GROUP 4(E-BOOK) PFM

GROUP 4

LECTURER:
MADAM SYAZANA

MADAM RIANA

DPA10203 PERSONAL
FINANCIAL MANAGEMENT

(E-BOOK)

CONTENT & PAGES

3 MEMBERS IDENTITY 11-12 WHAT IS REPAYMENT PLANNING

OBJECTIVE
4
THE IMPORTANCE OF RETIREMENT

INTRODUCTION OF CREDIT TRAP 13-15 PLANNING
5 HOW DOES A DEBT TRAP WORK

HOW TO AVOID THE CREDIT TRAP
START SAVING RETIREMENT AT
6 & DEFAULT IN LOAN REPAYMENT YOUNG AGE

16-18 CONCLUSION
7-10

CLOSING...
17

Group member:

LUCIANA UBONG IVY SEE YA ANAK MUHD QHAIRIL RIZMAN
IGNATIUS BRODIE BIN SULAIMAN

(20DSK21F1023) (20DSK21F1038) MARIANA THOMAS (20DSK21F1020)

(20DSK21F1036)

Objective:

We will explain how to avoid the credit
trap and default in loan repayment.
We will explain the important of
retirement planning.
We will explain to start saving for
retirement at a young.

CREDIT TRAP

Credit trap happen when you pay just the
minimum each month and interest charge
will incur, and it will take you longer
to settle your outstanding balance
which will resulted in huge debts in a
short time frame

HOW DOES A
DEBT TRAP

WORK?

Whenever you borrow a loan from a moneylender, two
elements come into force the first is the principal loan
amount (the amount you borrow), and the second is the
interest (the amount the lender charges on the
principal loan amount).
You can only make progress in repaying the loan when
your principal starts reducing. But there’s a hitch here.
When you repay the loan every month, you make a
payment towards both the principal as well as the
interest. This is because most loans have amortising
structures. That means your loan is designed to be paid
off in a series of fixed payments over a loan tenure,
and each payment you make towards your loan applies
to both the principal and the interest.

HOW TO AVOID
THE CREDIT
TRAP &
DEFAULT IN
LOAN
REPAYMENT

HOW TO AVOID THE CREDIT TRAP & DEFAULT IN LOAN REPAYMENT

1.We must understand the card.

Look for one that best suits your circumstances.
If you go to a bank’s or a card provider’s website, you will see that the cards are segregated into various sections; -
mainly travel, shopping, fuel, cash back, premium or luxury.
Some of the important details to take note of are rate of interest, grace period, membership fees, and renewal or
annual fees.
Use the comparison tool.
Take care to understand how the card works and how the interest is applied. If the website’s explanation isn’t enough,
take the help of the Internet for more information.

2.If we can’t afford don’t buy it.

Credit cards are not a source of free money. In fact, using a credit card is like taking a loan.
A simple way to avoid card misuse is to charge only those purchases to the card which you know you will be able
afford even at the end of the month.
Increasing the credit card’s limit may sound attractive, and there are many offers to do so. Before you take up such an
offer, refer to the 20-10 rule. “Avoid borrowing more than 20% of your annual net income on all of your loans (not
including a mortgage).
And payments on those loans should not exceed 10% of your monthly net income," said a Visa spokesperson.

3) Set Up an Emergency Fund

Once you have an emergency fund, you will be less likely to fall into the trap of using a
credit card because you can tap the fund for emergencies such as car repairs or medical
bills instead of whipping out that credit card.

4) Create a budget

Without imposing spending limits on yourself, you can buy indiscriminately and never
know that there is a debt trap set up for you.
In contrast, you’re less likely to fall into the trap of excess credit card spending if you
establish a budget: a plan for how you intend to spend your money every month.

5) Avoid Credit Cards Completely

if you are over-reliant on credit cards, identify the reasons why you need them.
If your budget reveals that you're only overspending by a little, try switching a portion of
your spending from credit cards to cash or debit cards to cover your expenses.
The money you spend on a debit card gets withdrawn from a checking account, which
allows you to avoid the debt trap.

7. Firstly, you need to acknowledge 8. Create a priority list of all your
and admit that you have a debt needs.
problem.
Make debt repayment your first priority,
Identify areas that are causing you as that can have a positive and long-term
to fall into a debt trap. effect on your financial situation.
Create a plan to work on these Refrain from indulging in non-essential or
areas. even semi-essential items at least till you
Make a budget and prioritise your are back on track.
needs Opt for a debt consolidation loan
Make a budget and prioritise your Instead of repaying different loans at
needs different times in a month, you could
After a thorough analysis of your consider consolidating your high-interest
debt situation, you may now be debt by getting a low-interest personal
able to identify essential, semi- loan or a debt consolidation loan.
essential and non-essential After debt consolidation, you just need to
expenses. worry about making one payment to one
lender every month.

