INTRODUCTION

INTRODUCTION Nowadays, financial planning is an important tool for the individuals as the train medium towards our better future financial management. One of the financial management agencies are Credit Counseling and Debt Management Agency, a wholly owned subsidiary of Bank Negara Malaysia (BNM) has conducted road shows, talks, workshops and briefings targeted at the public, university students, corporations and government agencies to ensure that Malaysians are aware of its existence and services that stress on the financial planning. Credit Executive Officer (CEO) of Credit Counseling and Debt Management Agency or known by its Malay acronym AKPK (Agensi Kounseling dan Pengurusan Kredit), Mohamad Akwal Sultan said in an interview with Business Times in Kuala Lumpur recently, since AKPK opened its doors to the public on 17 April 2006, 10 000 people came for counseling. Over 3 000 people came for its debt management programme, while the rest came for inquiries. According to him, these people came from all walks of life with ages ranging from the 20s to 70s and earning from as low as RM 500 up to RM 30,000 a month. He also said that, in most cases, poor financial planning, ignorance and lack of discipline to live within their means are factors contributing to their debt and inability to repay. Trough Mohamed Akwal experience in debt resolutions after having served asset management company Danaharta as deputy general manager, his opinion on financial problems are universal which a problems have a domino effect and always lead to other predicaments. Beside that with over 25 years of experience in local and foreign banks, he said financial education can help Malaysians lead a healthy lifestyle, support bank reduce non-performing loans and eventually contribute to a robust economy. Good financial management has elements of prudent savings, prudent spending and wise debt management. Consequently, personal financial planning is an important element in managing our money. Personal financial planning is planning that covers the important elements of an individuals financial affairs and is aimed at fulfilling his or her financial being. Before we set realistic goal, firstly we should develop our financial plan, and effectively manage our money and know our current financial situation. We also need tools to monitor the progress. Personal financial statements are planning tools that provide an up to date evaluations of our financial

well-being that can help to identify financial problems and help to make better-informed financial decision.

What is Financial Planning? According to the Certified Financial Planner Board of Standard, financial planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a home, saving for your child's education or planning for retirement. The financial planning process consists of six steps that help you take a "big picture" look at where you are financially. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals.

The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans. As life and circumstance change, so your financial plan will need to be reviewed and revised on a regular basis:

Ensure you are on track to meet your goals Identify and address new goals and Make sure the financial tools you are employing still meet your needs.

Steps to the Financial Planning Process: 1. Identifying and setting short, intermediate and long-term goals. Ideally, each goal will have a date and dollar amount attached to it. 2. Evaluating your current situation - cash flow analysis and calculating your net worth. You need to honestly assess your current financial status, including positives and negatives. 3. Review your insurance coverage, including life, disability, home, auto, umbrella liability and long-term care. 4. Review your current tax situation to identify tax-saving opportunities and potential deductions. 5. Review your estate plan to ensure that your will, living will, healthcare power of attorney and other estate planning documents (revocable living trusts and durable power of attorney) are upto-date and valid. 6. Develop a retirement funding plan that covers when you plan to retire and how much you will need to support your retirement lifestyle. 7. If you have children, develop a college funding plan to help cover higher education expenses. 8. Develop an overall investment plan with proper investment portfolio that supports your goals, while staying within your investment time horizon and risk tolerance. All of these areas will help us develop initial financial roadmap. Finally, review your plan and progress periodically by giving yourself an annual check up to make sure you are staying on track. Life will throw you a curveball from time to time; divorce, a serious illness and an unexpected job loss can all affect your financial plan. So be prepared and be flexible.

CUSTOMER BACKGROUND

Customer Background As a financial planner, I have to find a client to analyze and give some recommendations or advice how to improve my clients financial well being. My client is Encik Rozaidi Bin Abd Majid, 40 years old. He married with Puan Salmah Bt Ismail. Encik Rozaidi is a government servant work as a teacher at Sekolah Menengah Sains Pasir Puteh, Kelantan while his wife is a housewife. Encik Rozaidi has 3 children schooling in the primary school. Encik Rozaidi is very concern and cares about his family health and himself. He also becomes an advisor in ST John Club in his work place. Now, Encik Rozaidi is currently further his study in MBA at UiTM Shah Alam as a PJJ student. Encik Rozaidi Gross salary is RM 4,263.83 per month. He worked as a teacher for 26 years and actively involved in the society. He currently live at the quarters that provided by his employees and the rental is free. He already bought a house at his hometown and planning to stay there after his retirement. Encik Rozaidi want me to analyze his financial well being so that after requirement he will have saving to support his life and capital to set up a business.

