BA3123
FARAH DHEEBA
ID: 00005018
PERSONAL FINANCE
LECTURER: MR BERNAD
PROGRAMME: BAAF

Executive Summary
This financial plan consist the introduction of the student’s background and followed by the current financial position. Continued by the long term financial goals using the smart goal setting guideline which is important for the financial plan to be on track and achieved it in the future. Then, an environmental scanning and analysis on the politics, economy, social, and technology which is relevant to the goal. In addition, an analysis on opportunity cost have been done by comparing personal and financial opportunity cost. Followed by action plan regarding how the financial plan is carried out. In addition, contingency measure on the action plan. Finally, a conclusion on the whole financial goal.

Personal Data
Name: Farah Dheeba
E-mail: f.dheeba@yahoo.com

Current Financial Position
Currently a college student, not taking up any part time job either. Presently being fully financially support by parents. They paid for all the fees and gave allowance too. In order to lessen their burden they are few things that I do. Nowadays, it is impossible to live without laptops and smartphones; it is a necessity. But these types of gadgets have their own brands and prices range from affordable to expensive. Therefore, it is important to bear in mind that I’m a college student and I don’t need to keep on updating to a new device on every new release. I just need to pick a laptop that can last up to three to four years. Furthermore, I’ve learned my lesson on something. I used to think that since I’m in college I just need to buy things that are cheap as possible. I’ve made these mistake few times and realized that there is a big difference between buying cheap as possible and buying best quality possible so it last. There are some thing that it is okay to apply the former method but it all depends on the situation. In addition, making new friends and hanging out is important too but social activities budget is something that is quite hard to maintain if too often spending it mindlessly with friends. Furthermore, there is no need to buy new textbook every semester. It is possible to borrow the textbook needed from library or senior that had it and photocopy it outside with a cheaper price. An original textbook could cost RM90 and photocopying it outside is only half of the price RM45. Every semester intake, I take 5 classes and there is definitely the need of textbook, 5 textbook RM 450 but I can get it for RM 225 and save the remaining RM 225. Besides that, there is also a need to set limit. I don’t necessarily withdraw all my allowance at one because when there is money on your hand, sometimes when there are things that you don’t really need you end up buying just because you feel the need to buy it but in reality you don’t. Therefore, I always bring money just enough for that one day and a little bit extra in case something happened. It is not wise to spend money in daily lives without any financial values and goals. I have to set a specific financial goals that range from my current spending to developing an extensive savings and investment program for my future economic security. I will create a long term financial goal plan with the duration up to 12 years and the course of action throughout the periods will be different depending on my financial stability. For now, I’m still in college I will continue to save any residual money that I have left every end of the month.
The situation will change once I get a job and the amount of money save increased and will consider to use either money market account or regular savings account.

Financial Goals: Saving for a home down payment
Time frame for this financial goal is long term; 12 years. I have to determine my financial situation once I get a job whether it is financially stable or not. Preparing a list of current asset and debt balances and amounts spent for varieties of items gives me the head start of my financial position. It indicates whether I can start my saving right away or it needs to be on hold for living expenses and debts. I can’t simply create a financial plan by assuming that the economic condition is stagnant. Financial planning needs relevant information at every level of the decision making process.

Environmental Scanning and Analysis
Malaysia’s Prime Minister Najib Razak had announced during the government reading of the 2014 budget, Sales and Services Tax will soon be replaced by GST tax of six percent starting April 1st in 2015. Malaysia was plagued by the unforeseen and tragic incident of MH 370 in March and MH 17 in July. It is really sad for Malaysia to be known in the world through these incidents. These incidents were really bad for Malaysia economy as it significantly affected the tourism sector and other inter-linked sector. In addition Malaysia Airline have been facing loses before the tragedy happened and these unfortunate incidents have forced Malaysia Airline to cut cost and displaced workers due to major losses. At the same time facing fierce competition with other airline that provide lower fare does not help in increasing the company revenue let alone profits. Besides that, Malaysia is currently facing massive brain drain. Other than that, Malaysian have been facing one major problem. The numbers of household debt have increased significantly over the past few years.

Analysis on Opportunity Cost
On personal opportunity cost, time used for shopping and leisure will be the opportunity cost. For financial opportunity cost, since I have choose to keep the money in a savings plan with little risk which is Amanah Saham Berhad (ASB) and also I’m not a risk taker therefore, the opportunity cost will be the potential higher returns from an investment. Saving money consistently is not an easy task. It is easy to say how hard is it to save RM500 per month? Extremely hard! Though it still depends on the individual. After graduating from college, secure a job and initial salary offered by company is RM2000. It will take few years for the company to increase the salary of an employee depends on the qualification and working performance and at the same time with the goal in mind money have to be save regularly without fail. Therefore, opportunity cost will arise. With a salary of 2000, a quarter of the salary will be saved plus paying necessary expenses on rents, credits cards, and allowance for parents would be impossible to afford expensive holiday trip, a car, anything else that requires a huge amount of money. It is possible only after the first goal is done and the amount of salary have increased in the future. Thus there are many things that have to be on hold until the time comes when spending extra money on expensive goods and services is possible by not falling into multiple debts and savings in bank are still on track. For the time being, the opportunity cost will be buying a new car. Car is an important transportation to go for work and settling other errands or businesses. Since my parents have 2 cars, I can use one of their old cars. As long the car is still in good condition, there is no problem in using it for another 10 years or so.

