UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF BUSINESS AND FINANCE

BACHELOR OF BUSINESS ADMINISTRATION (HONS) ENTREPRENEURASHIPS BACHELOR OF BUSINESS ADMINISTRATION (HONS) BANKING AND FINANCE BACHELOR OF ECONOMICS (HONS) FINANCIAL ECONOMICS

GROUP ASSIGNMENT (MARKING SCHEME)

Tutorial Group: T6

Group Members:
1. Chen Yun Sing 1204606
2. Chu Yoong Wee 1302285
3. Edmund Ng Jin Kia 1104349
4. Lee Jia Qian 1102622
5. Tan Sier Yen 1204327

Topic: Personal Financial Planner

No. Assessment Marks
Allocation
1 Introduction 5
2 Contents 25
3 Conclusion 15
4 APA format 5

50

Marks
Obtained

Overall comment:

Assessed by: Ms. Nur Amalina

Date:

Introduction
I am Ken, currently the year ended student of University Tunku Abdul Rahman (UTAR). I am 23 years old and currently having a part time job as a waiter of RM 800 per month and confirm recruit by one company can Big Capital firm after graduated.

I still have two more months to finish my study and I have been living together with my course mates in university. We rent a double storey house and the average rental for every person is approximately RM 300 per month (include Utility). My parents were buying a car to me 2 years ago for easily work and study. The transportation cost per month is within RM 200 to RM 250.

My personal property consist of an iPhone6 (RM 3,000), HP Pavilion Entertainment Personal Notebook (RM 2,800), and the total saving of RM 3,500 as working as part time. In addition, my parents have purchased Maybank Insurance Care 3 years ago for me to protect my future. After 3 more months, I will get total of RM 45,000. Currently, my only liability is PTPTN loan, which is RM 48, 000.

In order to survive in city and for better future life, I will start conduct and learning a personal financial planning to identify the short term, intermediate term, and long term goals want to achieve in future. After that, I need planning the appropriate strategy to achieve and take into account for risk, future economic condition and life situation.

Short term goals A short term goal refers to future achievement that u wish to accomplish within one year period. Therefore, I have to develop a personal financial planning to analyze my income and my spending. A good financial planning need to planned nicely and organized thus need to plan carefully step by step. First, I have to evaluate my financial health. I am a student and ready for graduate and work after next two months. I now have a saving of RM 3000 and approximately will increase to RM 3,800 with the part time job mentioned above. The allowance or income offered by Big Capital Company is RM 2,500 as fresh graduate. Commonly, the EPF of salary below RM 5,000 is 11% which mean I will get RM 2,225 after minus the EPF. I will live with my parents in Kuala Lumpur after graduate. The transportation fees will be increase due to the troll and my living place are relatively far, then I approximately need RM 300 after I work. Besides that, the extra RM 300 need for a telephone bill and other utility fees. I also need pay to parents as the living fees and car for RM 300 every month to thanks what they did to me and contribute something to help family. Therefore after all of this, I will leave RM 1,325 for achieve my short term financial goals. After getting a clear image of my current financial situation then I will proceed with my second step of financial planning process which develop my short term financial goals. The first short term a financial goal is travel to Perth with my friends after graduate which cost RM 1,200 per person as the celebrating of graduate. The second short term goals is purchase a full gym sets machine which cost me about RM 800 and I would achieve within one years While the third short term goal is register an investment course which cost RM 1, 500 to improve my knowledge. The last short term goal is purchase myself a pair of new sport shoes of RM 350 that suitable for sport activities like gym. Travel, full gym sets machine, investment course, new sport shoes are the short term goals I need to achieve. Therefore, the next step is identifying alternative course of action. In my course of action, flexibility is present in my short term financial goals. Flexibility also can defined as manipulate the plan based on current situation or unexpected situation. For example, the price of currency drop will affect the price of gym sets machine, it take 4 months’ time or longer to complete the gym machine purchases. Next, for the investment course, I planning saving RM 300 per month by reduce my entertainment cost and try to register and complete it as soon as possible, and it expected to complete within 6 months. For the shoes, extra RM 100 need reduce from my salary and it expected to take 3 month to complete about it. Overall, after minus the all the of gym machine from United States is higher than the price expected due to the inflation or depreciation of currency, and then maybe I will delay this purchasing by allocating this extra money for my saving or try to buy the machine with installment. In addition, in the currency depreciation or the flight ticket to Perth is expensive more than I expected, most probably we will delay our flight or travel to other places as alternative ways to save the budget. However, the investment course and shoes mostly probably is remain unchanged because will help me improve in future and promote a healthy life style. After determine the alternative course of action, I will start to create a frame and implement my financial action plan for each of my short term goals First, I will allocate RM 200 out of my net salary of RM 1,325 for the preparation of Perth travel. By approximately 6 months’ time, I will able to travel to Perth with my friends. Besides that, I will keep RM 200 of every month to buy a gym saving for goals, and I still left RM 525 for my saving and emergency. The final step will be the review and rives my plan. The purpose of this step is ensuring my plan is match with my actual financial plan with taking the account of current situation. If I able to achieve my short term financial goals, it will be increase my confidence in intermediate and long term goals financial planning.

