A Personal Financial Planner for Malaysian

Chapter 1: Introduction

1.1 Background of Study

The job of Personal Financial Planner is the development and implementation of total, coordinated plans to achieve and to assist user in planning of finance. Personal Financial Planner provides estate, tax, retirement, risk management and investment planning advice individuals and closely held entities. It is specific for Malaysian especially those young working Malaysian who have no much experience in financial planning. Most people use various financial tools as common stock, bonds, mutual funds, insurance, fixed and variable annuities, money market accounts, certificates of deposit, saving accounts, individual retirement accounts, qualified retirement plans and other employee benefits, personal trusts, and real estates may be elements of soundly conceived financial plans. Also involved in the planning process is the development of personal financial polices to help guide a persons financial operations. In financial planning, people make assumption about the current economic climate and what holds for the future.

1.2 History of Malaysian

The name Malaysia was adopted in 1963 when the existing states of the Federation of Malaya, plus Singapore, North Borneo and Sarawak formed a new federation. Prior to that, the name itself had been vaguely used to refer to areas in Southeast Asia. A map published in 1914 in Chicago has the word Malaysia printed on it referring to certain territories within the Malay Archipelago. Politicians in the Philippines once contemplated naming their state "Malaysia", but in 1963 Malaysia adopted the name first. At the time of the 1963 federation, other names were considered: among them was Langkasuka, after the historic kingdom

located at the upper section of the Malay Peninsula in the first millennium of the Common Era. Malaysia's multi-racial society contains many ethnic groups. Malays comprise a majority of just over 50%. By constitutional definition, all Malays are Muslim. About a quarter of the population is ethnic Chinese, a group which historically played an important role in trade and business. Malaysians of Indian descent comprise about 7% of the population and include Hindus, Muslims, Buddhists, and Christians. Non-Malay indigenous groups combine to make up approximately 11% of the population. Population density is highest in peninsular Malaysia, home to some 20 million of the country's 28 million inhabitants. The rest live on the Malaysian portion of the island of Borneo in the large but less densely-populated states of Sabah and Sarawak. More than half of Sarawak's residents and about two-thirds of Sabah's are from indigenous groups. Relate this paragraph with the topic as well for better understandings the concept of the research.

1.3 Research Objectives

Each persons financial objectives may be different in terms of individual circumstance, goal, attitudes, and needs. The main objective of this project is to develop a financial knowledge and financial strategies to users.
y y y

Protection against the personal risk. Reduction of income tax. Investment and property management.

1.4 Problem statement

Personal financial planning sometimes fails to properly diversify an investment portfolio which can result in substantial losses. And failure to plan can result in higher than necessary income, estate, gift and perhaps generation skipping transfer taxation. Some people do not know how to finance their money because they do not know where to invest their money. This study identifies two problems: i. ii. Lack of information about financial planner for those working in Malaysia. Lack of taxation strategy focusing on Malaysian policies.

People fail to plan for many reasons. They often feel that they do not have sufficient assets or income to make plan or that their affairs are already in good order. Both these assumption are frequently wrong. There is also the natural human tendency for busy people to procrastinate with respect to planning. Finally some people may be deterred by what they think will be the high cost of planning services. However high quality planning services are usually well worth for the cost. Also knowledge consumers can secure some valuable planning services without additional cost.

1.5 Research Question

1. Does the personal risk really affect financial planning or not? 2. Does the reduction of income tax affect on a personal financial planning or not? 3. Is Investment and property management really important for a personal financial planning or not?

1.6 Theoretical Framework (independent and dependent variables)

A personal financial planner is important for a person, who does not know how to make a financial plan. Personal Financial Planner leads industry standard, ensures graduates gain the knowledge, skills and tools to evaluate and manage various wealth forms to optimize his/her financial situations. To make the financial plan, information depends on dependent and independent variables. The determinant of the Personal Financial Planner has been considered as the independent variable for conducting the study. The determinants are -

Skill of the person Status of financial position

Property of the person

Total worth of the person

Figure: 1 Theoretical Framework. The study will assess the determinants (independent variables) and evaluate the potential of financial planning (dependant variable) For Malaysian.

1.7 Research Hypothesis

The research will be conducted on the basis of the following hypothesis Hypothesis 1: Based on protection against personal risk can this study make a personal financial plan for Malaysian? Hypothesis 2: Is financial Planning really helpful for Malaysian? Hypothesis 3: Is tax reducing only the way to make a personal financial planning?

1.8 Significant of Study

Personal financial planner is a practicing professional who helps people deal with various personal financial issues through proper planning for investment and also for a business. From this planning people will be developed. They will know where to invest and how can make more money. So personal financial planning is important because to organize a proper financial plan for a person.

1.9 Contribution of Study

In general, my research focused on personal financial planning for Malaysian. Personal financial planning is for Malaysian broadly defined as a process of determining an individual's financial goals, considering his/her resources and purposes in life, risk profile and current lifestyle, to detail a balanced and realistic plan to meet those goals. The individual's goals are used as guideposts to map a course of action on to reach those goals. This study basically for young people for Malaysian they do not know where to invest their money how to utilize, to make a proper goal or destination they need help from the planner. The purpose of each goal is determined to ensure that the goal is meaningful in the context of the individual's situation. Through a process of careful analysis, these goals are subjected to a reality check by considering the individual's current and future resources available to achieve them. In the process, the constraints and obstacles to these goals are noted. The information will be used later to determine if there are sufficient resources available to get to these goals, and what other things need to be considered in the process. If the resources are insufficient or absent to meet any of the goals, the particular goal will be adjusted to a more realistic level or will be replaced with a new goal.

1.10 Limitation of the research

There are some limitation of the research which are time and resources such as internal data and secondary data, which cannot be released to the public, so its difficult to predict the accuracy of how profitable a company is. The study takes much time because the researcher has search the internet, read and analyze the data. The resources that are mostly books get from library and searchin via g Internet enable this study to be completed. Since the study is to predict the future, secondary data may not be helpful in timely basic.