Action Plan
There are 7 days in a week; weekdays and weekend. It is possible to cook everyday but sometimes it can get a bit tiring. Therefore, days that classes start from morning to evening I will eat in canteen or outside and days where there is only one class I will cook including weekends. Cooking can save a lot of money since the ingredients are fairly cheap and last longer and the portion that I normally cook is much smaller than the one I ate in canteen. It may seem insignificant but doing this routinely can definitely save money. The allowance I get I will save RM 20 every month and this routine will be repeated until I finish college in 2016. In a year I’ll get RM240 and two years I will get RM480 and that amount of money will be keep in Amanah Saham Berhad (ASB). Before starting a financial plan I have to obtain appropriate career training and once I have completed and start working, I will not save any money for the first two year in order to establish financial independence and will continue saving in 2019 until the end of 2027. Creating an affective financial recordkeeping system helps the financial goal to be measurable since the amount of money I bank in every month is the same and it will increase once I get a raise and ensuring that along the period of saving my source of income is stable and reliable. It is attainable since for the first two year I didn’t do any saving for the purpose of paying off necessary debts and expenses. As long the schedule below is done consistently and diligently the amount of money I can achieved in 2 years is up to RM24000. If by any chance, I got promoted and my salary increase; in 2023 the amount of my saving will increase as well, the amount taken out is still a quarter of my increased salary. The purpose of increasing my saving is for my own personal use as in I want to accumulate an appropriate amount of money for emergency fund use and not for buying luxury branded items. I can use the money in case of emergency and knowing that there is money in the bank gives the feeling of assurance. At the same time, creating and implementing a flexible budget for the upcoming expenses to keep the financial plan on track. Other than that, I can purchase appropriate types and amounts of insurance coverage. Obtaining disability insurance to replace income during prolonged illness. Time based for this goal is 12 years, it is a long period of time. During this period I have to make sure that my debts are under control and credit report stays clean.

Furthermore, it will be saved in a bank that offers high interest rates in return which is ASB or another financial institutions that offers higher earnings on saving. I will need to find a house that its location is near to town and also comes with affordable price. The down payment will be 20% of the house price.

Years | ‘15 | ‘16 | ‘17 | ‘18 | ‘19 | ‘20 | ‘21 | ‘22 | ‘23 | ‘24 | ‘25 | ‘26 | ‘27 | | minor saving | no saving | major saving | Age | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | Per month | RM20 | RM20 | - | - | RM500 | RM500 | RM500 | RM500 | RM1000 | RM1000 | RM1000 | RM1000 | RM1000 |

Contingency Measures
Duration of my financial plan is up to 12 years. Economic activities are important influence on financial planning. I have to keep in track how is the current economic condition and what business cycle is the economy going through throughout the financial plan period. I have to check the interest rate risk regularly especially during the time where the amount of my money I save is enough for me to make down payment. Even if I have enough money to make a down payment but I still need to make a loan in order to obtain the house. Thus, I will only make a down payment once I can borrow at a low interest rate since it will be an advantage to me. Other than that is liquidity risk, it is certainly beneficial to save in savings and investment that have potential for higher earnings. However, it is more difficult to convert to cash or to sell without significant loss in value. Besides that, personal risk can be in the form health risk or safety risk. It is important to get regular health check up at a nearby clinic. What is the point of doing financial plan and getting sick along the way and there is no back up for financial security.

Conclusion
In conclusion, financial goal that has a solid plan can enhance the quality of my life and increase my satisfaction by not having to consistently worry about future need and resources. This does not only apply during the period of my saving but throughout my lifetime being able to managed and increased efficiency in obtaining, using, and saving my financial resources. In addition, I have the ability to control my financial affairs by not being in the spot of excessive debt, bankruptcy, and depending on families or relatives for financial security. Besides that, a sense of assurance from financial worries obtained by looking to the future, upcoming expenses, and at the same time realizing my personal economic goals. Furthermore, having a financial goal helps an individual to realize their priority. At the age of 35 I can make a down payment and from there I need to choose a loan that is suitable for my current income. It is much better to settle the loan earlier rather than settling it during near retirement age.

APPENDIX