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Learning outcome
1.1 Personal financial planning
- Whats this
- SIRE
- Illustration
1.2 Advantages of Personal financial planning
1.3 Six step process of Financial planning
1.4 Goal setting guidelines
1.5 Influences of Personal Financial planning
- Life situation
- Personal values
- Economic factor
- Economic condition
- Global influences
- Effect of rising inflation
1.6 Tools in every financial planning
1.7 Financial opportunity cost
1.8 10 principle of Personal Financial planning
1.9 Strategies of achieving Personal Financial planning
SIRE
Illustration
Step 1:
DETERMINE YOUR CURRENT FINANCIAL SITUATION
Evaluate income, savings, living expenses, and debts
Prepare a list of current asset and debt balances and amount spent for
various items
Match financial goals to current income and potential earning power
Step 2:
DEVELOP YOUR FINANCIAL GOALS
Identify feelings about money and the reasons for those feelings
Determine the source of your feelings about money
2
3
4
5
S = Specific
Goals should be simplistically written and clearly define what you are
going to do Why? What? And How?
M = Measurable
Include tangible measurement of achievement
A = Action-oriented
Should be able to motivate and challenge you towards greater
achievement. You need to have the relevant knowledge, skills and
abilities to achieve the goals
R = Realistic/Result Oriented
Should measure outcomes not activities
T = Time-based
Linked to a timeframe to promote a sense of urgency, or results in tension
between the current reality and the vision of the goal.
Step 3:
IDENTIFY ALTERNATIVE COURSES OF ACTION
Step 4:
EVALUATE YOUR ALTERNATIVES
Step 5:
CREATE AND IMPLEMENT YOUR FINANCIAL ACTION PLAN
Develop an action plan that identifies ways to achieve financial goals
Possible action plans can be increasing savings, reducing spending, or
making provisions for taxes
To implement action plans you may need assistance from others
Step 6:
REVIEW AND REVISE YOUR PLAN
Financial planning decisions need to be assessed regularly
Complete review should be done at least once a
year
More frequent reviews may be required for changing personal, social, and
economic factors
Regular reviews of decision-making process can help in making priority
adjustments to achieve financial goals
2. Economic factors
3. Economic Conditions
Consumer prices
Consumer spending
Interest rates
Money Supply
Unemployment
Housing Starts
Gross domestic product (GDP)
Trade balance
Stock market indexes
4. Global Influences
2.
3.
4.
5.
6.
7.
8.
9.
10.
Just do it!!
1.9 Strategies for achieving personal financial goals different life situations
COMPONENTS OF PERSONAL FINANCIAL PLANNING
Obtaining Sources of finances employment, investment, business
Planning Budgeting, tax and savings planning
Saving Resources for emergencies, unexpected expenses, retirement,
childrens education
Borrowing Control over credit purchases
Spending Controlled, impulsive versus compulsive spending, frugality
Managing risk E.g. insurance coverage to reduce financial uncertainty
Investing Regular income, long term growth, asset allocation
Retirement and estate planning
1.2Record system
PERSONAL FINANCIAL RECORDS SYSTEM
Net worth
Net Worth is an indication of the financial position at any given date
ACTIVE
Derived from employment or business
E.g.: Salaries and profits from business
PASSIVE
Derived from savings or investment
Interest, dividends, rentals and royalties
Type of expenses
Fixed Expenses
Remarks
Generally necessities and amounts are normally the same
Credit card outstanding balances are included here in full
Includes purchase instalments, rental payments, insurance
premiums
Variable Expenses
Discretionary Expenses
Example
The humble loom band millionaire - the inventor 'worth 80m' who refuses to
splash the cash
Last year his company was reported to have made $44 million (25 million) last
year alone and business shows no signs of slowing down. The firm is now
reportedly worth 80 million, and there's barely a playground in the country that
isn't lit up with the bands' flashes of multi coloured plastic.
But despite the profits, Cheong is clearly a humble man. While he has bought a
BMW for his wife, he is still driving his 12-year-old banger and lives in a
modest 235,000 house in the far-from-glamorous Detroit.