Chapter 2-Literatuer Review

The literature review is based on the literature that the researcher is going to research in the field of the project. Reviewing literature exists because of two main reasons. First, the preliminary search helps researcher to generate and refine research ideas. Secondly, literature review is also referred to as critical review, which is a part of a proper research project. (Smith, Thorpe and Lowe, 1991) Researcher will get foundation from the literature review. Its main purpose is to helps researcher to develop a good understanding and insight into relevant previous research and the trends that have emerged.

2.1. Personal Financial Planning: A financial planner who helps to invest in individuals and corporations meet their long-term financial objectives by analyzing the client's status and setting a program to achieve goals. Financial planners specialize in tax planning, asset allocation, risk management, retirement and estate planning. The role of a financial planner is to find ways to increase the client's net worth and help the client accomplish all of his or her financial objectives.

Charles J. Farrell, J.D., LL.M. (2006) analysis on Personal Financial Ratios: An Elegant Road Map to Financial Health and Retirement. In this article he tries to explain personal
financial ratios that individuals can use to analyze their financial standing. Just as stock ratios are primarily based on a company's earnings, the personal financial ratios are based on an individual's income. There are three ratios: savings to income, debt to income, and savings rate to income. Based on those ratios he tries to make a personal financial plan.

IRMA International Conference (2005) explain on A Service Oriented Architecture for Personal Financial Planning . In this article they try to explain Personal financial planning is the process of planning spending, financing, and investing so as to optimize the financial situation. The framework they propose contains five main stages. 1: Data acquisition: Actual state, Data analysis, data acquisition: To-be concept, Implementation, and Supervision. In the Generalized Process Networks (GPN) graph events are represented by circles and functions are represented by boxes. Arcs are connecting events and functions or functions and events but never events and events or functions and functions. GPN may be used to model the gain in value a financial planner and a customer may have when using a Service Oriented Architecture.

Ming-Ming Lai and Wei-Khong Tan (2009) works entitled An Empirical Analysis of Personal Financial Planning in an Emerging Economy. In this paper examines the attitudes of the Malaysians toward personal financial planning, which encompasses money management, insurance planning, investment planning, retirement planning, and estate planning. This paper has implications on financial planners in formulation strategies on how to successfully deploy a personal financial planning programme for their customers. This paper, thus, fills the gap by examining the attitudes and management of general public, i.e., Malaysian towards personal financial planning, which encompasses money management, insurance planning, investment planning, retirement planning, and estate planning. They further explored the factors most influencing the decisions. This paper contributes interesting and additional empirical evidence to factors influencing the respondents attitudes, and managing personal financial planning in an Asian and different environment setting from western countries. The findings will be extremely useful for effective financial plan in tailoring the needs of individuals based on job status, age, gender, education level, income, race, and marital status. It is hoped that the findings of this study contribute to the financial planner profession and industry in an emerging economy such as Malaysia.

Lim (2003) analyzed via surveys in Singapore in the direction of the attitudes of 204 senior workers towards work and retirement, retirement planning, and their willingness to continue working after retirement, and to undergo retraining. The results showed that work taken a salient part of the lives of employees in their 40s and above. Respondents held rather uncertain attitudes with regard to the prospect of retirement. while they did not view retirement negatively, they were nevertheless anxious about certain aspects of retirement. In addition, respondents also generally have not planned for retirement. Those aged 50 years and above were more likely to engage in retirement planning involving discussion about retirement with others, financial planning, and planning for holiday trips compared with those below 50 years old. The majority of them preferred to remain employed and willing to undergo retraining after they have retired.

Kong Eng Chin (2009) analysis on A Personal Financial Planner for Malaysian (Taxation Planning Report). In this article he to describe about young worker in Malaysia those are do not know how to plan their financial planning. He tries to make a financial plan for a Malaysian how it should be. He tries to make a system that system focuses on 3 sub-systems
which are cash flow management, investment planning and taxation planning and is development by three students. Each of the students will be responsible on one sub -system. Taxation subsystem consists of fundamental knowledge which is able to allow users without any knowledge in taxation constitution to get started. Taxation calculator will be provided to users in taxation subsystem. This calculator will incorporate with the tax rate data maintained by the administrator of the system. The provided calculator can be manipulated to add or remove tax relief or tax rebate items from the calculator provided to users. The materials in the assessment are based on Malaysia taxation policies 2009. System administrator is allows to create new assessment and modify the current assessment contents.

Khor Su Teik(2009) analysis on A Personal Financial Planner for Malaysian ( Investment Planning). In this article he tries to describe personal financial planner system is a web-based
system that provides aid tools to assist user in planning of finance. It is specify for Malaysian especially those young working Malaysian who have no much experience in financial planning. He tries to make a system. This system allow user to explore the three main financial aspects,

which are investment planning, cash flow management, and taxation planning. The investment planning part will be focused in this report. Basically, the investment planning part allows user to study the fundamental knowledge, create a personal investment plan, and manage their investment portfolio. Besides, the system also provides several general modules such as registration, feedback, and glossary to user. In addition, the system allows admin to manage user, manage glossary, manage feedback, manage fundamental knowledge, modify question in investment plan, edit investment plans template, and manage portfolio as well.

J. E Cowen, W. T. Blair and S. M Taylor (2006) works entitled Personal financial planning education in Australian universities. Personal financial planning in Australia is a wide range of groups including consumers, the financial services industry, accountants, and educators. This paper based on the development of the Australian financial planning industry, focusing on its historical background and the relevant regulatory environment. This article then provides a descriptive analysis of the availability of dedicated financial planning courses currently available in Australian universities at both undergraduate and postgraduate levels. This report makes on basically those are new investor and those are finished their postgraduate they do not have knowledge how to invest their money and how they make a plan for the future.

Jalen & Mila Smith (2004) works entitled Sample Financial Plan (Planning toolkit 5). In this article they are trying to describe six step process of personal financial planning those are clarify your present situation, Identify goals and objectives, Identify financial problems, Recommendations, Implement strategies, Monitor and review. From those steps they try to make personal financial planning. Asset allocation is a tool designed to maximize the return on your portfolio while minimizing the risk. It involves structuring a diversified portfolio from these broad asset classes Growth, Income, Balanced and Cash based on income and growth needs and risk tolerance.

