UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF BUSINESS AND FINANCE

UBFB3143/UBFB3843 PERSONAL FINANCIAL PLANNING AND MANAGEMENT
MAY 2020

INDIVIDUAL ASSIGNMENT

TUTORIAL GROUP : T ______

NAME ID NO. PROGRAMME

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Topic: Personal Financial Planner

Marks Marks
No. Assessment
Allocation Obtained
1 Introduction 20
2 Goals 25
3 Financial strategy 40
4 Conclusion 10
Reference, language grammar,
5 5
spelling and citation
Total 100

Overall comment:

___________________________________________________________________
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___________________________________________________________________
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Assessed by: ____________________

Date:______________

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Introduction

I have interviewed Lim Kim Huat for the purpose of my assignment to study his
current financial condition. Mr. Lim is 48 years old and currently work as a sales manager in
Mildeast Avenue Sdn. Bhd at Penang with a monthly salary of RM8000. There are four
members in his family, including his wife, and one daughter and son. His elder son is
currently working, and his younger daughter is currently studying in the secondary school.
The assets owned by Mr. Lim can be divided into three parts which are personal possession,
liquid assets and investment assets. For personal possession, he owns a double-story house
and two cars which are Nissan Almera and Honda HRV. For liquid assets, he is having a
saving of RM30000 in Public Bank and also invest in fixed deposits. Mr. Lim’s retirement
fund which is in his EPF account currently valued at RM30000. Finally, as his investment
assets, Mr. Lim invested RM22000 in the stock market and currently earns an average of
RM400 per month.

Mr. Lim’s liabilities can be simplified into short-term liabilities and long-term
liabilities. For short-term debts, Mr. Lim has RM20,000 in credit card debt and still has to
pay RM500 per month. For long-term debts, Mr. Lim is having15-year car loan of RM99,800
from Honda HRV with a monthly repayment of RM550 and RM450000 of a 30-year double
house loan with a monthly repayment of RM1,500.

As a responsible father and husband, Mr. Lim has his own savings plan, investment
plan and medical plan. This is because he wants to prepare some money for his son's college
tuition and retirement. Regarding Mr. Lim’s current savings plan, he chose to save it to a
public bank for convenient use and keep part of his savings in public bank and fixed deposits
at an annual interest rate of 2%. For the investment plan, he chooses to invest in the stock
market for a long-term plan, which allows him to get an average monthly return of 2% to 5%.
Finally, Mr Lim enjoys medical insurance of up to one million ringgits per year with
unlimited lifetime. The medical insurance was purchased at the age of 25. Due to its
investment-linked plan, the medical insurance includes RM30,000 life insurance and
RM50,000 critical illness.

Financial Goals

By determining our financial goals, we should first understand our attitude towards
money and the purpose behind it. Through the dialogue with Mr. Lim, I know that he wants
his retirement life to be stable and comfortable. Mr. Lim is the head of the family, and his

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goal is to provide better living conditions for his family. He also hope that he will have an
annual family trip in his retirement life. After clarifying Mr. Lim's attitude towards achieving
his goals and current financial situation, I will formulate clear financial goals based on
SMART. Some of the goals that Mr. Lim hopes to achieve in the future are short-term goals,
medium-term goals and long-term goals. First, Mr. Lim’s short-term goal is to save nearly
RM56,000 for his daughter’s continue study at university. Therefore, his short-term goal will
take about 2 years to complete. Mr. Lim knows that her daughter can get a university
scholarship, but he knows that the standard of living in Kuala Lumpur is much higher.
Therefore, the savings include not only tuition fee but also living expenses and
accommodation expenses.

Next, the mid-term goal is what we hope to achieve within 1 to 5 years. In order to
achieve his mid-term goal, Mr. Lim needs to save RM40,000 in 4 years to make annual
family trips during retirement. This is because he hopes to retire after 5 years and have a
relaxing and memorable trip throughout his retirement life. Mr. Lim has a monthly surplus of
2,993 ringgit, which allows him to save on annual family travel expenses easily. Therefore,
for Mr. Lim, achieving his mid-term goal of annual family travel during his retirement should
not be a problem.

Finally, for long-term goals, Mr. Lim wants to save enough money after retirement.
From now on, this may take about 15 years because retirement requires a lot of funds. His
ideal retirement amount is RM500,000 which is enough to use part of his funds for
investment in his retirement life. After reaching retirement age, Mr. Lim can get RM80000
from the retirement fund, but these assets are not enough to support his long-term goals. Mr.
Lim only invested RM20,000 in the stock market and earned RM400 a month. Mr. Lim needs
to use retirement funds, savings and fixed deposits to invest in stock markets to achieve this
goal. In addition, I am convinced that RM500,000 and pension and investment income are
sufficient to sustain his retirement life.