Asked why he hasn't splashed out on a new car or fancy home, he said: "It's a
nice house, why should we move? We're not over-the-top people. Maybe when I
retire I'll buy a boat and go fishing.
"The good thing is now we definitely have the money for the girl's 23
education."
Discussion Question 1
RM 50 for clothes
RM 60 for entertainment
RM 30 personal items
RM 70 for entertainment
AKPK http://www.akpk.org.my/
an agency set up by Bank Negara Malaysia in April 2006 to help
individuals take control of their financial situation
Learning Objectives
1. Relate money management and savings activities to achieve financial
goals.
2. Analyze advantages and disadvantages of using consumer credit
3. Assess the types and sources of consumer credit in
4. Malaysia focus on credit card, car and housing loans
5. Determine whether you can afford a loan and how to apply for credit
6. Determine the interest rate effect by calculating interest using various
interest formulas
7. Develop a plan to protect your credit and manage your debts
1.1 Developing a savings habit
Save at least 10% of your income
Unemployment
Accidents
Medical
Repairs
Natural disasters
Death.
1.9 Credit
An arrangement to receive cash, goods or services now, and pay for them
in the future
Based on trust in peoples ability and willingness to pay bills when due
Example
Add-on interest
Interest calculated on full amount of principal
Interest added to original principal
Payment = Total divided by number of payments to be made
8,000
Instalments:
Housing loan
Car Loan
2,025
1,365
Credit card
Total debt instalment
500
3,890
Credits report
Credit limit
Joining fee - One time/ Initial fee
Annual fee Yearly subscriptions
Finance charges Imposed on outstanding balances. Maximum
18% per annum
Cash advance fees 3% to 5% of amount withdrawn (Minimum of
RM10 to RM 20 whichever is higher)
Late payment charges Imposed on failure to pay minimum
payment by due date
Government service tax RM 50 p.a. (Main) RM25
Supplementary
Administrative cost 1% or 1.5% for overseas transactions
1
2
3
4
5
6
Student loans
Personal loans
Unsecured no guarantor and collateral)
Higher interest rate
Car Loans (next week)
Secured- Hire purchase
Housing loans (next week
1.15 Counselling
AKPK
Set up by Bank Negara Malaysia
Three (3) main services Free of charge
1. Financial education programmers and materials on the proper use of
credit and basic money management skills
2. Financial counseling and advice
3. Debt Management Programme (DMP) Develop personalised debt
repayment plans and consults with financial services providers to
structure manageable repayment schemes
OTHERS
Universities, local county extension agents, credit unions, military bases,
and state and federal housing authorities provide nonprofit counseling
services
Check with your financial institution or consumer protection office for a
list of reputable, low-cost financial counseling services
1.16 Bankrupt
How?
Restriction
(A)Car
1.2 Consideration
B.
C.
C.
Example
Fee/penalty charge
Need to compare redemption value (outstanding balance of loan) versus
market value of the car if more, need to settle the difference before
sale/transfer
Rule of 78
1.8 Tutorial
Down payment 10%, Interest rate 2.8%, loan tenure 5 years. Calculate:
1)
Total loan
2)
Total interest
3) Monthly instalment
Tutorial Question 2
Shasha is a young executive working in a PR company in Mont Kiara. She has
just received a permanent employee status from her employer a month ago after
undergone 3 months probation period. Upon confirmation, her salary increased
to RM3, 500 per month with 11% EPF deduction and SOCSO deduction for the
amount of RM15 for insurance purposes.
Recently, she saw an advertisement on TV of the new Toyota Vios with a price
tag of RM70,000 and she is excited to own the car.
Currently, Maybank is offering the cheapest hire purchase rate of 2.7% annually.
Assume she pays 10% of the car purchase price as down payment. Calculate the
monthly instalment if she decides to purchase the car and pays off in 7 years.
Decide if she can afford to purchase the car base on AKPK rule on debt to
income ratio.