Federal Reserve Bank of Dallas (2010) explains on Building wealth. In this article want to explain how a beginner develops financial plan for future. To make a personal financial planning fast need proper information about that person and also wealth. Based on assets a planner needs to make a plan for a person. Planners control their financial affairs. They budget to save. A budget allows understanding where money goes, to ensure dont spend

more than make, to find uses for money that will increase wealth. Develop a budget need to calculate monthly income, track daily expenses, determine how much spend on monthly bills.

Gideon Rothschild and Daniel S. Rubin (2002) works entitled Estate Tax Savings with Self-Settled Trusts. In this article they are trying to explain that planners were urged to consider the use of trusts as the preferred estate planning vehicle because of the efficacy of those trusts in protecting beneficiaries from the claims of their creditors. Secondly the author explained some key point regarding the asset protection concept, discussing how certain jurisdictions (mostly offshore) have repealed the traditional self-settled spendthrift trust rule. The author explains that in such jurisdictions individuals can create trusts in which they remain discretionary beneficiaries, with the trust fund nevertheless protected from their own potential future creditors. The benefits that these offshore asset protection trusts provide to clients who feel themselves to be at risk in todays litigious society is almost incalculable.

Terrence A. Hallahan, Robert W. Faff, and Michael D. McKenzie (2003) works entitled An empirical investigation of personal financial risk tolerance. In this journal they are trying to explain that risk tolerance, a persons position towards accepting risk, is an important concept that has implications for both financial service providers and consumers. In this article they used Droms, 1987 for describing risk tolerance. Risk tolerance is one factor which may settle on the appropriate composition of assets in a portfolio which is optimal in terms of risk and return relative to the needs of the individual (Droms, 1987). Although its importance in the financial services industry, there remain some unresolved questions with respect to the determinants of risk tolerance. Although a number of factors have been proposed and tested, a brief survey of the results reveals a distinct lack of consensus. Education is a third factor that is thought to increase a persons capacity to evaluate risks inherent to the investment process and therefore endow them with a higher financial risk tolerance.

Haiyang Chen and Ronald P. Volpe (1998) analysis on An Analysis of Personal Financial Literacy among College Students. In this article he tries to explain a personal finance has become increasingly important in today's world. People must plan for long-term investments for their retirement and children's education. They must also decide on short-term savings and borrowing for a vacation, a down payment for a house, a car loan, and other big-ticket items. Moreover, they must manage their own medical and life insurance needs. This study

has three purposes. First, it provides evidence of personal finance literacy among college students. Second, it examines why some college students are relatively more knowledgeable than others. The analysis may help us identify factors that determine the level of competency possessed by college students. The third purpose is to examine how a student's knowledge influences his/her opinions and decisions on personal financial issues. This study surveys 924 students from multiple universities across the country to examine college students'

knowledge of personal finance; the relationship between the financial literacy and participants' characteristics such as academic discipline, gender, and experience; and the consequences of having inadequate knowledge. Results suggest that college students need to improve their knowledge of personal finance.

Michael Stephenson (1981) analysis on Personal Financial Planning. In this topic he tries to explain that some general guidelines how to make a personal financial planning and also to look ahead. This planning make a person increase saving and investments for retirement. And he tries to cover in this article such as budgeting, income tax, retirement and estate planning. Moreover, in this article he set out a guideline for reviewing present financial position. In this article he makes objective for short term and long term. Short terms are: 1. paying off a bank loan. 2. Prepaying a part of your mortgage each year. 3. Establishing a fund for your children's education. 4. Saving for a summer place, winter retreat, or holidays. 5. Saving for major items-car, furniture, home, renovations, etc. Long terms are: 1.Again, paying off your mortgage. 2. Children's education. 3. Creating investments-stocks, bonds, real estate. 4. Retirement-adding to pension plans. 5. Estate planning requirements sufficient asset liquidity to provide income for your family.

Arthur B. Kennickell, Martha Starr-McCluer and Annika E. Sunden (1996 ) works entitled Saving and Financial Planning. In this paper they are trying to focus on saving and financial planning. Most practical work on saving is consistent with the concerns emphasized in theory, especially saving for retirement, incentives to save precautionary, and the desire to leave wealth to heirs. In this regard, it may be valuable to investigate directly the ways in which households make saving-related decisions. To resolve inter temporal trade-offs correctly, households would seem to need to obtain and process a fair amount of information. Some households undertake deliberate planning activities, such as keeping a budget, consulting a financial planner, or reading books and magazines on personal finance. In this article he uses Bernheim (1994a, 1994b, 1994c ) as references to describe financial planning.

He has analyzed some surveys on financial planning that were sponsored by financial institutions. The surveys suggest that people's financial planning methods are fairly rudimentary, that their financial knowledge is generally poor, and that their self-described savings plans are often inconsistent with the predictions of standard saving models.2 It is unclear what accounts for these findings. People may lack problem-solving skills or abilities required to make sound savings decisions. Or they may not consider systematic planning to be worthwhile, especially if uncertainty in income, health, and other factors make it hard to define optimal savings and consumption plans. This paper summarizes the results of a focus group on saving and financial planning. The group consisted of eight individuals with relatively high levels of income and wealth, mostly successful business people or professionals.

2.2 Personal Financial Risk: Lenart sjoberg (2003) analysis on The different dynamics of personal and general risk. In this journal he tries to explain personal and general risk. Risk perception has often worked with an undifferentiated concept if perceived risk. In this time people do make a clear distinction between to personal risk and general risk. In many studies it has been found that personal risk are judged as smaller then general risk, especially so called lifestyle risk. Personal risk are seen as so small that they can be dismissed or ignored and behaviour then proceeds to various forms of pleasant or exciting experiences that can be quite destructive and dangerous. The personal or general distinction is thus crucial to the understanding of the rationality or lack of it involved in various forms of addictive behaviours. In many previous studies it in not clear if general or personal risk is the most important factor in demand for risk mitigation. Demand for risk mitigation needs to be measured separately, and then related to independent rating of personal and general risk. As a result of personal and general risk ratings showed that general risk tended to be rated as larger than personal risk and that the differences general and personal risk were of varying size across hazards. The standard deviations were combined for general and personal risk separately for each hazard.