Financial Strategy

There are three goals can be achieved using financial strategies. Although I am sure
that Mr. Lim should have no problem in achieving these financial goals, I would like to
propose some financial strategies to improve the efficiency of achieving these goals. First of
all, Mr. Lim’s short-term goal is to have his daughter’s university tuition, as well as living
expenses and accommodation expenses of RM 56,000 within 2 years. Currently, Mr. Chong

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has saved approximately RM30,000 in his public bank savings account and RM25,000 in his
existing fixed deposit account. Under this circumstance, I suggest Mr. Zhuang to deposit all
funds into the May Bank eFixed Deposit Account. This is because the FD interest rate
(2.6%) offered by May Bank is higher than savings accounts (0.25%) and current fixed
deposit accounts(2%). In addition, it also provides greater convenience, because new
placements can be made anytime and anywhere through Maybank2u (Maybank2u, 2020). For
a fixed deposit of RM30000 + RM25000 = RM55000, Mr. Lim can earn a total of RM55000
+ (RM55000 x 2.6% x 2years) = RM57860 in 2 years. This money can pay for his daughter's
future accommodation and food expenses at the university.

Next, for the mid-term goal, Mr. Lim hopes to save RM40,000 in 4 years for annual
family trips during retirement. Therefore, I suggest that Mr. Lim can make investment plans
for properties and collect rental from tenants. As I know, Mr. Lim has a monthly surplus of
RM 2,993, which is good for him to easily own a property in Penang. According to EdgeProp
(2020) a condominium located in the Batu Kawan, Penang is only cost RM2261 for monthly
repayment without down payment, legal fees and printing fees and also provide 2 years of
free management fees and it is such a benefit to own the property. Besides that, the property
is near shopping centers, university towns, hospitals, and facilities, so you can easily rent
apartments. Mr. Lim can charge a monthly rent of RM1800 when the condo is completed in
2022. It will take another two years to earn RM1800x12x2 years = RM43200. Therefore, Mr.
Lim can successfully achieve the mid-term goals and enjoy the annual family trip after
retirement.

Finally, for the long-term goal of more than 5 years, it is well known that Mr. Lim
hopes to save enough RM500,000 after retirement. Mr. Lim can adopt 3 suggestions on
financial planning. First, for savings plan, there is actually certain product that can help Mr.
Lim with savings plans, such as savings insurance. For example, Prudential provides
PRUCash Double Rewards, which enable policy holders to pay monthly, with an annual
income of 3% from the first policy year to the fifth policy year, and 6% from the sixth policy
year (Prudential, 2020). In addition, the plan has 100% of the initial sum assured plus the
final annual survival benefit plus the total bonus at the end of the policy, including a choice
of 10, 15 or 20 years of premium payment term. Saving insurance may be the best long-term
savings tool as the interest rates of fixed deposit is getting lower and lower. Therefore, I
suggest that Mr. Lim allocate part of his monthly savings in the savings insurance instead of
saving in fixed deposits.

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 Next, in terms of insurance plans, Mr. Lim linked investment insurance with medical
insurance, with a maximum annual limit of RM1 million. It also includes life insurance and
critical illness insurance, up to RM30000 and RM50000 respectively. This is enough to meet
Mr. Lim's current medical insurance needs, but not enough to pay for life insurance because
Mr. Lim is getting older. Therefore, I suggest Mr. Lim apply for eTiqa's Ezy-Life security
insurance. It provides a minimum of RM50000 in compensation, which is paid when an
accident or illness causes death or disability (Etiqa, 2020). In addition, it offers choice of year
or monthly flexible premium frequency. It also allows to choose plan tenure from at least 5
years to the policy anniversary before the 80th birthday. Therefore, Mr. Lim can flexibly pay
monthly or annually and withdraw the money according to his needs and affordability.

Finally, in order to achieve long-term goals, it is recommended that Mr. Lim use his
main financial resources for investment plans in the stock market. If he gets the increment
in salary, he can save RM2000 per month and invest in investment portfolio. It is
recommended that Mr. Lim learn about investment knowledge in his spare time so that he can
profit in his retirement life. Mr. Lim can allocate half of his monthly savings to the stock
market, which may allow him to get 20%-30% returns every year. In addition, he can put his
remaining monthly savings into a relatively low-risk mutual fund to diversify his investment
portfolio because for some well-performing funds, the fund can generate about 9% to 10%
per year of annual income.