(B)House
2.1 Evaluating and Buying alternatives
Rental activities
Down-payment
Loan instalments
Personal savings for investment
EPF Account 2 withdrawals
Debt to income ratio (< 40%)
Margin of financing:
Lenders can lend up to 90% of purchase price
Location
- Basic amenities
- Surrounding area shops,
banks, schools, hospitals etc
Type of property
Landed versus
High Rise
- Public Transportation
Ownership Type
Freehold Indefin
Leasehold Usua
up to 99 years from
State Authourity
- Distance to work
- Traffic condition
- Security
Title
Developers Reputation
o Individual Landed
Reputation
o Strata
Condominiums/Apartments
On time delivery
Quality of work
Past customers
satisfaction
Adherence to prom
in advertisements
Summary
Tutorial 3
Taxation
Learning outcome
1.1 Taxation
1.2 Planning your Tax strategy
1.3 Types of taxes in Malaysia
- Direct taxes
- Indirect taxes
1.4 Individual tax
- Chargeable income
- Offences fines and penalities
- Rate of individual tax
1.5 Types of Income
- Employment income
- Other income
- Exempt income
1.6 Personal tax relief
1.7 Gratuity
1.8 Rate your assessment 2015
1.9 Married couple joint vs Separate assessment
1.10 Zakat
1.11 Tax records to be kept
1.12 GST
- How?
- Examples
(A)Standard rated
(B)Zero reated
(C)Excempt
- GST and investment
(A) Share
(B) Unit trust
(C) Reits
Learning objective
Identify the major taxes paid by people in our society.
Calculate taxable income and the amount owed for federal income tax.
Prepare a federal income tax return.
Select appropriate tax strategies for various life situations
1.1 Taxation
Oxford dictionary:
Contribution levied on persons, property, or business for the support of
govt.
Law cases:
A compulsory exaction of money by a public authority for public
purposes enforceable by law (Matthews v The Chicory Marketing Board,
1938).
Raising money for the purposes of govt by means of contributions from
individual persons (R v Barger, 1908)
IRB Tax guide
Is an amount of money which is taken from your earnings to help towards
some of the cost of services we received in this country
Self- assessment
Form BE Individuals with no business income
Form B- Individuals with business income
Form M Non-residents with Malaysian derived income
Every person must file a tax return even if income is taxed at
source(Before Y/A 2014)
Option to treat monthly tax deduction as final (Y/A 2015 onwards)
Husbands and wives must file separate returns although they elect to be
assessed jointly.
Final submission April 30 in the year following the year of assessment.
Penalty up to RM2,000 and imprisonment for non-submission - refer
http://www.hasil.gov.my/pdf/pdfam/3717.pd
Employers need to prepare and provide employees with the Form EA no
later than February 28 of each year.
Exempt Income
1.7 Gratuity
1.10 Zakat
EA/EC Form
Medical receipts
Donation receipts
Zakat receipts
Marriage certificate
Categories of taxes
Standard rated
Zero Rated @ 0%
Exempt
@ 6%
Standard Rated
Cooking oil
(palm/groundnut/coconut)
Sardines
Chilli sauce
Books and e-books
generally
Cement, bricks and sand
Commercial properties
including (SOHO and
SOFO)
Petrol RON97
Electricity For
consumption above 300
units
MEPs fees on interbank
ATM withdrawals
Tuition center fees
Manicure, pedicure and
hair styling services
All insurance premiums
(except life insurance)
Zero Rated
Corn oil
Rice
Cili padi, cili
kering
Dictionaries
Religious
books
Newspapers
Petrol RON95
Exempt
Healthcare
providers
Highway Tolls
Education
institution fees
(IPTA/IPTS)
Security Services
Residential property
-Corporate news
-Malaysia information sources
Other factors that influences the prices of the stocks
Behavior finance and stock prices
1.3 Capital Market
- Primary
- Secondary buying and selling stocks
1.4 Long and short term investment strategies
1.5 Dollar cost averaging (DCA)
1.6 Fund
- Investing in Mutual funds
- Why Investors Purchase Mutual Funds
- Unit trust funds in Malaysia
- Note for potential mutual fund/unit trust investors
1.7 Return on investment