Financing your future

Introduction
Personal finance is a term that encompasses money management, savings, and
investments. It includes budgeting, banking, insurance, mortgages, investments, retirement
planning, tax, and estate planning. Personal finance is geared towards achieving individual
financial goals, whether it’s meeting short-term financial needs, planning for retirement, or
saving for your child's college education. All of this depends on your income, expenses,
lifestyle requirements, personal objectives, and creating a plan within your financial
constraints to meet these needs.

The importance of personal finance lies in helping us define our financial goals and
prioritize them. It can identify the sources of financial stress in our lives, as well as potential
risks and emergencies, and propose solutions. It will recognize your spending habits and
introduce solutions to increase cash flow. Wise personal finance involves crafting strategies,
including budgeting, establishing an emergency fund, paying off debts, using credit cards
wisely, saving for retirement, and more.

A budget is the process of creating and controlling a financial plan. This expenditure
plan is called a budget. Creating this expenditure plan allows you to determine in advance
whether you have enough money to do what you need or want to do. If you don't have
enough money to do everything you want, you can use this planning process to establish the
order of priority for expenses and allocate funds to the most important things for you.

A monthly budget is a calculation of the funds that go in and out of a financial

account within a month. It is a plan for how you intend to spend your money each month.
Monthly budgets are popular because many recurring expenses, such as rent, utility bills,
credit card payments, and other loan payments, occur monthly.

Becoming a recent graduate is one of the best things, as it means entering the real
world and starting to receive your monthly salary. This implies that you will be able to
purchase anything you desire. However, did you know that some recent graduates are prone
to overspending and poor financial management? Some recent graduates even wait until the
end of the month to make a backup plan, leading them to be frugal due to not having enough
money.
 Therefore, the purpose of this assignment is to prepare students for their future
personal financial planning. For many of us, embarking on our careers also means securing a
stable income and taking responsibility for our finances. With a monthly income in place, we
also need to manage our expenses and investments, just like that. The researcher strongly
recommends that everyone should budget and track their expenses.
METHODOLOGY

By searching the internet the current average monthly salary of a fresh graduate in
Malaysia has been listed down and assuming that the salary will increase by per year and
continue holding the same position. The average salary for the first five years is calculated
and recorded in Table M1.

Year Monthly salary (RM)

1 P
2 P ( 1+ x )
3 2
P ( 1+ x )
4 3
P ( 1+ x )
5 P ( 1+ x )
4

As a fresh graduate, I have to control my financial lifestyle, a plan is needed to

achieve the financial goal. My short-term financial goals are savings for an emergency fund,
buying a new car, and funding a vacation. While the long-term financial goal is buying a new
house. Information as Table M2 will create to do planning about the financial goal

Financial goals Fund (RM)

Vacation
Emergency Fund
Deposit for New Car
Deposit for New House
Total
Table M2

To achieve these financial goals, I will save some amount from my salary monthly
into a saving account which grow at a certain annual interest rate compounded monthly. The

saving amount is caculated by usng the sinking fu formula: R=A [ i

n
(1+i) −1],

where R = Periodic payment at the end of each period

A = Future value of an annuity

I = Interest rate per period

 n = Total number of payments

Besides that, the expenses in a month are recorded in Table M3

Item Amount monthly (RM)

Accommodation
Transportation
Food
Entertainment
PTPTN
Utilities
Parents
Insurance
Table M3

I have taken up a loan to finance my bachelor’s degree study at a 4% interest rate per
annum compounded monthly. The total amount of loan when graduated calculated as Table
M4 using theformula:

er tuition fees

0.04
i = interest rate per month =
12

n = number of month

Semester Tuition Fees (Rm) Amount including interest when completion of study(RM)
1
2
3
4
5
6
 7
8
Total

I have agreed to amortize the loan for 108 months and it starts on my first salary, the
monthly repayment is calculated by using the amortization formula :

P
[ i
1−(1+i)
−n
]
where P = present value of an annuity (total amount of loan including interest),
i = interest rate per period,
n = total number of payments.

I am considering buying a car with a down payment of 10% of the price required and
the remaining balance of the price will be financed using a car loan from a financial
institution with several repayment period. The monthly repayment is calculated based on the
simple interest rate with the formula :

P (1+rt)
Monthly repayment
12 ×t

where P = present value of an annuity,

r = simple interest rate per annum (in decimal form),
t = period of time in years.