International Risk Management Institute, Inc. (2008) explains on Personal Risk Management Tips you can use. In this article they are trying to describe how to minimize personal risk. They have shown many ways to minimize a personal risk. This report has given the following ideas for purchasing insurance for the home owners. Insurance is one of the

sources to minimize personal risk. In this report they have shown many tips to get insurance. Like maintain home in optimum condition. If a repair is needed, perform it as soon as possible.
For example, loose or missing roof shingles should be repaired or replaced immediately. A home in excellent condition is much less likely to experience a loss. Insurance company helps to

customer to reduce risk. As well as anyone can do insurance on his or her personal car. If anyone gets accident with his or her, insurance company bound to pay all money to fix that car.

Victor J Callan PhD FAIM FAICD and Malcolm Johnson (2002) works entitle Some Guidelines for Financial Planners in Measuring and Advising Clients about Their Levels of Risk Tolerance. In this journal they are trying to explain on to provide advisers and planners in the financial services industry with an outline of the key issues to consider as they develop an understanding of the risk tolerance of their clients. A planner can develop a tailored financial plan that reflects on the clients perception between risk and the compensation required for bearing risk. By making the clients risk tolerance explicit and understandable, the planner is able to help the client identify any mismatch between psychological and financial needs, then work with the client to make any trade -offs that might be required. Most important is the financial planner provides the best approach to settle on the risk tolerance of clients. Understanding the risk is most important to make a personal financial plan for clients. In particular, this paper builds upon existing knowledge available to advisers and
planners in the financial services industry by providing a set of guidelines to consider as they assist clients in developing an understanding of risk tolerance. In particular, this discussion examines (a) the concept of risk tolerance; (b) why it is important that planners understand the risk tolerance of clients; (c) how planners should go about obtaining an understanding of their clients risk tolerance; (d) what planners should look for in a risk tolerance test; and (e) some other general issues. These guidelines are also provided to assist financial planners and counsellors to identify the main features of a good measure of risk tolerance.

Personal Financial Planning: Theory and Practice, 2nd Edition written by Michael A. Dalton, this book tell us that sections on communication, internal analysis, and helping clients establish financial direction are thorough and give the proper emphasis on the planning process. The early and detailed discussion of mission, objective, and goal setting provides an excellent framework for working through the specific planning.

2.3 Personal Tax Reduction: Jim Saxton (2001) analysis on Economic benefits of personal income tax rate reductions. In this article he tries to explain on how to minimize a persons personal income tax. He has mentioned that there are six effects to reduce the income tax those are: 2.3.1. Labour Supply: A reduction in insignificant income tax rates would increase the rewards to additional labour earnings. Workers respond to tax rate cuts by substituting more labor for less leisure since labor becomes relatively more attractive. But tax cuts also create an incentive to reduce labor because a higher after-tax income. Empirical research has found that labor supply substitution effects usually outweigh income effects. As a result, overall labor supply can generally be expected to modestly raise in response to marginal tax rate cuts. An interesting conclusion from economic theory is that it is only the substitution effect that comes into play in determining deadweight losses, not the overall change in a taxpayer's behaviour. As a consequence, substantial deadweight losses may be occurring in situations where substitution effects are offset by income effects and behaviour is little changed. 2.3.2. Saving: Personal saving provides individuals with financial security and allows the levelling out of consumption over a lifetime. The nation's savings are put to use by businesses to increase their capital stock and generate long-term economic growth. It is widely recognized that the income tax system is biased against saving and towards current consumption because the returns to saving often face high tax rates whereas current consumption does not. This basic problem with income taxes has contributed too much of the interest in fundamental tax reform in recent years. Income tax rate reductions can partly alleviate this distortionary bias in the tax code. 2.3.3. Entrepreneurial Activity and Small Business Growth: The income tax system has a wide-ranging impact on how businesses are structured and operated. Taxes affect such decisions as purchasing capital equipment, hiring workers, and designing compensation plans. Marginal tax rate cuts would reduce the influence of taxation on business decisions allowing firms to allocate resources with greater efficiency. Personal income tax rates have a direct effect on small business profits, hiring, investment, and growth. This is important because small businesses fill a unique role in the economic growth process. While many small businesses stay small, some will grow to become leaders in whole new industries. New firms often challenge existing firms with untried ideas and thereby generate greater competition and efficiency.

2.3.4. Production and Consumption Efficiency: The income tax code is riddled with incentives and disincentives affecting different industries, investments, and consumption goods. As a result, taxes alter the relative prices of different economic activities thus redirecting resources to less efficient uses. For example, the income tax exclusion on state and local government bond interest alters the allocation of investment funds in the economy. 2.3.5. Tax Avoidance: Tax avoidance refers to a wide range of activities designed to legally reduce tax liabilities. As tax rates rise, individuals and businesses restructure their operations, maximize their tax deductions, adjust employee compensation packages, modify investment portfolios, change the timing of receipts and payments, and conduct various other transactions to minimize taxes. They are aided by a large industry of expert accountants and lawyers whose job is to continually develop new techniques and products for tax planning. 2.3.6. Tax Evasion: Tax evasion is tax avoidance by illegal means. Like legal tax avoidance, tax evasion rises as tax rates rise, as confirmed by numerous empirical studies. Like tax avoidance, tax evasion creates deadweight economic losses. These occur as resources are shifted from more productive uses to less productive uses that are easier to hide from the government.

2.4 Personal investment:

St Andrews Life Assurance plc (2010) explains on Key features of the personal investment plan for growth. In this report they are trying to describe where should invest money. Invests in different assets, for example stocks and shares, bonds and property. The funds are split into units and the price of these units depends on the value of the assets the fund invests in. If these funds increase or decrease then it makes profit or loss. The funds bear the costs of buying and selling investments and these costs are included in the unit price. If invest in the high Income Fund, it take charges from the capital rather than the income which will reduce the growth potential of investments. If Income received from the investments is added into the funds which will increase the value of units.