Summary of Short Term Goals

| Amount (RM) | Amount (RM) | Salary | 2,500 | | Total income | | 2,500 | | | | EPF (11%) | 275 | | Parent | 300 | | Transportation fees | 300 | | Telephone bills and other utility fees | 300 | | Total Monthly Expenditure | | (1,175) | | | | Saving for travel | 200 | | Saving for gym sets machine | 200 | | Saving for investment course | 300 | | Saving for sport shoes | 100 | | Total Short Terms Goals Expenditure | | (800) | | | | Net Savings | | 525 | | | |
Table 1.1

Intermediate goals Intermediate goal is the one that I need accomplished within 5 years period. In order to planning the longer period financial goal, I need consider and take account of risk and uncertainty by analyze the economy condition as well. My goals within 5 years are buying a new car or second hand car, put money in any investment or fixed deposit)
Purchasing a new car or second hand car First, I need to purchase a new car or buying a second hand car in year 2016 since the car given by my parents need give to my computer for her study. Purchasing a car has been thought for long time. Since I do not have money monetary property and assets to afford a car, I would like to take a car loan form banks. I am currently finding a car which suitable for work, stable performance and lower prices. After the consideration and get references from my friends, I would like to choose the model Perodua Myvi which suitable for my lifestyle, the on-the-road price is total of RM 47,900 by refer the autofreak.com. I am planning to finish the payment within 4 years, which is before 2020. Expecting there is the increment in salary of RM 300 per year due to my great performance in work, and then I would get RM 2,800 in 2016 and assume it continuously increases. Besides that, I expecting manage to save RM 48,150 (RM 45,000 of Maybank Insurance care mentioned above + saving of 6 month in year 2015). I also need consider the other goals but not only for car, therefore I planning to pay more down payments which are 20% of car price, total of RM 9,580. Car price | RM 47,900 | Down payment (20%) | RM 9,580 | HP Loan amount | RM 38,320 | HP rate (flat rate) | 3% | Loan tenure | 4 years (48 months) | Total interest charges | (RM 38,320 x 3% x 4 years) = RM 4,598.40 | Total loan + interest | (RM 38,320 + RM 4,598.40) = RM 42,918.40 | Monthly installment | (RM 42, 918.40 / 48 months) = RM 894.13 |
Table 1.2

However, purchasing a car no only need consider the monthly installment, but also need take into account of insurance, tax, and other expenses. Car- related cost are summarize as following things: Car related cost | RM/month | Petrol and troll (remain unchanged) | 300 | Insurance | 125 (RM1,500 p.a. / 12months) | Road tax | 6 (RM 70 p.a. (1300cc)/ 12 months) | Service and maintenance | 70 | Total | 501 |
Table 1.3
Assuming that I am finish my short term goals, my total was get roughly RM 1600 left minus the monthly expenditure in year 2016 (RM 2,800 – monthly expenditure (table 1.1)). The monthly payment of car is cost me total of RM 1,395.13 (RM 894.13+ RM 501) and I will leave RM 204.87 for every month of year 2016. Luckily, my salary will increase every year, but the cost is fixed for 4 years.