The comparison between three different brands and models car are recorded in Table
M5.
 1 2 3
Brand
Model
Price(rm)
Down Payment (RM)
Loan Amount (RM)
Bank
Interest Rate
Tenure
Monthly Repayment (RM)
Table M5

I am considering to buy a property with a down payment of 10% of the price is

required and the remaining balance of the price will be financed using a housing loan from a
financial institution with 30 years of repayment period. The monthly repayment is calculated
based on the compound interest rate with formula:

Monthly repayment = P [ i
1−(1+i)
−n
]
where P = present value of an annuity,

i = interest rate per period.

n = total number of payments.

The comparison between three different type of property are recorded in the Table M6.

1 2 3
Type
Price (RM)
Down Payment (RM)
Loan Amount (RM)
Bank
Interest Rate
Tenure
Monthly Repayment(RM)
Table M6
 Finally, projected monthly budget is recorded in Table M7 by using Microsft Excel
and the projected balance is calculated by using excel formula.

Year 1 Year 2 Year 3 Year 4 Year 5

Salary
Extra Income
Total Monthly Income
Housing
Rent
Internet
Electricity
Water
Total Housing
Transportation
Bus / Taxi Fare
Insurance
Fuel
Maintenance
Total Transportation
Food
Groceries
Dining Cost
Other
Total Food
Gift and Donation
Gratitude to Parents
NGO
Total Gratitude and Donation
Entertainment
Movies
Sporting Events
Total Entertainment
Loan
 Study Loans
Home Loans
Home Loans
Total Loans
Total Expensis
(total projected cost)

The figure in the above projected monthly budget table will be adjusted until arrive at
zero or positive projected balance.

With the calculation of the projected balance by the projected monthly budget. I can
make a conclusion that whether I can afford to buy a car and a house at this early working
age. If so, then what model of car and type of house are affordable for me. If it is not. I need
to project how long it takes for me to have my own car and house. A well-planned and fetish
expense is very important for a better future and long-term investment as well.
Result

I am a fresh graduate of Malaysia. My first monthly salary is RM2700 and the salary
increases by 8% per year and continues holding the same position. The following amount of
my salary increment per year.

Table R1 shows the suggested amount of salary increment per year

Year Monthly Salary (RM)

1 2700.00
2 2916.00
3 3149.28
4 3401.22
5 3673.32

Table R1

When it comes to personal finance, everyone’s situation is unique. When someone is

ready to take control of their finances, creating a well-thought-out plan is essential to achieve
their financial goals. My short-term financial goals are to establish an emergency fund, fund a
vacation, and purchase a new car, while my long-term financial goal is to signing up a
retirement plan.

Table R2 shows my financial goals for the next five years.

Financial Goals Fund (RM)

Emergency Fund 5000
Vacation 4000
Deposit for New Car 5000
Deposit for New House 22000
Total 36000
Table R2

This means around RM37000 of savings is needed for the next five years calculation
below shows the monthly savings needed to achieve the financial goals for the next five
years. The savings account pays an interest rate of 2.85% compounded monthly. The
following is my calculation of my monthly savings
 (
[ )
]
5 ×12
0.0285
1+ −1
12
0=R
0.0285
12

[( ]
0.0285
12
R=37000
)
5 ×12
0.0285
1+ −1
12

R=¿RM574.50

Thus, I have to save RM574.50 monthly to achieve my financial goals.

Table R3 shows Monthly expenses for a single individual

Item Ringgit Malaysia (RM) monthly

Accommodation 350.00
Transportation 200.00
Food 600.00
Entertainment 150.00
PTPTN 287.00
Utilities 150.00
Parents 600.00
Insurance 150.00
Total 2487.00
Table R3

Besides, a loan is taken up to finance my 3 years Bachelor’s degree in Business

Administration in UKM, which is at a 4% interest rate per year compounded monthly. The
loan was used to pay full amount of tuition fees at beginning of each semester. Table R4
shows the tuition fees for each semester and the amount including interest when completion
the study.