2.5 Personal Property Management:

USAID (2008) explains on Personal Property Management. In this chapter they are trying to explain on how to manage property. Personal Property means such items as vehicles, furniture, equipment, supplies, appliances, and machinery. It refers to all property not otherwise classified as land, land improvement, buildings, and structures, which are normally referred to as real property. They have mention to follow a system. This system shows how manage a personal property those are: a. Ensures the economical and timely acquisition of property required by the Agency; b. Maintains issuance, inventory control, maintenance, and accountability records, as required; c. Safeguards against waste, fraud, loss, and misuse of personal property; and d. Provides the Bureau for Management, Office of Financial Management (M/FM) with cost and inventory control data needed for the proper recording of capitalized personal property.

Chapter 3

3.1 Purpose and area off study The purpose of this study is to evaluate on personal financial planning for Malaysian. This study basically for young people for Malaysian who do not know where to invest their money, how to utilize, to make a proper goal or destination they need help from the planner. The purpose of each goal is determined to ensure that the goal is meaningful in the context of the individual's situation. Personal financial planning is for Malaysian broadly defined as a process of determining an individual's financial goals, considering his or her resources and purposes in life, risk profile and current lifestyle, to detail a balanced and realistic plan to meet those goals. 3.2 Population & Sampling Procedure The main focus of the study is held on students and young workers who are new and lacks in experience regarding investment. This is why the young workers and the students have been considered as the population for the study.

This study conducted via questionnaire survey. For the purpose of my desired study, a survey will be needed to conduct via self administered questionnaires which will be distributed among a random number of the Malaysian student and young workers. The survey will be held on a random sample size of around 150 respondents who will be mostly from three different professions (young workers, executives and professionals, and student) at different areas in Kuala Lumpur, Malaysia. After collecting data from the respondents, the data analysis will be held and necessary recommendations regarding financial planning will be provided.

3.3 Instruments reliability and validity Interview, telephone conversation and other mode of face to face communication is considered to identify whether the respondents real opinion is reflected through the questionnaire or not. By this way the validity will be tested. Asking two different questions

with same meaning to the respondents will help to measure the reliability of the data. If both of the questions have same result from the respondents, the data will be found reliable.

3.4 Data collection methods While several data collection techniques have been developed and applied across different disciplines, market survey has been identified as the most popular means of generating primary data in business research (Zikmund, 2000). For marketing researchers, the selfadministered questionnaire survey has proven to be an important and useful instrument (Ranchhod & Zhou, 2001). For the purpose of this study, although there were many possible ways to communicate with respondents, such as online focus groups and also chat rooms, the self-administrated questionnaire was used. His method is considered to be the most popular method used given the time and budget constraints of the project. More importantly, since the questionnaire was highly structured and relatively straightforward, respondents will be able to complete the survey on their own without much help from the researcher. Therefore, the use of a self-administered questionnaire helps to increase convenience for the respondents to participate in the survey. 3.4.1 Primary Data Primary data are which first hands experience data are. In other words these are data which I myself will be collecting and observing for the purpose of my research. The main advantage of primary data is to find the data that is the most applicable for research purpose and the disadvantage is that through primary data collection, it is usually more costly and burns more precious times. (Slideshare 2009) Primary data can be gathered by communication methods or observation methods or both. Communication methods include interacting with respondents, asking for their opinions, attitudes, motivation, characteristics and these can be collected by methods like surveys, focus groups, pannels e.t.c.

On the other hand an Observation method usually does not interact with respondents and letting them behave naturally and drawing conclusions from their actions. (Slideshare 2009) For my research based on a personal financial planner for Malaysian I will use both communication methods and the observation methods. The ways I am planning to achieve these methods are by applying or using the structured questionnaires and personal observation methods. 3.4.2 Secondary Data Secondary data are those data that have been collected for some project and has already been collected by someone else for a different purpose. Secondary Data can almost always be gathered faster and at a lower cost than primary data (Zikmund, 2000, p58). The common sources of secondary data include censuses, surveys, organizational records or data collected through qualitative methodologies or qualitative research. (Wikipedia 2010) Secondary data analysis saves time that would otherwise be spent collecting data and particularly in the case of quantitative data, provides larger and higher quality databases that would not be feasible for any individual researcher to collect on their own. (Wikipedia 2010)

3.5 Data analysis method There is a number of software available for analyzing the study. In this research, Microsoft Excel 2007 software has been used to analyze data. In this research, the responses and information collected from survey will be tested using various statistical techniques such as frequency distribution, ANOVA etc. Thus the overall data analysis for the study will be conducted.

Chapter 4

As mentioned earlier a research was conducted by using the questionnaire method and later the data gathered from different area in Kuala Lumpur, Malaysia. The study will be analyzed by using the frequency distribution testing and the outcomes of the research are described below. 4. Facts and result of study
Table 1 shows the demographic profile of 150 respondents form different area in Kuala Lumpur, Malaysia.
Table 1: Demographic Characteristics of the 2010 Survey Participants.

Characteristic

Respondents( In percentage )

Respondents ( Total )

Gender Male Female Age Below 20 20 29 29-39 40 or above Marital Status Married Single Race
Malay Chinese Indian Others

64.66 35.33

97 53

13.33 47.33 28.66 10.66

20 71 43 16

13.33 86.66

20 130

35.33 44.66 15.33 4.66

53 67 23 7

Religion

Islam Christian Hindu Buddhist Others

Highest Education

35.33 14.66 15.33 30 4.66

53 22 23 45 7

Primary O level A level Degree Post Grad. Others

Occupation

0 0 7.33 49.33 40.66 2.66

0 0 11 74 61 4

Govt. Job Private Sector Own Business Student Others

Monthly Income

8.66 28.66 18 42 2.66

13 43 27 63 4

RM 2000 or less RM 2000 RM 2999 RM 3000 RM 4999 RM 5000 or more

32 48 14 6

48 72 21 9

The overall result presented in the above table represents study mentioning that most of the male want financial planning because males responded is 64.66% all though female are 35.33% of the total respondents. Form the survey of my study it is to be mentioned that there are different people of different ages who want personal financial planning but mostly form 20-29 ages people need financial planning for their future because they have been come up with new knowledge but do not know how to invest and make a financial plan for them. So my study will help those find out how to make financial planning for them. From the data of