Investment or Fixed deposit
For the investment or fixed deposit, since choose the stable and safe income, the fixed deposit would be my first choice. After doing research and comparison, according to ringgit-plus website, currently the interest rate offer by OCBC bank is highest. The interest of 4.2% per annum is attractive and safe for me. Therefore I will invest in OCBC MYR fixed deposit. I am planning to put in fixed deposit in OCBC banks for 5 years in order to generate more income and saving at the same times. As mentioned above, I will left RM 38,570 after the down payment of car (RM 48,150- RM 9,580) and I plan put RM 30,000 into deposit in order easy for the long term goals rather than put in the banks without any interest. The following table will be my expectation after 5 years: Years | Principal(RM) | Interest rate (%) | Total earning (RM) | 1 | 30,000 | 4.2 | 31,260 | 2 | 31,260 | 4.2 | 32,572,92 | 3 | 32,572,92 | 4.2 | 33,940.98 | 4 | 33,940.98 | 4.2 | 35,366.50 | 5 | 35,366.50 | 4.2 | 35,851.89 |
Table1.4
As we seen, I would earning the profit of RM 5,851.89 which almost 20% after 5 years. This amount of money will help me a lot in planning in long term goals and also giving a financial protection for my future.

(iii) Purchasing Insurance
For prevent the risk and unexpected events, I would like to purchase a medical insurance for own protection. Assume I am planning buying at 2017, since the increment of RM 300 of salary every year, and I have no any action on year 2016, the monthly net saving increase to RM 500. The insurance is a great investment for me since I not need to worry about the extravagant medical costs as I would be insured with such fees. Besides that, would be provided a medical card which includes many benefits such as hospitalization treatment, normal surgical fees and emergency accidents treatment fees. So, I would like to spend RM 150 per month for my medical insurance. The term of insurances would last for ten years and my net saving after decrease the insurance cost will left RM 350 per month after that.
Overall, those are three intermediate goals I want to achieve within 5 years period. The following table will be my expected income and expenses in next 5 years. Assuming the monthly expenditure is increase of RM 150 per annually and the salary was starting slow increase to RM 200 per years.

Year 2016(annually) | Income (RM 2,800 x 12) (RM 300 increment of salary) | RM 33,600 | Total saving | RM 48,150 | (-) down payment of car | RM (9, 580) | (-)Monthly expenditure (epf, parent and etc.) | RM (14,400) | (-) total car expenses (RM 1395.13 x 12) | RM (16,741.60) | (-) invest in fixed deposit | RM (30,000) | Total money left | RM 11,028.40 | | | Year 2017 | | Income (RM 3,100 x 12) | RM 37,200 | Saving left | RM 11, 028.40 | (-)Monthly expenditure (epf, parent and etc.) | RM (14,550) | (-) total car expenses | RM (16,741.60) | (-) insurances (RM 150x12) | RM (1,800) | (+) gain form fixed deposit | RM 1,260 | Total money left | RM 16,396.80 | | | Year 2018 | | Income (RM 3,300 x 12) | RM 39,600 | Saving left | RM 16,396.80 | (-)Monthly expenditure (epf, parent and etc.) | RM (14,650) | (-) total car expenses | RM (16,741.60) | (-) insurances (RM 150x12) | RM (1,800) | (+) gain form fixed deposit | RM 1,312,92 | Total money left | RM 24,388.12 | | | | | Year 2019 | | Income (RM 3,500 x 12) | RM 42,000 | Saving left | RM 24,388.12 | (-)Monthly expenditure (epf, parent and etc.) | RM (14,800) | (-) total car expenses | RM (16,741.60) | (-) insurances (RM 150x12) | RM (1,800) | (+) gain form fixed deposit | RM 1,368.06 | Total money left | RM 34,414.58 | | | Year 2020 | | Income (RM 3,700 x 12) | RM 44,400 | Saving left | RM 34,414.58 | (-)Monthly expenditure (epf, parent and etc.) | RM (14,950) | (-) total car expenses | RM (16,741.60) | (-) insurances (RM 150x12) | RM (1,800) | (+) gain form fixed deposit | RM 1,425.52 | (+) return of fixed deposit principal | RM 30,000 | Total money left | RM 76,748.50 |

