FACULTY OF BUSINESS AND MANAGEMENT BA243 BACHELOR OF BUSINESS ADMINISTRATION (HONS.) HUMAN RESOURCES MANAGEMENT FIN533 PERSONAL FINANCIAL PLANNING ASSIGNMENT 1 : FAMILY’S FINANCIAL PLANNING PREPARED BY: KBA2433A NAME MATRIC NUMBER AIN NURSYABILA BINTI MUHAMMAD HATTA 2022928389 PREPARED FOR: DR. ZURAIDAH BINTI MOHAMED ISA DATE OF SUBMISSION: 11 MAY 2023
TABLE OF CONTENT No. Content Page Number 1.0 Acknowledgement 2 2.0 My Family Background 3 3.0 Financial Information ended 31 December 2022 4 4.0 Monthly Expenses Statement 2022 5 5.0 Balance Sheet as at 31 December 2022 6-7 6.0 Cash Flow Statement for the year ended 31 December 2022 8 7.0 Financial Ratio 9-10 8.0 Income Tax 11 9 .0 Comments and Advice 12 10.0 Recommendations 13 11.0 References 14 12.0 Appendix 15 1
ACKNOWLEDGEMENT In the name of Allah, the Most Gracious and the Most Merciful. All praises to Allah and His Blessings for the completion of this assignment. I thank Allah for all the opportunities, trials and strength that have been showered on me to finish writing this assignment. I experienced so much during this process, not only from the academic aspect but also from the aspect of personality. My humblest gratitude to the holy Prophet Muhammad (SAW) whose way of life has been a continuous guidance for me. First and foremost, I would like to thank my Personal Financial Planning (FIN533) lecturer, DR. ZURAIDAH BINTI MOHAMED ISA for her guidance, understanding and most importantly, she has provided positive encouragement and a warm spirit to finish this assignment. It has been a great pleasure and honour for me to have her as my lecturer. My deepest appreciation goes to all of my family members. It would not be possible to finish this assignment without the support from them. I would also like to thank my dearest father Muhammad Hatta, my mother Azila and three of my brothers which are Haziq Fiqry, Amir Hakimy and Hariz Naufal. I would sincerely like to thank all my beloved friends who were with me and supported me through ups and downs. Most importantly I would like to thank all my classmates from KBA2433A. May Allah shower the above cited personalities with success and honour in their life. 2
2.0 My Family Background In this assignment, I chose my own family to conduct this case study. My family consists of 6 members including me. My parents have been married for almost 22 years with 3 sons and 1 daughter, which is me Ain Nursyabila. My father’s name is Muhammad Hatta Bin Talib, 46 years old and working as a Manager at a private company, earning a monthly salary of RM9800 with EPF of 11 percent respectively. My mother’s name is Azila Binti Hashim, 44 years old and a full-time housewife. My father started working there before getting married. It means that he has worked there for almost 20 years. Next, my name is Ain Nursyabila and I’m the eldest of 4 siblings. I’m 22 years old and currently pursuing my studies at University of Technology Mara Sungai Petani Campus, Kedah. Next, Haziq Fiqry, 18 years old who has just finished his SPM and is waiting for the SPM results to continue his studies. Third, Amir Hakimy, 14 years old who currently studies at SMK Putrajaya Presint 14. Last one is Hariz Naufal, 5 years old who is still in kindergarten at Kemas Kindergarten near my house. We lived at Kampung Sungai Tapah Tambahan in a terrace house in Ipoh, Perak which my late grandfather gave to my father. Both my parents have 3 cars, of which 2 cars have been paid off namely Toyota Innova, and Perodua Viva while Ford Fiesta is still not paid off. They also have 2 more houses, a terrace and an apartment where both houses are rented out to increase side income, however the houses have not yet been paid for. 3