my study it is to be noted that 86.66% unmarried people need financial planning rather than married people, because most them are student and young worker in Malaysia. In Malaysia there are three races Malay, Chinese and Indian. But when I went for my survey most of the area are Chinese. So, most of the data have been gathered from Chinese people which are all about 44.66% of the total data gathered. From my survey, I got to know that the area I went for survey mostly are Chinese, so in Malaysia most Chinese are Buddhist and Christian. In Malaysia most of the student wants financial planning after completion of their Degree. One reason for the low level of knowledge is the systematic lack of a sound personal finance education in college curricula. Most of the higher education institutions put little emphasis on students personal finance education. Even business schools do not require students to take a Personal Finance Management course. According to a survey, there are few good business school offers an undergraduate major in finance services. Given the lack of personal finance education, it is not surprising the results which show that college students have inadequate knowledge on personal finance. So for them my study will help to make a personal financial plan. From the survey, everyone will be able to know most of the student needs personal financial planning which is about 42% as well as private sector workers need also personal financial planning. Young workers do not know how to invest and make a financial planning for them in their working place. So my study will be helpful for them to create a good financial plan.
RM 5000 or more RM 2000 or less St dent Govt. Job Post Grad. O level Others Christian Others Malay Married 29-39 Age Gender

20

40

60

80

100

120

140

Figure 2: Demographic Characteristics

Table 2: Frequency of Managing for Various Aspects of Personal Financial Planning.

Items

Details

Responses (In Percentages)

Investment Planning 1. What is the primary I am saving to use these funds for a large goal of your investments? purchase or expense, such as a car, home down Please choose the most important one. payment or other goal within five years I want to invest for the long-term, but I need this investment to generate cash flow and provide regular income. I would like long term growth. I have no need for income now or over the next 10 years. Im only interested in aggressive growth over the long run. I want to maximize my potential return. 2. Your personal time horizon is an important part of your financial strategy. What percentage of your income do you plan to invest within the next 5 years? More than 50%

41%

35%

13%

11%

26%

30% to 50%

42%

Less than 30%

32%

I dont plan to spend any of it.

N/A

3. Investment is the commitment of funds to achieve long term goals or objectives.

Strongly Disagree Disagree No Opinion Agree Strongly Agree

N/A N/A N/A 57% 43%

4. Investment is the longterm financial success.

Strongly Disagree

N/A

Disagree No Opinion Agree Strongly Agree

N/A N/A 48% 52%

5. Which of the following All of my investments will go on Savings statements best describes Bonds because I need the income or security. your current investment situation? (If you dont Most investment will be made to generate currently have income and preserve capital, but I need some investments, choose the response that best capital growth. describes how you think.) Most of my investments tend to be mutual funds, although they are generally not aggressive funds. My investments tend to be moderately aggressive mutual funds. My objectives are longterm growth; therefore I dont often make changes unless my reasons for investing have changed. I tend to choose aggressive investments for the long term. Money Management planning 6. Spend my money very carefully.

23%

21%

29%

16%

11%

Strongly Disagree Disagree No Opinion Agree Strongly Agree

N/A N/A N/A 46% 54% N/A N/A

7. Maintain a disciplined savings or investment program.

Strongly Disagree Disagree

No Opinion Agree Strongly Agree 8. Maintain adequate disability insurance. Strongly Disagree Disagree No Opinion Agree Strongly Agree 9. Reduce taxable income. Strongly Disagree Disagree No Opinion Agree Strongly Agree 10. Start education children. or maintain fund for Strongly Disagree Disagree No Opinion Agree Strongly Agree Estate Planning 11. I would like to make specific plans for asset distribution in the event of my death. Strongly Disagree Disagree No Opinion Agree Strongly Agree

8% 53% 39% N/A N/A 7% 51% 42% N/A N/A N/A 35% 65% N/A N/A N/A 67% 33%

N/A N/A N/A 72% 28%

12. My life insurance is consistent with my total estate plan.

Strongly Disagree Disagree No Opinion Agree Strongly Agree

N/A N/A N/A 71% 29% N/A N/A 6% 73% 21% N/A N/A N/A 43% 57% N/A N/A N/A 45% 55%

13. I would like to know what income my family will receive from the proceeds of my estate.

Strongly Disagree Disagree No Opinion Agree Strongly Agree

14. I would like to understand how taxes will be applied to my estate.

Strongly Disagree Disagree No Opinion Agree Strongly Agree

15. I am well informed about estate planning.

Strongly Disagree Disagree No Opinion Agree Strongly Agree

The overall result presented in the above table shows the frequency of respondents in managing various aspects of personal financial planning. Overall, investment planning and money management appear slightly better and actively managed as compared to estate planning.

4.1 Investment Planning: In table 2 Malaysian respondents have a positive attitude toward investment. Investment is most important because it builds wealth and security for future life. Financial investment is determined by the financial goal. If goals are more specific then investments will help to meet those goals. But most of the Chinese respondents were more likely to engage in investment planning for their finances as compared to Malay and Indian respondents.

The study gets to know from survey question that how to set a goal for investment. Among 41% of people want to save money for a large purchase or expenses so that they can get, home down payment or other goal within five years. As well as 31% of people also want to invest in long-term because they need to generate cash flow and also to have regular income. Long term investments are the best choice for the investment. Good long term investments are those ones which bear low risks and offer high profit on the outcome. And also good long-term investments are often focused at the future, and in order to make high profit in future.

I only interested in aggressive growth over the long run. I want to axi ize y potential return.

I would like long ter growth. I have no need for inco e now or over the next 10 years.
I want to invest for the long-ter , ut I need this invest e nt to generate cash flow and provide regular inco e .

I a saving to use these funds for a large purchase or expense, such as a car, ho e down pay ent or other goal within five years

Figure 3: Primary Goal of Investment.

0%

5% 10% 15% 20% 25% 30% 35% 40% 45%

From t

anal i it i to be noted t at about 42% people want to invest of t eir income 30%

to 50% wit in 5 years. Because most of t em are student so t ey want to invest 30% to 50% in between. Mostly young workers t ey want to invest more t an 50%. And t ose are feeling agitated to invest t ey are 26% of people.