* Long Term Goal
PTPTN Loan Repayment
There are two months more I will graduate from Bachelor of business Administration (HONS) Banking and Finance in year 2015 at UTAR. As my family cannot afford the study fees so I apply for the PTPTN loan in order to complete my studies. Based on the rules of PTPTN organization, we need to repay the loan after 6 months we completed the studies. If follow the rules means I need to start to repay the loan on next years. The PTPTN organization last year announced that the loan borrowers can get 20% discount if they repay their loan in full amount by March 31 2015 and those unable to repay in full also can get 10% discount if they make payment for 12 consecutive months.
For the latest news about PTPTN, the Ministry of Education announced that the PTPTN borrower now only need to repay once their wages hit a certain threshold. I will start to repay my loan after I graduate 6 months and I get a stable job. I need to pay an administrative fee of 1% per years within the repayment period which is between 5-20 years. If you obtained a first-class undergraduate students may apply for exemption from repayment of PTPTN loan but I do not have those result so I need to repay my loan every months.
Based on the organization PTPTN, the repayment period is according to level of study of the students. As my study level now is degree at private Institutions of higher learning (IPTS) so the repayment period is up to 15 years. My principal of my PTPTN is RM48000.00. When I repay the loan, I need to plus the extra charge in administration cost which is RM7200.00 (RM4800*1%*15years) so the total of my repayment is RM55200.00. Thus, I need to repay RM306.00 (55200/180 months] and it means I will repay full amount at the age of 38.
There are various ways to repay the PTPTN loan such as pay over the counter, online banking or direct salary deduction. I will choose the method of direct salary deduction. This is because if I need to settle my other financing problem, I can apply for the cancellation of my loan repayment and I can get the cancellation letter within 7 working days. Besides that, I no need to repay my loan over the counter and waste my time to wait my turn to repay loan. * Retirement Planning-Employees Provident Fund (EPF)
Retirement planning involved the process of developing financial planning. Normally retirement scheme consist of money in a pension account and a destination for saving money for the future such as EPF.
EPF is the most popular of the individual investment that owned by employee. As a rule, any company with more than 20 employees need to registered with EPFO. It aims to assist employees save a small portion of their monthly salary which is used when the employees lost their ability to work or during their retirement life. This investment are gathered by many employees through a trust investment.
After I graduate, I expect my monthly income will be RM2500 and will increase by RM300 every year. As the EPF is deduct every month from my salary so I using the table below to calculate the total amount of EPF (excluding the EPF) I will have when at the age of 39. The table separate out 70% from EPF account for account 1 and 30% for account 2 which is prepared for supplementary benefits.

Age | Salary
(RM) | 11% EPF from me (RM) | 12% EPF from employer (RM) | Total(RM) | A/C 1 (70%)(RM) | A/C 2 (30%)(RM) | 24 | 2500*12=30000 | 0.11*30000=3300 | 0.12*30000=3600 | 6900 | 4830 | 2070 | 25 | 2800*12=33600 | 0.11*33600=3696 | 0.12*33600=3744 | 7440 | 5208 | 2232 | 26 | 3100*12=37200 | 0.11*37200=4092 | 0.12*37200=4464 | 8556 | 5989.2 | 2566.8 | 27 | 3400*12=40800 | 0.11*40800=4488 | 0.12*40800=4896 | 9384 | 6568.8 | 2815.2 | 28 | 3700*12=44400 | 0.11*44400=4884 | 0.12*44400=5328 | 10212 | 7148.4 | 3063.6 | 29 | 4000*12=48000 | 0.11*48000=5280 | 0.12*48000=5760 | 11040 | 7728 | 3312 | 30 | 4300*12=51600 | 0.11*51600=5676 | 0.12*51600=6192 | 11868 | 8307.6 | 3560.4 | 31 | 4600*12=55200 | 0.11*55200=6072 | 0.12*55200=6624 | 12696 | 8887.2 | 3808.8 | 32 | 4900*12=58800 | 0.11*58800=6468 | 0.12*58800=7056 | 13524 | 9466.8 | 4057.2 | 33 | 5200*12=62400 | 0.11*62400=6864 | 0.12*62400=7488 | 14352 | 10046.4 | 4305.6 | 34 | 5500*12=66000 | 0.11*66000=7260 | 0.12*66000=7920 | 15180 | 10626 | 4554 | 35 | 5800*12=69600 | 0.11*69600=7656 | 0.12*69600=8352 | 16008 | 11205.6 | 4802.4 | 36 | 6100*12=73200 | 0.11*73200=8052 | 0.12*73200=8784 | 16836 | 11785.2 | 5050.8 | 37 | 6400*12=76800 | 0.11*76800=8448 | 0.12*76800=9216 | 17664 | 12364.8 | 5299.2 | 38 | 6700*12=80400 | 0.11*80400=8844 | 0.12*80400=9648 | 18492 | 12944.4 | 5547.6 | 39 | 7000*12=84000 | 0.11*84000=9240 | 0.12*84000=10080 | 19320 | 13524 | 5796 | Total | 912000 | 92720 | 109156 | 209472 | 146630.4 | 62841.6 | The table above shows that account 1 have RM146630.4 and RM62841.6 in account 2.