3.0 Financial Information ended 31 December 2022 Items RM Take-home pay - En Hatta 9,800 Take-home pay - Pn Azila 3,500 Saving account En Hatta 30,000 Saving account Pn Azila 13,500 Personal loan balance (monthly commitment is RM250) 7,000 Terrace house in Meru Perdana (market value) 250,000 Terrace house in Sungai Tapah (market value) - loan fully paid 300,000 Zakat per year 1,200 Terrace house in Meru Perdana loan balance 186,560 Monthly installment on Terrace house 972 Perodua Viva (market value) - loan fully paid 20,000 Toyota Innova (market value) - loan fully paid 30,000 Ford Fiesta (market value) 40,000 Ford Fiesta loan balance 52,492 Monthly installment on Ford Fiesta 1,094 ASB balance as at 31 December 2022 100,000 Rental income of Terrace House Meru Perdana 800 Groceries per month 600 Monthly allowance parent 500 Utilities and bills phone 700 Monthly transportation (Fuel, Toll, Parking) 800 Children expenses (per month, per children) 500 Clothing expenses monthly 500 Ipad air purchased in December 2022 2,700 Credit Card Balance 4135 Borrowed from a friend due in September 2022 500 Monthly Vacation 3,000 Dining per month 300 Taxation per year 3,600 House Maintenance per month 100 Donation to Rumah Anak Yatim Prima per month 200 4
4.0 Monthly Expenses Statement 2022 DETAILS JAN FEB MAR APR MAY Installment of Terrace House Meru Perdana 972 972 972 972 972 Installment of Ford Fiesta 1094 1094 1094 1094 1094 Personal Loan Comitment 250 250 250 250 250 Zakat 100 100 100 100 100 Groceries 600 600 600 600 600 Utilities and Bills Phone 700 700 700 700 700 Ipad Air ( Buy in December 2022) Parents allowance 500 500 500 500 500 Transportation (Fuel,Toll,Parking) 800 800 800 800 800 Children Expenses (per childern of 4) 2000 2000 2000 2000 2000 Taxation 300 300 300 300 300 House Maintenance 100 100 100 100 100 Donation to Rumah Anak Yatim Prima 200 200 200 200 200 Clothing 500 500 500 500 500 TOTAL MONTLY 8116 8116 8116 8116 8116
5 JUNE JULY AUG SEPT OCT NOV DEC TOTAL EXPENSES 972 972 972 972 972 972 972 11664 1094 1094 1094 1094 1094 1094 1094 13128 250 250 250 250 250 250 250 3000 100 100 100 100 100 100 100 1200 600 600 600 600 600 600 600 7200 700 700 700 700 700 700 700 8400 2700 2700 500 500 500 500 500 500 500 6000 800 800 800 800 800 800 800 9600 2000 2000 2000 2000 2000 2000 2000 24000 300 300 300 300 300 300 300 3600 100 100 100 100 100 100 100 1200 200 200 200 200 200 200 200 2400 500 500 500 500 500 500 500 6000 8116 8116 8116 8116 8116 8116 10816 100092 TOTAL PER YEAR 100092
6 5.0 Balance Sheet as at 31 December 2022 ASSET RM RM LIABILITIES RM RM Liquid Assets: Current Liabilities: Saving Account balance - Hatta 30,000 Credit Card balance 4,135 Saving Account balance - Azila 13,500 Borrowed from a friend 500 Total liquid assets 43,500 Total Current Liabilities 4,635 Lifestyle Assets: Perodua Viva 20,000 Long-Term Liabilities: Toyota Innova 30,000 Personal Loan Balance 7,000 Ford Fiesta 40,000 Ford Fiesta Loan Balance 52,492 Terrace House - Sg Tapah 300,000 Terrace House Meru Loan Balance 186,560 Ipad Air 2,700 Total Long Term Liabilities 246,052 Clothing 6,000 Total Lifestyle assets: 398,700 Total Liabilities 250,687 Invetment Assets: Terrace House - Meru Perdana 250,000 Net Worth 541,513 ASB balance 100,000 Total Investment assets: 350,000 TOTAL ASSET 792,200 TOTAL LIABILITIES AND NET WORTH 792,200