Semester Tuition Fees (RM) Amount including interest when completion

( ) =8792.72
36
1 7800 0.04
7800 × 1+
12
 ( ) =6629.92
30
2 6000 0.04
6000 × 1+
12

6000 × ( 1+
12 )
24
3 6000 0.04
=6498.86

000 × ( 1+
12 )
18
4 6000 0.04
=6370.38

000 × (1+
12 )
12
5 6000 0.04
=6244.45

000 × ( 1+
12 )
6
6 6000 0.04
21.00

Total 40657.33
Table R4

The calculation below shows the total amount of the loan with interest upon
completion of study if the annual interest is 4% compounded monthly to amortize the loan for
108 monthly and it starts on my first salary. The total amount of the student loan according to
the fees academic program is RM40657.33.6

[ ] [ ]
−n
1− (1+i ) i
P=40657.33 , r=0.04 , m=12∧n=108esent value P=R R=P −n
i 1−( 1+i )

[ ]
0.04
12
R=40657.33
0.04 −108
1−(1+ )
12

R=RM 448.90

From the calculation. I need to make a periodic payment of RM448.90 to amortize the loan
for 108 months.

Here is my plan to buy a car. Normally, a down payment of 10% of the price is paid
and the remaining balance of the price can be financed by taking a car loan from a financial
institution. Based on the following table, three car models with nine years or less of
repayment period are shown in Table R5.

Option 1 Option 2 Option 3

Brand Perodua Perodua Proton
Model Axia Bezza Persona
Price (RM) 40444.38 45679.07 49401.60
Down payment (RM) 4144.38 4579.07 5001.60
Loan payment (RM) 36300.00 41100.00 44400.00
Bank Purchase Maybank Hire CIMB Hire Public Bank Hire
Purchase Purchase-i Purchase
Interest rate 3.40 3.00 3.31
Tenure 7 9 7
Monthly repayment (RM) 534.99 483.31 643.27
Table R5

Apart from cars. here are my considerations for buying a house. Normally, a down
payment of 10% of the price is required and the remaining balance of the price can be
financed in long-term financial from a financial institution. Based on table R6, three types of
property with 30 years or less of repayment period are shown.

Option 1 Option 2 Option 3

Type Flat Terrace Condominium
Price (RM) 160000.00 400000.00 780000.00
Down payment (RM) 16000.00 40000.00 78000.00
Loan payment (RM) 144000.00 360000.00 702000.00
Bank Bank Islam UOB Bank CIMB Bank
Interest rate 4.00 4.00 4.00
Tenure 30 30 30
Monthly repayment (RM) 687.48 1718.70 3351.46
Table R6

Year 1 Year 2 Year 3 Year 4 Year 5

Salary 2700.00 2916.00 3149.28 3401.22 3673.32
Extra Income 300.00 324.00 349.92 377.91 408.15
Total Monthly Income 3000.00 3240.00 3499.20 3779.13 4081.47
Housing Rent 250.00 250.00 300.00 350.00 350.00
Internet 60.00 60.00 60.00 60.00 60.00
Electricity 65.00 65.00 65.00 65.00 65.00
Water 10.00 10.00 10.00 10.00 10.00
Total Housing 385.00 385.00 435.00 485.00 485.00
Transportation 50.00 0 0 0 0
Bus / Taxi Fare 50.00 0 0 0 0
Insurance 0 200.00 200.00 200.00 200.00
Fuel 0 100.00 100.00 100.00 100.00
Maintenance 0 110.00 120.00 130.00 140.00
Total Transportation 100.00 410.00 420.00 430.00 440.00
Food 200.00 200.00 200.00 200.00 200
Groceries 100.00 100.00 100.00 100.00 100.00
Dining Cost 100.00 100.00 50.00 50.00 50.00
Other 100.00 100.00 50.00 50.00 50.00
Total Food 500.00 500.00 400.00 400.00 500.00
Gift and Donation 0 0 0 0 0
Gratitude to Parents 500.00 400.00 200.00 300.00 300.00
NGO 50.00 50.00 50.00 50.00 50.00
Total Gratitude and 550.00 450.00 250.00 350.00 350.00
Donation
Entertainment 50.00 50.00 50.00 50.00 50.00
Movies 20.00 20.00 20.00 20.00 20.00
Sporting Events 0 0 0 0 0
Total Entertainment 70.00 70.00 70.00 70.00 70.00
Study Loans 448.90 448.90 448.90 448.90 448.90
Car Loans 0 643.27 643.27 643.27 643.27
House Loans 0 0 0 687.48 687.48
Total Loans 448.90 1092.17 1092.17 1779.65 1779.65
Total Expenses 2053.90 3107.17 2667.17 3444.65 3624.65
(total projected cost)
 Total Monthly Saving 946.10 332.83 832.03 264.48 456.82

