FIN 61004

PERSONAL FINANCIAL PLANNING

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Compulsory
Text Book
•Main Text Book:
•Kapoor, J. R., Dlabay, L. R. &
Hughes, R.J. (2022), Focus on
Personal Finance, 7th Edition,
McGraw-Hill (International
Edition)
 FIN 61004
PERSONAL FINANCIAL PLANNING
Assessments Allocation Submission Date
TEST- Face to face 15% Friday, 2023 (Week 5)
(during
lecture/lecture hall)
Individual 35% Thursday, 2023 (Week
Assignment 11) not later than 2 p.m.
(4,000 words)

Final Examination- 50% Exam week

Face to Face
Students’ Consultation Hours
Dr. Shaliza Alwi (Lecturer) 4

Email : [email protected]
Consultation Hours: Tba

Tutors:
Dr Kelvin Lee Yong Ming
Email : [email protected]
Consultation Hours: Tba

Notes:
For appointments other than the above time, please email/contact the lecturer or
tutors to check availability at least 1 or 2 day(s) prior to the appointments.
Example of Asses sment 4

Coursework Final Final Result Final Result

(%) Exam(%)

70 38 54 Fail

38 70 54 Fail

40 50 45 Fail

38 38 38 Fail

40 40 40 Fail
 5

Assessment Offences (Additional Clause)

The University is to check any work submitted by students using
text comparison software, for instance Turnitin. The similarity index
produced by the software is an important tool to assess a
student’s performance. However, the index is not the only tool to
conclusively determine the existence of breach of academic integrity.
It is important to note that although the rate of similarity maybe
significantly high or 0therwise, the lecturer/tutor/instructor is
responsible to exercise his or her independent professional
judgement to determine the actual existence of a breach of academic
integrity.
 Lectures and Tutorials
Lectures can be:
o Overview of content
o Detail of content
o Additional to textbook
o All of these
o Partial lecture slides available before lecture on TIMES
o Attendance will be marked and recorded.

Tutorials
o Attendance will be marked and recorded.
o From textbook with additional questions
o All tutorial questions are available in the study guide
o Preparation for tutorials is crucial to succeed in this module
o Participation in learning activities are important

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 Lecture 1
Introduction to Personal
Financial Planning

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Learning Outcomes
1. Analyze the process for making personal financial
decisions
2. Develop personal financial goals
3. Assess personal and economic factors that influence
personal financial planning
4. Calculate time value of money situations associated with
personal financial decisions
5. Identify strategies for achieving personal financial goals for
different life situations

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 What is Personal Financial Planning?

The process of managing your money to achieve

personal economic satisfaction.

Set Objectives

Planning for future

Assessing assets & monetary needs
resources over life cycle

Estimating future
needs

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Get to know you

• Name
• ID
• Age
• Hobbies
• Where do you see yourself in 5 years
• Where do you see yourself in 10 years
• What are your life goals
• Views about work-life balance

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 S.I.R.E

Source : Private Pension Fund Website : http://www.ppa.my/getting-started/retirement-funding-formula/save-invest-retire-enjoy / 12

Once Rich Always Rich?...Think Again…

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Source : Calvalco & Hamdan (2015) Becoming bankrupt at 35, The Star Online (22 June 2015) , available at
http://www.thestar.com.my/News/Nation/2015/06/22/Becoming-bankrupt-before-35-Worrying-trend-of-about-25000-Gen-Y-Msians-i
n-debt-over-the-last-five-ye/ 16
accessed 30 July 2015
Source: https://www.akpk.org.my/debt-distress-many-are-30-40-bracket

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 Advantages of financial planning

1. Increased effectiveness in obtaining, using

and protecting financial resources.

2. Increased control of one’s financial affairs

3. Improved personal relationships

4. Sense of freedom from financial worries

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The Budgeting and Planning Process: Evaluating Your Financial
Health and Developing a Plan of Action
Six-step Procedure for Financial Planning

Continued… 1-20
Step 1:
DETERMINE YOUR CURRENT FINANCIAL SITUATION

• Evaluate income, savings, living

expenses, and debts
• Prepare a list of current asset and
debt balances and amount spent for
various items
• Match financial goals to current
income and potential earning power

Continued… 1-21
Step 2:
DEVELOP YOUR FINANCIAL GOALS

• Identify feelings about money and the

reasons for those feelings

• Determine the source of your feelings

about money

• Determine the effects of the economy

on your goals and priorities

• Make sure that your goals are your

own and are specific to your situation

Continued… 1-22
My Financial Dreams & Goals
My financial dreams are:
• ………………………..
• ………………………….
Financial
Dreams
• …………………………..
• ………………………….
• …………………………….