7 Calculation of Terrace House Meru Perdana 1. Loan Balance Purchased price – Downpayment = RM160,000 – RM1,000 = RM 159,000 2. Total Loan Loan Balance x Interest Rate = RM159,000 X 0.04 = RM6,360 X 30 years = RM190,800 + RM159,000 = RM349,800 3. Annual Installment Total Loan / Tenure = RM349,800/30 years = RM11,660 4. Outstanding Balance Annual Installment x Outstanding Balance = RM11,660 x 16 years = RM186,560 Calculation of Ford Fiesta 1. Loan Balance Purchased price – Downpayment = RM93,500 – RM500 = RM 93,000 2. Total Loan Loan Balance x Interest Rate = RM93,000 X 0.03 = RM2,790 X 9 years = RM25,110 + RM93,000 = RM118,110 3. Annual Installment Total Loan / Tenure = RM118,110/9 years = RM13,123 4. Outstanding Balance Annual Installment x Outstanding Balance = RM13,123 x 4 years = RM186,560
8 6.0 Cash Flow Statement for the year ended 31 December 2022 En Hatta Cash Flow Statement for the year ended 31 December 2022 Income: RM RM Salary En Hatta (9,800 x 12) 117,600 Less: EPF (11%) 12,936 Annual Tax 3,600 Take Home Pay 101,064 Add: Rental Terrace House Meru Perdana (800 x 12) 9,600 Total income 110,664 Less: Expenses Installment of Terrace House Meru Perdana (972 x 12) 11,664 Installment of Ford Fiesta (1,094 x 12) 13,128 Personal Loan Commitment (250 x 12) 3,000 Zakat (100 x 12) 1,200 Groceries (600 x 12) 7,200 Utilities and Bill Phone 8,400 Purchase Ipad Air in December 2022 2,700 Parents’ Allowance 6,000 Transportation - Fuel,Toll,Parking (800 x 12) 9,600 Children Expenses per children (2,000 x 12) 24,000 House Maintenance (100 x 12) 1,200 Donation Rumah Anak Yatim Prima (200 x 12) 2,400 Clothing (500 x 12) 6,000 Total Expenses 96,492 Contributions to Savings 14,172
9 7.0 Financial Ratio 7.1 Liquidity Ratio i) Current Ratio = = = 9.39 times Comment: The cutoff threshold of current ratio is 1. Mr. Hatta’s current ratio is 9.39 times, indicating that he has a significant liquidity position. This means, Mr. Hatta is currently in a safe position and he able to meet his obligation. So, for every RM9.39, he may pay every RM1 of existing liabilities. ii) Liquid Asset to Take Home Pay = = = 38% Comment: The cutoff point of liquid asset to take home pay is 3-6months which is from 25% until 35%. His liquid asset to take home pay is 38%, which his liquid asset is having low because it is more 35%. This means that he has a poor liquidity position, which puts him in risky position. In other words, Mr. Hatta unable to meet his obligations. Liquid Asset Current Liabilities RM 43,500 RM 4,635 Liquid Asset Salary - Tax RM 43,500 RM 117,600 - RM 3,600
10 7.2 Debt Ratio iii) Debt Ratio = = = 32% Comment: For private employees, the debt-to-income ratio cutoff is 30% and Mr. Hatta’s debt ratio is at 32%. Based on the cutoff, his debt ratio is more than 30%, it means he has more debt, which puts him in a risky position. ii) Debt Service Coverage Ratio = = = RM 4.10 Comment: The cutoff point of debt service coverage ratio is RM1. His debt service coverage ratio is at RM4.10. This means, he earns RM4.10 in take home pay for each RM1. As a result, he is in a safe position which he able to pay off his debt. Total Liabilities Total Assets RM 250,687 RM 792,200 Salary – Tax Total Installment RM 117,600 – RM 3600 RM 27,792
11 8.0 Income Tax MR. HATTA INCOME TAX FOR THE YEAR ASSESSMENT 2022 Income RM RM Salary 117,600 Add : Rental Income Received 9,600 Total Aggregate Income 127,200 Less: Donation 2,400 Aggregate of total Income 124,800 Less: Reliefs Self 9,000 Spouse 4,000 Children: Ain Nursyabila - Degree 8,000 Haziq Fiqry 2,000 Amir Hakimy 2,000 Hariz Naufal 2,000 Lifestyle: IpadAir 2,500 Total Personal Relief 29,500 TOTAL CHARGEBLE INCOME 95,300 Tax charge: ON THE FIRST 70,000 4,400 NEXT (RM 95,300 - 70,000) x 21% 5,313 GROSS TAX PAYABLE 9,713 Less: Tax Rebate Zakat 1,200 NET TAX PAYABLE 8,513 Less: STD 3,600 BALANCE TAX PAYABLE/ REFUDABLE 4,913
