Personal Finance Chapter 1

Introduction

Personal Finance prepared for En Basarudin Shah Basri

July 2009

Presenter:  ‘AFIFAH BT ABDUL HAMID 2008279422  ANISAH BINTI ZAINI 2008279504  ILY NADRAH RAZMAN SHAH 2008279506  NIK NUR SHAFIKA MUSTAFA 2008279264  NOOR SHARENA BT ISMAIL 2008279488  NUR SYAERAH BT PAING 2008279444 B5L4 SITI FAUZIAH ROSMANI

Introduction to Personal Finance

Contents 1

Definition

2

Info and Tips

3

News and Statistic

4

Agency

5

Islamic and Conventional View

Past Sem Questions

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Introduction to Personal Finance

Definition Personal Finance

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PERSONAL FINANCE ► Obtain maximum benefit from limited financial resourses. ► The study of individual and household financial decision . ► Help you make better decision about money.

Personal financial Planning Developing and implement on integrated , comprehensive plan to meet financial goal and prepare for financial emergency. B5L4

Introduction to Personal Finance

COMMON FINANCIAL PROBLEMS

Not planning Overspending Delaying saving for retirement Very little life insurance Not prepared for medical emergencies Financial illiteracy B5L4

Introduction to Personal Finance

IMPORTANCE OF FINANCIAL PLANNING

Proper long-term savings Responsible for setting up our own retirement plans protect you against inflation Allow us to maintain our lifestyle. B5L4

Introduction to Personal Finance

IMPORTANCE OF FINANCIAL PLANNING Income Cash flow Capital Investment Family security Financial understanding Savings B5L4

Introduction to Personal Finance

FINANCIAL PLANNING PROCESS

1.Listen closely to understand our life and financial goals. 2. we determine what it will take for you to achieve your goals. 3.Working with us, we create a written analysis of your situation and a recommended action plan based on the priorities you have identified. 4.Then we follow-up to make sure our plan stays on track. B5L4

Introduction to Personal Finance

ADVANTAGES OF FINANCIAL PLANNING  Savings for Those Tight Spots  Better Control of Your Money  Paying Down Debts is Another Advantage of Good Financial Planning  Invest In Your Own Future  Set Out Clearly The Money To Be Well Used B5L4

Introduction to Personal Finance

DISADVANTAGES OF FINANCIAL PLANNING

 It can take a lot of time  It can be costly process because we will need the assistant of our accountant r financial adviser  A financial plan merely forecasts and the accuracy will depend on the information which it is based  It can tend to discourage us if our actual results are far off the projected results in our financial plans

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Introduction to Personal Finance

HOW TO MAKE FINANCIAL PLANNING WORK  Set measurable financial goals  Understand the effect of each financial decision  Re-evaluate your financial situation periodically  Start planning as soon as you can  Be realistic in your expectations  Realize that you are in charge B5L4

Introduction to Personal Finance

Information and Tips

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TOP FOUR FINANCIAL TIPS 1. Get Paid What We're Worth and Spend Less Than We Earn. 

No matter how much or how little we're paid, we'll never get ahead if we spend more than we earn.

2. Stick to a Budget. 

List all what really we want to buy, an ensure that all the things are really needed and necessarily.

3. Pay Off Credit Card Debt. 

Try to a avoid having credit card because this will give financial obligation in our life.

4. Have a Savings Plan. 

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Teach ourselves to make saving by save at least 5% or 10% from our salary or earning. Introduction to Personal Finance

DISCOUNT FOR SAVINGS Shopping with Discounts

u  

Do not shop at any place that does not offer a discount. Buy only at outlets that have a sale or discount on offer. Try to target the 50% off sales.

3. Promotion Offers  

Look around for promotion offers. Buy something we can get a free on. For ex: buy 1 free 1 such as bags, shampoos and so on.

4. Festival Offers  

Exchange Offers

u  

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Almost all stores have festival offers. This is usually a good time to buy clothes and household goods. For ex: During Hari Raya Aidilfitri or Chinese New Year. Rather than throw old thing away, its better we trade in the old thing and changes for new one. For ex: television, washer machine or microwave oven.

Introduction to Personal Finance

MONEY IN FAMILY 1. Prioritization of Expenses 

Spend on something are important such health and education day to day expenses personal expenses expenses for comforts and luxuries.

2. Personal Privacy 

When allowances are handed out there should not be too many questions about personal expenses especially teenagers.

3. The Family Money Pool 

This conceptually means that everyone contributes money to the person who runs the house and makes the day to day expenses.

4. Keep Family Bonds Strong 

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This is done by helping each other out when needed. Shared responsibilities and values go along with shared finances.