Inv st within 5 y

No Opinion 0

s

ore 50

Fi

For long term goal 57% people agree to invest t eir money. Long Term investments and funds are investments in a company for more t an one year. They can consist of stocks and bonds of other real estate, companies, and cash that have been set aside for a speciic f purpose. So long term investment is safe for investing and also can achieve good amount of income.

Inv st in lon t m o ls

60 57% 43%

Strongly DisagreeDisagree

Fi

20

40

Agree Strongly Agree

42

I don t plan to spend any of it

Less than 30

32

26

30 to 50

In my survey 52% people strongly agree to invest in long-term investment because they think it will success for their future life. There are many to success in long term investment those are: y Di i : Investing in a number of stocks in different markets and in mutual funds,

bonds and other instruments. Diversify into property funds, commodity funds and hedge funds. This should give protection against a collapse in any one particular sector. y Run the stars and sell the dogs: Monitor investments and compare their performances against the market position. If anyone holdings do well then the

temptation is to cash in and take a profit. On the other hand ditch the dogs that significantly underperform the market. The temptation is to hold onto them in the hope of a rebound or worse still to increase holding at the lower price. So sell the dogs and run with the stars. y Reinvest dividends: The overall growth in most portfolios comes from reinvested dividends rather than in appreciation of the stock prices. Choose some investments with a solid history of dividends.

Lon -t m Fin n i l su
60%

ss

48%
40%

52%

20%
0%

0%

0%
Strongly DisagreeDisagree

0%

No Opinion

Agree

Strongly Agree

Figure 6: Long-term Financial Success.

Based on the survey it is found that 29% of the respondents to have mutual funds because those are generally not aggressive funds. Mutual funds raise money by selling shares of the fund to the public. It is an open ended fund operated by an investment company which raises money from shareholders and invests in a group of assets to makes profit. As well as 23% of respondents they want to invest on saving bonds because they need income or security. Invest in a savings bonds are a great way to add investment portfolio. Its a safe and solid way to make money grow and work. Based on the research 11% of respondents want to have aggressive investment for the long term. They want to make more profit then others.

I tend to choose aggressive invest ents for the long ter . My invest ents tend to be oderately aggressive utual funds. My objectives are Most of y invest ents tend to be utual funds, although they are generally not
o st invest e nt will be a de to generate inco e and reserve ca ital, but I need so e All of y invest e nts will go on Savings Bonds because I need the inco e or security. 0 5 10 15 20 25 30 35

Figure 7: Best investment situation.

4.2 Money Management Planning: In table 2 Malaysian respondents on money management planning. Money management is the process of managing money, investments, budgeting, banking, and taxes. Money management is basically important for young because they did not learn properly how to save, invest, allocate, or how to make money work.

   

 

Among 54% strongly agree from respondents wants to spend money very carefully. As well as 46% agree respondents want to sends money carefully.

Sp nd Mon y
0% 0%

0%

46% 54%

Strongly Disagree

Disagree No Opinion Agree

Strongly Agree

Figure 8: Spend money very carefully.

Most of the respondents 53% agree to have disciplined savings or investment program. Disciplined saving or investment program is important for personal financial planning because its help to how to maintain personal saving or investment. As well as among 8% of the respondents they did not give any opinion.

M int in Savin o Inv stm nt

60% 40%

20% 0%
Strongly Disagree Disagree No Opinion

Agree

Strongly Agree

Figure 9: Maintain Saving or Investment.

Maintain adequate disability insurance is important for personal financial planning because disability insurance provides partial wage replacement to eligible workers who are unable to work because of a disability. Based on my survey 51% of respondents agree to have disability insurance. Rather than 42% of respondents also strongly agree and 7% of respondents they do not have an opinion about disability insurance.

Disability Insu an

60% 40% 20%

0%
Strongly Disagree Disagree No Opinion Agree Strongly Agree

Series1

Figure 10: Disability Insurance.

Reduce taxable income is one of the most important for personal financial planning. Personal

income tax usually progressive, levied on annual income subject to certain deductions. A person means an individual, an ordinary partnershi of person. In general, a person liable to p personal income tax has to compute his tax liability, file tax return and pay tax. In my research respondents wants to reduce their taxable income. Among 65% of respondents strongly agree to reduce their taxable income. So there are many way to reduce taxable income those are: 1. Invest in home to save on tax: Buy a house or any real estate property. So that respondents can include the mortgage interest and property tax in of their deductions. 2. Keep house for two years, save tax while selling: Home sale exclusion is one of the best tax breaks available today. Respondents can exclude up to RM750000 of profit on the sale of their home from their taxable income. But to qualify for the exclusion, they must have owned and lived in that home for at least two years in their house.

3. Timely sale of investments: If respondents earn more than they expected, than they can sell some of their losers and reduce their tax liability. As well as selling mutual funds, they can save their tax outgo just by selling them before the yearend distributions. So that they can save on capital gains tax or dividend tax. Their investments can be allocated to retirement accounts, thereby reducing your overall tax burden. 4. Pre-Payment of Interest: Pre-payment is a common approach to claim the interest deductions on margin loan or investment property loan so it will have the tax deductions this financial year. As long as the loan is used to generate taxable income so it can claim a tax deduction on the interest payments.

Redu e taxable in ome

0% 0% 60% 40% 30% 20% 10% 0%

Education fun for children is one of the most important planning for future. Because the education expenses are so high, so respondents should plan to fund these costs well in advance. Now a days parents are worried about how to fund their childrens educ tion. So a they have been trying to save for education costs is to set aside an appropriate sum that will grow until its adequate to pay all your childrens education costs. However, most middleclass family simply dont have enough money sitting around to invest a lump sum toward college funding. There are many ways to come up with money to supplement what they have saved for their childs education those are:

 

Strongly Disagree

Disagree

No Opinion

Agree

Strongly Agree

Figure 11: Reduce Taxable Income.

Get a private loan for education by tapping into homes equity by taking out a home loan.

y y y

Cash out on investments such as mutual funds, retirement funds and so on. Apply for financial aid such as scholarships, education grants and student loans. Study and work part-time during college.