12 9.0 COMMENTS AND ADVICE In reference to the statement that was just made, Mr. Hatta owns assets or savings where the amount is large enough to satisfy his liabilities. More specifically, the total of his assets is RM 792,200, while the total of his liabilities is RM 250,687. It is not a problem for Mr. Hatta to pay his debt obligations, which include current liabilities and non-current liabilities, using the amount that is stated in the balance sheet and the percentages of ratios. He also has the chance to make another loan because his ability to pay the debt increased. However, this still shows that Mr. Hatta has more debt, which may place him in an untenable circumstance. Aside from his contributions to the ASB, Mr. Hatta can additionally decide to make another investment to accumulate additional savings for the future. The following piece of information is that this family has a net worth of RM 541,413, which indicates that their assets are greater than their liabilities and that they have additional savings in case of any unexpected events. According to the statement of cash flows presented earlier, Mr. Hatta and his family can accumulate some savings because their total income is greater than their total expenditures, which results in a total sum saved of RM 14,172. However, they have a quantity of money that they may save, the fact that this family's expenses are so high is a major cause for concern. Mr. Hatta has higher utility expenses than average, which come to RM 700 per month and might be lowered by decreasing the amount of energy and water used. In addition to that, Mr. Hatta was able to cut the monthly costs associated with transportation down to RM 500. This may allow Mr. Hatta to save more money for the future while also freeing up some of his budget.
13 10.0 Recommendations Investments planning is the main component of financial planning. Investment planning is the process of identifying financial goals and converting them through building a plan. (Eleanmarkets, 2020). In addition to investing money aside for the future, Mr. Hatta need also consider investing some of his money into investments. As a result, a rise in total assets might result in an increase in the net worth of an individual. Based on the information that is shown in the statement of the balance sheet, it can be deduced that Mr. Hatta made an investment in the rental of his property and ASB. When compared to the amount he would have to invest in ASB, the savings from renting his house amount to RM 9,600. Regarding ASB, there is no cap placed on the amount that we are willing to invest. In the future, for this family to continue their living without experiencing an excessive amount of anxiety, Mr. Hatta will need to make further investments to provide protection for unforeseen circumstances. Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve those goals. Mr. Hatta, who is currently employed in the private sector, is entirely dependent on the Employees Provident Fund (EPF), which contributed 11% of his monthly earnings. If Mr. Hatta wants to change his financial planning for the future, he needs to reconsider whether he should retire early. As for the recommendation, it was made that Mr. Hatta make contributions to the Private Retirement Scheme (PRS) to make further investments for his later years. As Mr. Hatta is between the ages of 45 and 50, he is eligible to select a low-cost fund choice from the available options. Because of this retirement plan, there will be sufficient funds for Mr. Hatta and his family in the years to come after he has retired.
14 11.0 REFERENCE Tax Rate. (2022). Lembaga Hasil Dalam Negeri. Retrieved from https://www.hasil.gov.my/en/individual/individual-life-cycle/how-to-declare-income/tax-rate/ Tax Reliefs. (2022). Lembaga Hasil Dalam Negeri. Retrieved from https://www.hasil.gov.my/en/individual/individual-life-cycle/how-to-declare-income/tax-reliefs/
15 12.0 APPENDIX