Conclusion

Overall, the personal financial plan is the main factor in achieving our financial goals.
First of all, financial planning makes our lives clear and provides direction and meaning for
our financial decisions (Beniwal, 2019). By making a good plan, we can deal with all the ups
and downs in life, such as serious illness or unemployment. We will also make some
monetary decisions that affect our standard of living and such changes may result in positive
or negative changes in the financial situation. Therefore, the financial plan predicts the
financial needs under different conditions and ensures that a smooth financial process is
always maintained.

Besides that, personal financial planning can help identify financial errors and reduce
risks (Singh, 2018). This is not only an expense, but the overall financial plan will expose the
financial mistakes we might have made, and it can be easily resolved. When making
appropriate financial plans, we can better determine the insurance coverage required. For

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example, proper financial planning allows us to analyze opportunities for investing in idle
funds or debt consolidation. Therefore, we do not have to pay too much for any unnecessary
insurance nor will we end up with insurance less than the required insurance amount.

Finally, the importance of personal financial planning is to ensure retirement.

According to (Singh, 2018), achieving your family goals is the overall goal of having a
comfortable post-retirement life. Only a financial plan that takes care of your lifestyle is
possible. In addition, cash reserves help take care of medical expenses and other emergencies.
When expenses continue but income dries up, a proper financial plan will help us create
enough funds for your retirement. It is recommended to invest as early as possible to achieve
the life goals.

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 REFERENCES

Beniwal, H (2019). Importance of financial planning in your life. Retrieved from https://w
ww.tflguide.com/importance-of-financial-planning/

EdgeProp (2020). Rediscover Batu Kawan. Retrieved from https://www.edgeprop.my/listin

g/sale/1225312/penang/batu_kawan/nonlanded/condominium-apartmentservicedresi
dence/sinaran-batu-kawan-near-ikea-0-downpayment--cash

Etiqa. (2020). Ezy-Life Secure Insurance. Retrieved from https://www.etiqa.com.my/v2/life-

insurance-family-takaful/ezy-life-secure-insurance

Maybank2u, 2020. EFixed Deposit Account. Retrieved from https://www.maybank2u.com.

my/maybank2u/malaysia/en/personal/accounts/fixed_deposits/efixed_deposit.page?ut
m_source=involveasia

Prudential. (2020). PRUCash Double Reward. Retrieved from https://www.prudential.com.

my/en/our-products/products/prucash-double-reward/

Singh, A. (2018). Ten reasons why personal financial planning is important. Retrieved from
https://thriveglobal.com/stories/ten-reasons-why-personal-financial-planning-is-
important/

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Appendix I

Below is the income statement of Lim Kim Huat for June 2020

Lim Kim Huat

Income Statement for June 2020

Income RM RM
Salary 8000
Interest earn on fixed deposit (2%*25000)/12 42
Average capital gain on stock market 400 8442
Total Income

Expenses
House Loan 1500
Medical Insurance 200
Life Insurance 100
Food expenses 1000
Daily supplies 300
Car Loan 550
Credit card loan 500
Utilities bill 400
Petrol and Toll Expenses 600
Entertainment expenses 200
Others 100
Total expenses 5450
Surplus (8442-5450) 2992

Based on Mr Lim’s income statement, we can see that every month he will have a monthly
surplus of Rm2992.

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Appendix II

Below is the personal balance sheet of Lim Kim Huat for June 2020.
Lim Kim Huat
Personal Balance Sheet as at 31 June 2020

Asset RM RM RM
Liquidity Asset
Saving in Public Bank 30000
Fixed Deposit 25000 55000

Investment Asset
Stock Market 22000
Retirement Fund 30000 52000

Personal Possession
Automobile (2015 Honda HRV) 99800
(Depreciation 35% ) 99800*35% (34930) 64870
Automobile (2012 Nissan Almera) 66000
(Depreciation 65% ) 66000*65% (42900) 23100

Total Asset 194970

Short Team Liability

Credit card balance 20000

Long term liability

Car Loan Balance 50000
House loan Balance 110000 160000
Total liabilities (170000)
Net worth(194970-170000) 24970

Based on Lim Kim Huat’s income statement, he is able to generate RM35904 of surplus
every year. From his balance sheet, we can see that Lim Kim Huat is having positive net
worth with RM24970 in the current financial position.