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Life Priorities

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 Wealth = Money + Family + Health + Happiness + Self-actualization
Gunaratnam,N. (2008)
Rank your life priorities (1=Most important….5= Least important)

Rank Importance placed in:

Money • Building up of material assets e.g. cash, property, shares

Family and close friends • Relationships with spouse, parents, children, grand-children,
relatives and close friends

Health • Physical fitness

• Positive mental state
Happiness • Sense of achievement and self-esteem
• Extrinsic – Fame, respect from others, and self-glory
• Intrinsic - Satisfaction with present life achievements, respect
of oneself, do things guided by inner purpose

Self actualization • Seek self-growth

• Expand our experiences and strive towards higher potential
• Charity work
• Religious activities (including serving and charity)

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Goal-Setting – The “SMART” Model
 S = Specific
 Goals should be simplistically written and clearly define what you are going to do –
Why? What? And How?

 M = Measurable
 Include tangible measurement of achievement

 A = Action-oriented
 Should be able to motivate and challenge you towards greater achievement. You need
to have the relevant knowledge, skills and abilities to achieve the goals

 R = Realistic/Result Oriented
 Should measure outcomes not activities

 T = Time-based
 Linked to a timeframe to promote a sense of urgency, or results in
tension between the current reality and the vision of the goal.
Did NOT apply S.M.A.R.T model

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What is Financial Freedom?

• Means different things to different people

• Anthony Robbins:
o Financial Security – Amount of money to cover
food, housing, cars, travel and basic entertainment
o Financial independence – You don’t have to work
but all your needs are covered
o Financial Freedom - You don’t have to work but
everything you can dream of is covered.

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Road Map to Financial Freedom
 Prevent  Strategies for  Enjoying fruits
leakages of “money to make of one’s labour
 Set Financial wealth money”  Give back to
 Creation of
Goals  Consider debt  Investment community
multiple  Retirement &
 Re- management, planning
sources of estate planning
programming tax and
income
mindset insurance
 Proper debt
(beliefs, planning
management
personality,
habits, goals)
towards
financial Wealth
matters giving
Wealth
Wealth growing
Wealth guarding
Wealth generating
Grounding

Source: Chan, P. (2011) Managing your personal Finances, Mc Graw Hill: Singapore

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Step 3:
IDENTIFY ALTERNATIVE COURSES OF ACTION

• Possible courses of action can be:

o Continue the same course of action
o Expand the current situation
o Change the current situation
o Take a new course of action

• Creativity in decision making is vital to

effective choices

• “Do nothing” can be a dangerous

alternative

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Sirivat Voravetvuthikun

Thailand’s Mr Sandwich happier 10 years on

http://www.thestar.com.my/Story/?file=%2F2007%2F7%2F7%2Ffocus%2F18226
050&sec= 31
Step 4:
EVALUATE YOUR ALTERNATIVES

• Different choices  Different consequences

o Opportunity cost - What you give up

when you make a choice

o Trade-off of a decision cannot always be

measured in dollars. Sometimes the
cost is your time

• The best way to analyze and minimize risk is to

gather information from financial planning
sources.

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Influences on Financial Planning (continued)

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Step 5:
CREATE AND IMPLEMENT YOUR FINANCIAL ACTION PLAN

• Develop an action plan that identifies

ways to achieve financial goals
• Possible action plans can be increasing
savings, reducing spending, or making
provisions for taxes
• To implement action plans you may
need assistance from others

Continued… 1-34
Step 6:
REVIEW AND REVISE YOUR PLAN

• Financial planning decisions need to

be assessed regularly

• Complete review should be done at

least once a year

• More frequent reviews may be

required for changing personal, social,
and economic factors

• Regular reviews of decision-making

process can help in making priority
adjustments to achieve financial goals
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Developing Personal Financial Goals