Estate planning
I planned to buy a house when I reach 30 years old. I assume the housing price for the single story house will be RM200,000 and the interest rate for this housing loan offered by Public Bank is 4.45%. In addition, I choose to pay 20% of down payment which is RM40,000 for the housing loan. I can withdraw money from the deposit account to pay this down payment. The reason I choose to pay higher down payment is the lower the down payment I pay, the more interest payment I need to pay in the future. Next, I would like to borrow this housing loan for 20 years. This property can increase my wealth since the housing price is always appreciated over time.

House Price | RM 200,000.00 | Down payment (20%) | RM 40,000.00 | Loan Required | RM 160,000.00 | Home Mortgage Rate | 4.45% | Loan Tenure | 20 years (240 months) | Total Interest Charged | (160,000.00 x 4.45%x 20)= RM 142,400.00 | Total Loan (principal+ Interest) | (160,000.00+ 142,400.00)= RM 302,400.00 | Monthly Installment | (302,400.00/ 300)= RM 1260 |

Conclusion/ Recommendation Before the conclusion, there are some alternative solutions to overcome the problem or improve the financial planning. First, the travel for the Perth in the short term goal should be delay or change to other places. Since, as the fresh graduate, the income is low and need to buy many things. I think travel to Perth is too experience, the place should change to other economy place such as Bangkok or other interest place in Malaysia. Many travel company are offer many promotions and vulnerable deals such as Airasia is promoted year ended sale or month end sales, the promotion include the flight ticket and hotels only cost RM 500, it is far better cheaper and more suitable for a fresh graduate. Besides that, there are many websites such as Groupon and Tripadvisor are always doing travel promotion, the price is lower compare with normal times. The gym sets is expensive, there are other way to overcome this problem. I can choose the go the fitness center and it save a lot of money since I just start to work at that time. For example, now the True fitness center in on the 10th year anniversary promotion, it giving a free membership now. Paying by installment also one of the effective way to control the cash flow. According to Jones.E.W (1966), the author stated that the installment method or deferred payment is beneficial to consumers due to the easily of management fund and helping the consumers have a right to delayed the payment although it will accumulated to next payment. Overall, in order to improve the financial planning and cash flow of every month, I would like to change the mind which travels to Bangkok to reduce the cost since it looks interest and fun. Ken should buy the gym sets with installment because it’s lack of fund at the beginning and also provide stable and controllable expenses. While the investment course will remains unchanged, since it would help to increase my income in future. Furthermore, from the overview of intermediate goals, the purchasing or new car is occupying a biggest part form the overall expenses, it takes almost half of income every months. In order to reduce the expenses, buying the other car model is the best alternative way. In order to reduce the cost, Perodua Axia is the best choice since it fulfills the criteria of quality, cost saving and stable performance. Since the Axia is also manufacture of Perodua, the quality is guarantees. In addition, I also consider the current situation and future use, the Axia is suitable for both personal use and also suitable after forming a new family in future. But most important part is the price of Perodua Axia is only half of the Myvi. According to Perodua website, Axia is only cost almost RM 30,000 for buying a new car. After the calculation, it takes RM 977.50. This price affordable and lower than RM 1,395.13 every month, with consider same conditions like interest, expenses, maintenance, down payment and insurance. In addition, invest in fixed deposit is profitable and safety. However, there are some other alternative choices with different kind of risk. From the fundsupermart.com, the return 5 years fund return is higher compare with the fixed deposit. The