Total Annual Saving 11353.20 3993.96 9984.36 3173.76 5481.84

Accumulated Annual 11353.20 15347.16 25331.52 28505.28 33987.12

Saving

Note Accumulated Buy the Accumulated Buy the

annual car at the annual house at
savings are beginnin savings are the
enough for g of the enough for beginning
the car down year (pay the house of the
payment. the down down year (pay
payment) payment. the down
payment)
Table R7

According to Table R7, I can buy a car after the first year of work. Which is the
Proton Person with a market price of RM49401.00 and a down payment is RM 5001.60. In
the second year of working, my expenses will increase by 51%, and no bus fare due to travel
in my car. On the other hand, I need to pay my car loan, fuel expenses, insurance, and the
maintenance fee. To cover the loss I decided to dedube the gratitude to my parents from
RM550.00 to RM450.00. Then, my monthly savings became RM 332.83 still lower than my
targeted savings of RM574.50.

In the third year, I can afford to buy my first house after the third year of working
since my accumulated annual saving is RM25331.52 - RM5001.60(buy car down payment) =
RM20329.92. This value will be my 10% down payment of an RM160000.00 flat with a
down payment of RM16000.00. I face an increase in an annual RM10 increase in car
maintenance expenses. To accommodate these additional costs, I chose to cut down on dining
out and adjust my food expenses. So. I can save more money. By reducing expenses. I
managed to save RM832.03 monthly and the accumulated savings will come to RM25331.52.
 In 4th year, my monthly savings increased to RM456.62 but still haven’t reached the
target monthly savings. While no longer needing to pay rent due to owning a house, I now
face a monthly house loan installment of RM687.48. Result, my monthly savings amount to
only RM684.48, falling short of my target amount. However, the accumulated annual savings
increased to RM33545.28. At the end of 5th year, my accumulated savings of more than
RM36000.00, I have reached my financial goal and can have a vacation.

This project underscores the significance of disciplined financial planning and

expenditure management for a brighter future and long-term investments. It demonstrates
how aspiring to own a car and a house can motivate individuals in their early working years
to work diligently and save consistently.
Result

In today's challenging economic landscape, many young adults, especially fresh

graduates, find themselves navigating a complex financial terrain. The evolving job market,
coupled with rising living costs and inflation, adds significant pressure, making it harder to
achieve financial stability. Effective money management is paramount in such times,
especially for individuals with modest starting salaries.

As a Malaysian fresh graduate, my first monthly salary is RM2700.00 and it will

increase by 8% per year. Thus. I have planned some short-term financial goals for myself. For
example, buying a new car, having some savings for emergencies, and funding a vacation.
Hence, financial planning for the next five years is important. I should have savings which is
roughly around RM37000 to achieve my financial goals. Furthermore, my total monthly
expenses are about RM2487, not including the loan I amortized. So, I found an extra income
such as doing overtime work to increase my income and savings. Moreover, I have taken a
loan to finance my 3 years Bachelor’s degree in Business Administration at UKM. In this
case, I need to make a periodic payment of RM448.90 to amortize the loan for 108 months.
On the other hand, I plan to buy a car and a house too. From my calculations. I will be able to
buy a car after 1 year which is a Proton Person with the lowest monthly loan, RM643.27. In
the second year, as I need to pay the car loan and fuel expenses, my monthly saving is
RM332.83 which is lower than my targeted saving, RM773.43. Next, in the third year, by cut
down on dining out adjusted my food expenses, and reduced my gratitude to my parents. I
managed to save RM832.03 monthly and the total of my savings will come to RM25331.52.
The same plan was applied in 4th year and at the end of 4th year, my accumulated savings
came to RM33545.48. Then I can buy the house at the beginning of the year. In short,
budgeting and managing our expenses are crucial for a brighter future. It motivates us to
work diligently and build substantial savings while we're young.

In conclusion, planning and managing expenses are crucial for financial security and
achieving life goals. By following a well-structured financial plan and saving consistently,
individuals can work towards their objectives, even early in their careers. Financial stability
is vital, and personal finance plays a pivotal role in securing a prosperous future and
responsible financial decisions. In essence, sound financial management leads to a stable and
prosperous life.