• Influenced by: The financial need that

drives your goals
Time frame in which you
want to achieve your goals

 Consumer product goals

 Durable-produce goals –
infrequently purchased
Long term goals should be expensive products
planned in coordination with  Intangible-purchase goals
short-term and intermediate –
goals e.g health, education,
holidays
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My Financial Goals

Short Term Medium Term Long Term

(Less than 1 year) (1 to 3 years) (More than 5 years)

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 Example : Financial Goal Setting

Goals Time Priority Date to Estimated Amount to How to achieve my

dimension achieve Cost (RM) save/month goal

Buy first car ST 1 x/x/xx 10,000 800 From salary

Genuine MT 6 x/x/xx 4,500 400 Find a part-time job

Gucci Bag
I Pad 5 ST 2 x/x/xx 2,000 250 Find a part time job

Children’s LT 4 x/x/xx 100,000 5,000/year Insurance plan

education
fund
Retirement LT 5 x/x/xx 500,000 850 EPF monthly
fund deductions, mutual
funds
Europe tour MT 3 x/x/xx 15,000 1,000 Find a part time job,
Decrease monthly
expenditure
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 Influences on Personal Financial Planning
Life situation and Personal Values

Single * Marriage * Start and Raise Family Approaching Retirement Years

Retirement
Years

Stage 3: Wealth
Distribution
$ Stage 2: Wealth
Accumulation

Stage 1: Basic Wealth

Protection

0 20 30 40 50 60 70 80
Years of Age
1-40
A Typical Individual’s Financial Life Cycle

Source : Keown (2013)

 Effects of Rising Inflation
A person with money in a savings account Suffer
A person who is borrowing money. Benefit
A person who is lending money. Suffer
A person receiving a fixed income amount. Suffer

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 Tools in every financial situation

• Reduce debt usage

• Reduce spending
• Review savings and
investments
• Evaluate insurance coverage
• Avoid financial scams
• Communicate with family

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Opportunity Costs and the Time Value of
Money
1) Future Value of a Single Amount

2) Future Value of an Series of Deposits/Annuity

3) Present Value of a single amount

4) Present Value of an Annuity

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Time Value of Money – Future Value of a Single Amount
Future Value of $1 (single amount), Future-Value Interest Factor
 Source : https://www.imoney.my/articles/need-for-speed-the-time-value-of-money
Note :
• Year 1 interest = 10,000 (1+6/12) 12
= 616.78
• Assumes monthly compounding
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Time Value of Money – Future Value of an Annuity
Illustration of a 5-Year $500 Annuity Compounded at 6%
Future Value of a Series of Equal Annual Deposits (annuity),
Future-Value Interest Factor of an Annuity
Time Value of Money – Present Value of a Single Amount
The Present Value of $100
Time Value of Money – Present Value of a Single Amount
Present Value of $1 (single amount)
Present Value of an Annuity
Illustration of a 5-Year $500 Annuity Discounted Back to the Present at 6%
Present Value of a Series of Annual Deposits (annuity)
Present-Value Interest Factor of an Annuity
Source : https://www.imoney.my/articles/need-for-speed-the-time-value-of-money 53
 10 Principles of Personal Finance (Keown, 2014)

1. The best protection is knowledge

2. Nothing happens without a plan
3. The time value of money  Saving & Investment
4. Taxes affect personal finance decisions
5. Importance of liquidity for emergencies
6. Smart Spending Matters  Waste not, want not
7. Protect yourself against major catastrophes
8. Risk and return go hand in hand
9. Mind games, your financial personality and your money
10. Just do it!!

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 Strategies for achieving personal financial goals different life
situations
COMPONENTS OF PERSONAL FINANCIAL PLANNING
• Obtaining – Sources of finances – employment, investment, business
• Planning – Budgeting, tax and savings planning
• Saving – Resources for emergencies, unexpected expenses,
retirement, children’s education
• Borrowing – Control over credit purchases
• Spending – Controlled, impulsive versus compulsive spending, frugality
• Managing risk – E.g. insurance coverage to reduce financial uncertainty
• Investing – Regular income, long term growth, asset allocation
• Retirement and estate planning
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