Eastspring Investment Small-Cap Fund provides the return total of 21.94%. In other words, I will get total of RM 6, 582 of profit after 5 years period. However, the funds stated in the website all with higher return, but it also takes a high risk. Krantz, D. and Kunreuther, H. (2007) also saying that use the emergency fund and useable resource to invest is put yourself into dangerous. Investment is always come with risk, Ken should consider about the life goals, resources, plans and decision rules. Tyson,E. (2010) stated that invest in education, research before buying and using the money effectively is the key to personal finance success. After doing the research, Perodua Axia is better choice after the consideration of cash flow and financial problem. However, I will remain the investment of fixed deposit after making the comparison. The although the return of fixed deposit (RM 5,851.89) is lower than invest in Eastspring Investment Small-Cap Fund (RM 6,582), but the risk of fixed deposit is far lower than Eastspring Investment Small-Cap Fund. In addition, the return of fund have not very big gap with the fixed deposit. Therefore, I will remain invest in fixed deposit. While the insurance will also remain unchanged due to the protection of property and reduce my expenses during the illness.
Last but not least, according to Jimborean and Najman (2005), available evidence suggests that households in developing and transition economies tend to save in cash. The low reliance on financial intermediaries for saving decision has the potential for adverse effects on economic development. In order to gain sufficient cash, I decided to invest in saving plan so that I am able to make the down payment for the purchase of house and car as well as to payback PTPTN loan. This behavior enables me to save the surplus funds but not spend it all. As our information, nowadays youngest always spend more than what they have. Therefore, I have to avoid making too much consumption to the goods and service that I don’t really need it. I recorded down all the monthly cash flow in order to ensure I did not spend more the monthly budget. At the same time, I also decided to deposit some of my surplus fund into fixed deposit account to earn interest income. All this investment may not benefits too much interest, but it is already enough because after all this investment reaches maturity, it gives me sufficient cash for me to make down payment for both house and car. The most important thing is, instead of invest in a high risk investment for higher return, I rather to be safety first by invest in savings account and fixed deposit in order to avoid any fluctuation for my wealth.

References
Airasiago (2015). Month End Sale! 20% off All Seats All Flights! Retrieved from https://www.airasiago.com.my/month-end-sale?&langid=2057&brandcid=airasia.mainbanner.monthendsale Fundsupermart (2015). Funds Ranked According to Returns. Retrieved from http://www.fundsupermart.com.my/main/fundinfo/topFunds.svdo?actionPerformed=topFunds Groupon(2015). True Fitness: 1 Month Membership plus 1 Session of Personal Training form RM 58. Retrieved from http://www.groupon.my/deals/klang/true-fitness-2/719648239
Jimborean, R. & Najman, B. (2005). Trade off between cash and deposits in transition economies. Retrieved from http://web.econ.ku.dk/fru/conference/Programme/Friday/A5/Trade%20off_Najman.pdf
Jones, E.W (1966). Deferred Payment Sales: The Installment Sale Provisions Re-exammined. Gonzaga Law review, 1, 53-76.
Krantz, D., and Kunreuther, H. (2007.). Goals and Plans in Decision Making. Judgment and Decision Making, 2(3), 137-168.
Perodua (2015). Axia Price List. Retrieved from http://www.peroduanewcar.com/axia/axia-price-list/
Ringgit-plus (2015). Best Fixed Deposit Promos in Malaysia. Retrieved from https://ringgitplus.com/en/fixed-deposit/
True Fitness (2015). Events and Pormotions. Retrived from http://www.truefitness.com.my/events-promotions/promotions
Tyson,E. (2010). Personal finance for dummies (6th ed.). Hoboken, N.J.: John Wiley & Sons.
Zaharin, A. (2015). Perodua Myvi Now Open For Bookings. Retrieved from
http://www.autofreaks.com/news/refreshed-perodua-myvi-now-open-for-bookings-we-have-the-official-price-list/