Introduction to Personal Finance

THE INTELLIGENT SPENDER

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Planning

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Responsibility

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Charity

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Saving

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Support to the Family

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Gifts

The plan includes a long term plan for a lifetime estimate and short term plans for the year. responsible and fulfills his responsibilities before making other expenses by using money carefully and avoid wastage. The sum given away to charity should not be disproportionately high. The right attitude is to save money for the future where it can save us from any contingency happen. In case anyone in your family needs money or is going through a bad financial phase we must contribute support. Do not gift away large sums of money or expensive gifts to anyone not closely related.

Introduction to Personal Finance

Understand the value of money Control it Save it Invest regularly and diversify Shield it Evaluate your spending habits Organize your financial life B5L4

Introduction to Personal Finance

RETIRE EARLY WITH THE FINANCIAL PLANNING DO’S AND DON’T DO

 Do know what we are getting into  Do have an exit strategy  Do invest only in what we are comfortable with  Do remember: nothing is sure in the world of investment

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DON’T

Don’t buy into something just because everyone is Don’t invest in the stock market Do not borrow money just so we can head off immediately Introduction to Personal Finance

FINANCIAL PLANNING FOR BUSINESS OWNER

There some financial planning for business owner: Assess Prioritize Recognize Understand Action Review B5L4

Introduction to Personal Finance

Agency

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AKPK (Agensi Kaunseling dan Pengurusan Kredit) Credit Counselling and Debt Management Agency

Financial Education •Credit and basic money management skills •Tips, guide & method for disciplined management

Title

Counselling and Advice on Financial Management •Counselling& advice on managing finance wisely •Learn to handle debt responsibly Debt Management Programme •Personalised debt repayment plans •Consult with the financial services providers to structure manageable scheme

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Introduction to Personal Finance

Diagram

Hijrah Wealth Management

Financial Planning Advisor (islamic)

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Certified Islamic Financial Planning (CIFP)

Introduction to Personal Finance

MAIN ASPECT OF ISLAMIC FINANCIAL PLANNING

Protection Planning

Alms Planning (Sadaqah)

Zakat Planning

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Islamic Financial Planning

Investment Planning

Estate Planning and Heritage Introduction to Personal Finance

WARISAN MUKMIN SDN BHD Agency of personal financial and wealth management based on islamic principle Located at Seksyen 9 , Shah Alam Corporate agent of Amanah Raya Bhd, Takaful Malaysia and Philip Mutual Fund.

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Introduction to Personal Finance

OBJECTIVES  To organize the socio-economic system and muamalat Islam in term of structure, strategy and action mechanism  To enhance the understanding and awareness of the importance of economic and financial planning among muslim through academic activities and practical in term of Islamic Financial Planning and Managing.  Offering the full services or product regarding the muamalat Islam through Pengurusan Muamalat Mukmin (PMM) package  To open up Muamalat Mukmin Service Centre over Malaysia and act as non-banking financial to give better, efficient and full services in order to fulfill customer aspiration

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Introduction to Personal Finance

MODEL MUAMALAT MUKMIN

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Introduction to Personal Finance

OTHER ALTERNATIVES Television talk show -BIJAK WANG -STOCK WATCH *Sponsored by Maybank I SQUARE TRAINING & CONSULTANCY

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Introduction to Personal Finance

News & Current Issues

July 2009

IBFIM AND FPAM PRODUCE THE FIRST BATCH OF ISLAMIC FINANCIAL PLANNER IFP is joint collaboration between IBFIM and FPAM - produce qualified Islamic financial planning professionals which is the 1st in Malaysia and the world. Approval from SC and BNM for licensing purposes. Introduce Islamic financial planning courses into their academics and professional programs. B5L4

Introduction to Personal Finance

 In light of uncertainties in the global financial markets and economic growth prospects – need for effective financial planning.  IBFIM is looking to export IFP overseas – planning  Received requests from potential education providers  Recipients – 22 non-Muslim from 57 :shows the acceptance of Islamic finance among non-Muslim B5L4

Introduction to Personal Finance

FPAM AND IBFIM RECEIVED RM1.15 MILLION GRANT FROM CMDF FOR ISLAMIC FINANCIAL PLANNING CERTIFICATION PROGRAM

 Received rm1.15m for their joint collaboration in the dev of certification program for Islamic financial planning  Targeted at all professionals and executives serving the retails segment of IFM  Lacked of skilled resources in Islamic finance  To produce qualified professionals and help build up a pool of talent B5L4

Introduction to Personal Finance

FINANCING PLANNING STAGES OF LIFE

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Introduction to Personal Finance

Malaysian not have enough saving for future •

total yearly saving below RM 18, 000

Economy downturn Criminal cases increase

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Introduction to Personal Finance

