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Words: 2088, Paragraphs: 207, Pages: 7

Paper type: Assignment

Table of Contents





SEMESTER 1, 2018/2019










Chapter 1 :

1.0 Personal Financial Planning Process :

Since Zika plan to retire at age 55 years old, she then needs to properly to plan her

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financial retirement planning in order to get a maximize consideration for her need in the

future. Personal financial planning is the process of estimating and manage the money for

an individuals in term of investment, budgeting and also for retirement. One of the

important of this financial planning is Zika able to avoid from involved with financial

problems and may help Zika in order to she achieve her financial goals. She then able to

achieve what her lifestyle goals after her retire at age of 55 years old.

1.1 Evaluate Zika Financial Health :

The first step that Zika needs to consider in order to planning for her retirement is Zika

needs to examine her current financial situation. The understanding of the Zika own

financial situation will help Zika to more realistic and understand clearly about her goals.

Based on the case study states that during 33 years old then plan to retire at 55 years old,

the earning of Zika is RM 72,000 per annum with an expected of her salary will grow at 6%

per annum. So the calculated amount in the future of Zika earning after 22 years is RM259

454.70. While for the expenses, the total of Zika expenses per year is RM505 400.

FV = PV(1+i)^n

FV = RM72 000(1+6%)^(22)

FV = RM259 454.70

Expenses of Zika : RM

1. Investment Linked Policy 200 000

2. Critical Illness 100 000

3. Payment per monthly of critical illness (RM200*12month) 2400


4. Personal accident insurance 200 000

5. Monthly premium of personal accident insurance




To see clearly about the current financial health, Zika need to know about her current

net worth. Zika can calculate her current net worth by minus her total of assets and the

total of her liabilities or spending on expenses. Assets is defined as simply on what Zika own

by herself while the liabilities is the value of what Zika owe such as the bills, the taxes, the

premium of insurance and others.

1.2 Define Zika Financial Goals :

The next step is Zika needs to set her financial retirement planning so she can see the

actual direction of her financial retirement plan. In this steps, Zika needs to define her goals

in specific, measurable, attainable, realistic and time-based which known as (SMART).

Others than that, Zika also need to differentiate between the needs and wants. Based on

the case study, one of Zika financial goals is to traveling one times per year where she will

use as 10% from her income for travel. Zika also has a plan to purchase a new house this

year using her eligible amount of her EPF which is has a current balance RM 190 000. In

order to fund her retirement fund, Zika already has their own strategies to get benefits from

the return of investment which is 5% and 9.5% for post-retirement and pre -retirement.

1.3 Develop aplan of action :

Based on case study of Zika, in order to get benefits from the dividend that she received

1.5% for every quarter from REIT and also 3.5% interest from Fixed deposit that she

received compounded monthly. This two interest and dividend are able to increase the

amount of money in the future after her retirement. In term of protection, Zika has

investment-linked policy with the total sum of RM200 000 with an accelerated of critical

illness of RM100 000 that she need to pay for every month of RM200. This investment-

linked policy and personal accident insurance


To makes sure Zika are able to achieve to meet his goals, she are required to has

others alternatives and strategies to achieve her goals. Zika should be flexibility on what are

happen in the future since she cant predict the future as a the plan that she sets may be

changed and some of unexpected thing such as Zika may be expelled from her current work.

This unpredictable changes will give an trouble for the calculation on Future value of

retirement fund.

1.4 Implement Zika Plan :

In this point, Zika should be identified with the options that she has for achieve her

goals and having her own strategies. Then, Zika need to look carefully on her financial

current situation and predict the future in order to maintain her goals. In other words, Zika

should to use her financial plan as aroad map for she to achieve her goals. The process of

implementation will be different with others because everyone has their own financial goals,

So Zika also need to create aschedule of discrete tasks to accomplish over aweek.

1.5 Review progress, reevaluate and revise Zika plan :

The last step for Zika in her financial retirement plan is to review the progress,

reevaluate and revise her plan because this is one of the important step. In this last step will

able to help Zika to achieve her financial retirement goals. Zika must reevaluate her plan

strategies because maybe her first strategies are not able to achieve her objective and goals.

Since Zika cannot predict the future, she also need to more flexible depends on financial

situation where there will unpredictable and unplanned of income and expenses that will

lead Zika to revise again her financial retirement plan as time may change to time.



Zika should emphasis on the issue and the importance of retirement planning. Also,

considered on the impact of inflation on retirement. The retirement planning needs analysis

on financial objectives and analysis the current asset, liabilities, and retirement expenses.

Retirement planning could help to achieve goals in life.

2.1 Determine the pre-retirement income of Zika .

i) Pre-retirement income using current salary

Zika aged 33 and plans to retire at the age of 55. Zika current annual income is RM 72 000

Per annum and she expects her salary to increase annually on rate of 6%.