BALANCE SHEET

ENCIK ROZAIDI BIN ABD MAJID BALANCE SHEET AS AT 31st DECEMBER 2007

ASSETS Liquid Assets Cash on hand Saving Account at Bank Rakyat Current Account at BIMB Current Account at Maybank Total Liquid Assets Lifestyle Assets House at Jerteh, Terengganu Furniture, household furnishing and appliance Automobiles: 2005 Naza Citra 1990 Produa Kancil 2004 Motorcycle Jewelry Computer Total Lifestyle Assets Investment Assets Trust Fund (ASB) Special Investment (LUTH) EPF Contribution Total Investment Assets TOTAL ASSETS

(RM) 700 1,013 8,000 3,607

(RM)

(RM)

13,320

98,000 25,000 168,000 10,500 3,900 24,000 2,500 331,900

88,087 15,500 45,084 148,671 493,891

LIABILITIES Current Liabilities Unpaid utilities bills: Electricity Telekom Credit Card Balances due: BIMB Credit Card AmBank Credit Card Total Current Liabilities Non-Current Liabilities Car loan Home Mortgage Personal Loan Total Non-Current Liabilities TOTAL LIABILITIES NET WORTH TOTAL LIABILITIES AND NET WORTH

(RM)

(RM)

(RM)

220 706 1,330 460 2,716

73,800 88,060 20,000 181,860 184,576 309,315 493,891

COMMENT ON BALANCE SHEET Balance Sheet or Statement of Financial Position is a summarization of persons or familys financial condition at a certain point in time. Assets are the items you own. An item is classified as an asset regardless of whether it was purchased for or financed with debt. Liquid assets are low risk financial assets held in the form of cash or instrument that can readily be converted into cash with little or no loss in value. Liquid assets help Encik Rozaidi to meets his family short term obligation or daily requirement. He can hold cash either cash on hand or in a demand

deposit (checking account). Saving accounts, money market deposit account, money market mutual funds, or certificates of deposits that mature in one year also classified as liquid assets. Regarding to Encik Rozaidis balance sheet, we can see that Encik Rozaidi have four items in liquid assets which are Cash on hand RM 700, Saving Account at Bank Rakyat RM1, 013, Current Account at BIMB RM8,000 and Current Account at Maybank RM3,607. Lifestyle assets are assets that help achieve desired quality of life. Regarding to Encik Rozaidis balance sheet, we can see that Encik Rozaidi have seven items in lifestyle assets which are House at Jerteh, Terengganu RM98, 000, Furniture, household furnishing and appliance RM25,000, Naza Citra RM168,000, Produa Kancil RM10,500, Motorcycle RM3,900, Jewelry RM24,000 and Computer RM2,500. As we noticed, automobile will depreciate in value but house is appreciated in value. Thus, Encik Rozaidi makes good decision when he buys a house. Investment assets are assets being purchased for getting extra or side income. Encik Rozaidi have three items in investment assets which are Trust Fund (ASB) Encik Rozaidi are RM 493,891. Liabilities represents an individuals or familys debt. A current liability is any debt due within one year of the date of the balance sheet. For the above case, Encik Rozaidi has four items current liabilities which are Electricity RM220, Telekom RM706, BIMB Credit Card RM1,330 and AmBank Credit Card RM460. Long term liabilities or non-current liability is debt obligation with final repayment dates more than one year from the date of the balance sheet. For non-current liabilities, Encik Rozaidi has three items which are Car loan RM73,800, Home Mortgage RM88,060 and EPF Contribution RM45,084. Net worth is the amount of actual wealth or equity an individual or family has in their owned assets. Encik Rozaidis family has net worth at RM 309,315. RM88, 087, Special Investment (LUTH) RM15, 500 and EPF Contribution RM45, 084. The total assets for

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INCOME STATEMENT

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ENCIK ROZAIDI BIN ABD MAJID INCOME STATEMENT FOR THE YEAR ENDED 31st DECEMBER 2007

INCOME Salary Other Income: Rental ASB Dividend Bonus Total Income EXPENSES EPF LUTH Takaful Ikhlas Insurance AmBank Credit Card Payment Mortgage Payment Car Loan Payment Utilities Childrens Pocket Money Parents pocket money Travel and Vacation Expenses Eating out Fuel, Maintenance and Repair for Automobile Groceries Income Tax Angkasa Payment (Personal Loan Payment) YPEIM Payment Master Fees paid at UiTM

(RM) 51,166 3,600 620 4,800

(RM)

(RM)

60,186

3,468 6,000 1,260 2,500 19,866 8,760 2,400 1,440 2,000 800 500 1,500 300 610 1,859 120 5,500

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Book and Magazines Clothing Total Expenses DISSAVING

760 1,500 (61,143) (957)

COMMENT ON INCOME STATEMENT There are three items in income statement which are income, expenses and cash surplus or deficit. Income refers to any cash inflow in the income statement. Sources income of Encik Rozaidis family are salary, rental, ASB dividend and bonus total RM60, 186. Expenses represent money used for outlay. There are many different kinds of expenses which are living expenses, assets purchases, tax payments and debt payments. Some are fixed expenses, which are usually contractual, predetermined and involve equal payment each period typically each month such as mortgage and installments loan payments, insurance premiums and etc. Others such food, clothing, utilities, entertainment and medical expenses are variable expenses because their amounts vary from period to period. Total expenses for Encik Rozaidis family are RM 61,143. The largest portion contributed to the high expenses is mortgage payment at RM19, 866. Due to the total expenses is more than total income, Encik Rozaidis family incurred dissaving at RM 957

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ANNUAL BUDGET

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