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Introduction to Personal Finance

Money work for us not us work for money Money is very IMPORTANT A smart financial management = a quality of individual, family, organization and country

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Introduction to Personal Finance

1) JAPAN 2) GERMAN

3) FRANCE 4) CANADA

5) UK 6) US

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Introduction to Personal Finance

Spend less than we have Buy that we really need Realize that not everything we can get  and Sediakan payung sebelum hujan

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Introduction to Personal Finance

Islamic and Conventional Views

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ISLAMIC FINANCIAL PLANNING new concept being developed nowadays and it has a relationship with the definition of Islamic Financial Marketing which defined by Ibnu Abu Yusuf & Ibnu Taimiyyah and Ibnu Khaldun. This means that we need to practice Islam while we perform our business and economic activities. B5L4

Introduction to Personal Finance

Provides a worldview that is harnessed to private and public life of muslims based on revelation, quran and sunnah. Wealth is considered as a bounty of God and thus not a scarce: Allah says, "God is rich but you are poor" (Qur'an 47:38).

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Introduction to Personal Finance

ISLAMIC PERSPECTIVE  In Islam, financial planning is not just merely a process of acquisition and accumulating wealth but it has a broad definition which relates to the concept of vicegerent (kalifa). Behold, thy Lord said to the angels: "I will create a vicegerent on earth." They said:” Wilt Thou place therein one who will make mischief therein and shed blood? - Whilst we do celebrate Thy praises and glorify Thy holy (name)?" He said: "I know what ye know not." (Surah Al-Baqarah, Verse 30) B5L4

Introduction to Personal Finance

Cont.. One of the important sources of unjustified earnings is receiving any monetary advantage in a business transaction without giving a just countervalue.” (Umar Chapra in, ‘Towards a Just Monetary System’)

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Introduction to Personal Finance

INSPIRATION  Prophet Yusuf a.s persuades King of Egypt and the citizens to cultivate crops in 7 years in a row, then save the efficacious. Then it comes the difficult year to the citizens and they can eat the crops efficacious which they save from the beginning. While on the rainy years, they squeeze grapes. From this situation, King of Egypt finds out the specialty of Prophet Yusuf and establishes him to be finance minister. Quran (surah Yusuf : 47-49). B5L4

Introduction to Personal Finance

FIVE SIMPLE POINTS CAN HELP ADVISERS INTEGRATE SHARI’ACOMPLIANT FINANCIAL PLANNING SERVICES INTO THEIR BUSINESSES

The generic financial needs of the Muslim client are no different from those of other clients Integrating noneconomic considerations into financial planning is already being done for the client concerned about environmental, social, and governance issues B5L4

Introduction to Personal Finance

Cont..  principles of Shari’a are fairly easy to grasp  expertise in conventional products is important for clients seeking Shari’a compliance  Islamic financial institutions have already put into place structures and processes for obtaining and maintaining Shari’a compliance that could be used by the personal finance industry. B5L4

Introduction to Personal Finance

CONVENTIONAL FINANCIAL PLANNING  conventional approach asks households to specify how much they want to spend  It then determines the amounts of saving and life insurance needed to achieve these targets  This operational level will be translated in the personal budget in every stage of creation, accumulation, protection and distribution of wealth  Is not based on syariah

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Introduction to Personal Finance

CONVENTIONAL PERSPECTIVE appear consonant with such consumption smoothing, the actual practice of conventional planning is anything but consumption smoothing is the notion that consumers will spend on average 70 to 80 percent of their pre-retirement income per year once in retirement.

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Introduction to Personal Finance

Cont… Setting spending targets that are consistent with consumption smoothing is incredibly difficult, making large targeting mistakes almost inevitable Conventional planning’s use of spending targets also distorts its portfolio advice

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Introduction to Personal Finance

Quotes …  Two weeks of solid financial planning on an estate may be worth to the owner more than the financial gains of the last 10 or 15 years" --- Price Waterhouse 1967

 Did you know that people spend more time planning their vacations than they do their financial planning?" --- Harold A. Lowe, CLU, CFP

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Introduction to Personal Finance

Cont..  Financial planning is a process not a product. It is a delivery system for financial security" -- James P. Ruth, CLU, ChFC   "In preparing for battle I have always found that plans are useless, but planning is indispensable" -- Dwight D. Eisenhower (1890 1969) 

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Introduction to Personal Finance

Cont.. “Becoming wealthy is not a matter of how much you earn, who your parents are, or what you do.. it is a matter of managing your money properly.” (Noel Whittaker)

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Introduction to Personal Finance

Past Semester Question Oct 2008,April 2007,April 2006

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Q & A Session

July 2009