Based on my survey 67% of respondents agree to have maintained education for children. As well as 33% of respondents was strongly agree to maintain education for children.

Education und
0

0 0

33

Disagree

gree
g ly gree

Figure 12: Education Fund.

4.3 Estate Planning: Estate planning is the preparation of a plan of administration and disposition of one's property before or after death, including will, trusts, gifts, power of attorney, etc. Personal estate plan must meet objectives and the objectives of their family. If it fails in this primary way, the plan is not worth the time they invest in creating it. So first step is making an estate plan to determine what they want to accomplish. Keep in mind that objectives will almost certainly change over time. So estate planning is important for personal financial planning. So estate planning used to be of importance only to the very wealthy. But even middle-income earners those do have a good job investing throughout their lifetimes can benefit from estate planning. It is important to understand the basics of estate planning so that they are financial goals are met even after they are gone.

%$

Str

&

67

"! "

N Opi i

"!

Str

gly Disagree

Most of the people want to have specific plan for assets distribution. So assets distribution is one of the important factors for personal financial planning. So fast step is to determine not only to whom but also in what manner property should be distributed. Consider special needs of children and parents. About 72% of respondents agree to have specific plans for assets distribution. And some of 28% respondents strongly agree to have assets distribution.

Assets Distribution
60 50

20 10

Figure 13: Assets Distribution.

Most of the people find that life insurance to be an important part in an estate planning. Life insurance can be helping many financial objectives those are:
y

Costs of the last illness, costs of administration, other settlement costs, immediate cash for payments of debts, and if necessary, payment of federal estate taxes.

Life insurance can also be used to create an estate planning where one would not otherwise exist.

Funds for the surviving partner to buy the partnership interest of the deceased partner from the heirs. This enables the business to continue as an on-going enterprise.

Some parents buy life insurance for their adult son or daughter who will be in the process of taking over the farm. This action offers protection for parents so that the death of the adult child will take the business.

0)

0) 0 32 )1

Str gly Disagree

Disagree

i i

gree

Str

g ly gree

0)

'

( '

30

'

40

( ' ( (

70

'

80

So based on my research 71% of respondents agree to have life insurance is consistent with their total estate plan. And rest of the 29% strongly agree to hav life insurance is consistent e with their total estate plan.

Life Insu an e
80% 70% 60% 0% 40% 30% 20% 10% 0%
6 6 6 6 5
Str ngly Disagree Disagree N Opini n Agree Str ngly Agree

Figure 14: Life Insurance. Most of the family they are conscious about what income their family will receive from the proceeds of their estate. So based on my survey 73% of respondents agree to know how much they will receive from the proceeds of their estate. And a few portion of respondents its about 6% they do not have any opinion. As well as 21% of respondents strongly agree to know how much they will receive from the proceeds of their estate plan.

In me Receive F m Es ate
80%
60% 40% 20% 0%

Figure 15: Income receive from estate.

Str ngly Disagree Disagree

7

N Opini n

Agree

Str ngly Agree

Tax is one of the most important factors for personal financial planning. So basic goal is to conserve as many of assets as possible to benefit heirs, minimi ing taxes is a major consideration. Much of the estate planning process focuses on reducing or eliminating taxes. This tax is known as the Unified Gift and Estate Tax. So based on my research respondents they want to understand how taxes will be applied to their estate plan. So my study has found out those ways they are:

Tangible personal property, real estate, and other assets. Jointly owned property. Life insurance. Employee benefits. Gift tax paid within 3 years of death.
Based on my survey 57% of respondents strongly agree to understand how taxes will be applied to their estate. As well as among 43% of respondents only agree to understandhow taxes will be applied to their estate.

Taxes Applied on Estate

57% 43% 0%

0%

0%

Strongly Disagree

Disagree

No Opinion

Agree Strongly Agree

Figure 16: Taxes applied on estate.

For personal financial planning every people has to well inform about estate planning. So everyone who owns anything has an estate. Like a home, cars, property, bank accounts, stocks, bonds, mutual funds, life insurance policies and retirement plans. Estate plans can minimi e the expenses of settling an estate So based on my research my study got to know . that everyone well informed about their estate planning. S from my research 55% of o

respondents are strongly agree that they are well informed about their estate planning. As well as 45% of respondents are also agree that they are well infor ed about their estate m planning.

Info med About Estate Plannin

0%

0%
0%

45% 55%

Strongly Disagree Disagree No Opinion

Agree Strongly Agree

Figure 17: Informed about estate planning

The studies which are conducting among the Malaysian those are do not know how to make a financial plan for them. So this study will help them to make a personal financial plan. The importance of personal finance is how to manage finances the way businesses do and to track things so can see at all times how is doing. This personal financial planning is important for those are young workers and students. From my survey results it contributes important to the financial planners in adjusting their respondents needs and achieving personal economic satisfaction, when the respondents move through different stages of their life cycle. For personal financial planning my study have measure some steps those are: y Clarify Present Situation: At first the financial planner need to know clear present situation of respondents. And then planner need to collect all relevant financial data such as lists of assets and liabilities, tax returns, records of securities transactions, insurance policies, will, pension plans and so many thing about respondents. y Identify oals and Objectives: After collecting all data from respondents planner

need to make goal for them. These may include providing for childrens education, supporting elderly parents or relieving immediate financial pressures which would help maintain your current lifestyle and provide for retirement.

Identify Financial Problems: After setting a goal for respondents financial planner need to identify their financial problem. Problem areas can be including too little or too much insurance coverage, or a high tax burden. So for planner they need to make a low tax for respondents.

Implement Strategies: A financial plan is only helpful if the recommendations are put into action. Implementing the right strategy will help to reach the desired goals and objectives. The financial planner should assist in either actually executing the recommendations, or in coordinating their execution with other knowledgeable professionals.

Monitor and Review: Every financial planner they need to review and revision their financial plan to assure that the goals are achieved.

After maintaining the steps planner can make a good personal financial planning for Malaysian. Based on my research on behalf of financial planner my study will able to make a good personal financial planning for Malaysian.