirement savings.

Insurance planning is very important for every family or individual especially in today condition where the whole world are in bad situation since COVID-19 spreadi...