WHAT IS REPAYMENT
PLANNING?

A repayment plan is a
structured repaying of
funds that have been
loaned to an individual,
business or government
over either a standard or
extended period of time,
typically alongside a
payment of interest.

Following are the reasons why retirement
planning is essential:

One cannot work forever.
The average life expectancy is increasing.
Higher complications, e.g., medical
emergencies.
Best time to fulfil life aspirations.
Relying on one source of income is risky,
pension.
Do not depend on children.
Contribute to the family even during
retirement.
Start planning early and diversify
investments.
Therefore, to lead a peaceful and
uncompromised life during retirement, it is
essential to start planning and investing
towards it.

The
Importance

of
Retirement

Planning

THE IMPORTANCE OF RETIREMENT PLANNING

yssawyeluotubEicouovnbobaecurrjsescurkaoterlbaiymcynaeqecucugnutoptgsulmteialehirmaninetlfeauniiotfetmyllrneaaoteidt,rdnutaenyevrgebactipsatafliniotycynnouddharevterwelaawrecsliyereg,lsnhglstetsseetr.iiosnronacawfeegtkolomleshyfroesaseowaaautnnmorrvtayalysnfyveaiuonosfriulnygiuacndalnhrryostadyiynettsi.vogniahtcueegtIeraorrfosl 1. Long-Term Care

Long-term care refers to regular care for people
with a chronic illness or disability, such as
through an in-home caregiver, adult day care or
an assisted-living facility or nursing home.
Long-term care insurance is an option, though
policies differ on which forms of care they will
cover.
Incorporating long-term care costs into your

retirement savings calculations helps fill gaps in

coverage.

2. Finding Income Resources

Planning for retirement by investing in securities and in retirement-focused
tools such as employer-based pensions, Individual Retirement Arrangement
accounts, which are known as IRAs, and 401(k) plans will give you increased
resources to enhance that monthly income.

3. Protect Yourself Against Market Risk

If you begin saving for retirement early, you can cushion yourself against some of
this volatility.
Your finances will be able to handle these dips because you’ll have plenty of time
to ride out any short-term losses.
This means that you can take more aggressive action with your portfolio and
potentially yield higher returns.
As you get closer to retirement, that’s when you’ll start shifting from growing
your wealth to protecting all that you’ve saved.

4. Practice Financial Discipline

Prioritizing saving for retirement is doing your future self a huge favor – and
helps ensure that retirement is some of the best years of your life. It might
even enable you to retire early. All it takes is some smart financial planning.

Start Saving
Retirement
at Young Age

WHY IT IS WISE TO START SAVING FOR RETIREMENT AT

YOUNG

I. Demands on your money are only going to increase

it may seem difficult to save even a few thousand dollars a year when you’re
young and broke. But unfortunately, it’s not necessarily going to get any easier to
find spare cash as you get older. While your salary is likely to go up as you
develop professional experience, demands on your money will also increase.
Some of this increased spending comes from improving your quality of life by
doing things such as dining out more. But many people also have additional
expenses associated with commuting to work, buying a home, and raising a
family.

II. The value of compound interest

the reasons it’s important to start saving as soon as possible is that having a
longer horizon gives compound interest more time to work. Compound
interest is when the interest you earn on a balance in a savings or investing
account is reinvested, earning you more interest. It’s basically money-making
money. Compound interest also accelerates the growth of your savings and
investment over time.

III. Building solid habits

even if you can’t save hundreds of dollars each month at first,
putting some money away for retirement as soon as possible also
helps young people develop solid financial habits. It can help you
see the benefit of saving and help you build up other funds, such
as an emergency savings fund. You may also need to work with a
budget, which can help you stay on track and avoid debt over
time. And, as you see the money you’ve saved for retirement start
to grow, it can encourage you to continue the path towards
financial freedom.

 

IV. Better health due to lower levels of stress

Money problems are a major source of stress. According to the
American Psychiatric Association, over 70% of adults worry about
money, and that can take a toll on your physical health. Financial
stress is linked to physical conditions such as diabetes, heart
disease, migraine headaches, and poor sleep. Not only that,
money worries can cause anxiety and depression, robbing you of
peace of mind to enjoy your life today. Taking steps today to get

Conclusion

We hope you can gain knowledge on
credit trap & how to avoid the credit
trap & default in loan repayment.
Everyone really should start saving for
their retirement at young aoge as it will
greatly benefit them in future.
Plan your future smartly so you can
enjoy retirement.

Thank You
From us
THE END !