Financial Calculation:

N=55-33=22, i=6%, PV= 72,000, FV= 259, 454.69

FV= PV �im �

= 72,000 �th� ��

= 259, 454.69

ii) Pre-retirement income using expenses level

a b

Current Level


Average Inflation



Amount Required

at Retirement


� � ��im ���

Investment liked policy 200,000 4% 473,983.76

Premium of personal

accident insurance

(250 ? 12 month)

3,000 4% 7,109.76


Personal Accident


200,000 4% 473,983.76

Critical Illness 100,000 4% 236,991.88

Payment of Critical Illness

(Per month)

(200 ? 12 month)

2,400 4% 5,687.81


2.2 Calculate Zika ’sdesired retirement income .

To fund her retirement, Zika need 2/3 of her last draw salary at age 55 with average annual

inflation of 4%. Zika current income is RM72, 000 Per annum.

Pre-retirement income: RM259, 454.69 ? 67%

Desired retirement income:

= pre-retirement income ? 67%

= RM259, 454.69 ? 67%

= RM 173,834.64

2.3 Establish the lump sum needed by Zika during her retirement years

? Current pre-retirement income = RM RM259, 454.69

? Percentage of current income desired at retirement = 67%

? The average annual inflation rate before & after retirement = 4%

? The average interest rate on investment after retirement = 9.5%

i.Inflation adjusted interest rate

= (1 + investment interest rate)/(1 + inflation rate) –1

= [(1.095)/(1.04)] –1? 100 = 5.29%


ii.Established the desired retirement income (using income replacement ratio method)

= = RM259, 454.69 ? 67% = RM 173,834.64

iii.Calculate the capital needed for comfortable retirement

= RM 173,834.64 [�� �

�th��? ��]? (1.0529)

= RM1,350,013.19

2.4 Assess Zika ’scurrent retirement savings

Zika has another 22 years to retirement. She has earn RM72,000 in bank deposit and she

need 2/3 to fund her retirement and EPF balance is RM190,000.

FV = PV �im �

Bank Deposits :72,000 �ihth� �� =259, 454.69

Fund retirement : =1,584,000

EPF Account Balances : =190,000

TOTAL = RM2, 033, 454.69

2.5 Match Zika ’sretirement savings against the lump sum capital needed.

Zika current retirement savings is RM2,033,454.69 since the capital amount she will need is

RM1,350,013.19. She retirement savings exceeds compared to the capital sum of

RM1,350,013.19. Therefore, she will have the required level of funding his retirement.


2.6 Eliminate Zika ’sretirement shortfall .

Zika retirement planning, there is no concern about savings for her retirement

because her retirement savings exceeds compared to the capital sum, so she will has

enough funding for her retirement. Besides that, Zika has an enough long-term growth of

income because the expected rate is higher and she could save more money before she

retires. In addition, Zika expenses are not high which of RM1, 197,756.97 and she can cover

the expenses by her income and asset that she has. Therefore, Zika could proceed with her

plans to retire at age 55 because she has higher income and can make a higher saving to

fund her retirement.


Chapter 3 :Zika ’sPersonal Balance Sheet & Net Worth

Personal Balance Sheet

Assets RM Liabilities RM

Current Assets 105,000 Secured Loans

House Loan 0

Monetary Assets Car Loan 0

Fixed Deposits 26,645

Unsecured Loans

Investment Education Loan 0

EPF Balance 190,000 Personal Loan 0

Investment-linked policy 200,000 Credit Card Loan 0

Personal Accident Insurance 200,000

Investment in Real


114,009 Other Payables

Loan from family/friends 0

Other Assets Other Dues 0

Car 0

Jewelry 0 Net Worth

Assets 835,654

Liabilities 0

Total Assets 835,654 Assets-Liabilities 835,654

Fixed Deposits

Fixed deposits are one of a financial instrument that have been provided by a bank to a

investors with a higher rate of interest than a regular savings account. Based on the case

study, Zika have a fixed deposit which is RM25, 000 that pays interest of 3.5% per annum

compounded monthly. Therefore the calculation as below:

FV= PV (1+ m

� )n

FV= RM25,000 (1 + hth��

�� )22

= RM25,000 (1.0658)

= RM26,645


The value of Zika ’s fixed deposit after 22 years will be RM26,645, after it has been

compounded monthly per annum with the rate interests of 3.5%.

Real Estate Investment (REIT)

Based on the case study, Zika ’s have a an assets in Real Estate Investment Trust (REIT)

with amount of RM105,000 and she will receive a dividend that pays 1.5% every quarter.

REIT is one if a company owning or finance income-producing real estate in a range of

property sectors. So the calculation for Zika ’sinvestment in REIT is as below:

FV= PV (1+ m

� )n

FV= RM105,000 (1+ hth��

� )22

= RM105,000 (1.0858)

= RM114,009

Therefore, the value of Zika ’sinvestment in REIT will be RM114,009 after 22 years after it

has been compounded quarterly.

Net Worth

Net worth can be defines as a summary that provides a snap shot showing a financial

situations at a certain point in time. Generally, the formula to find the net worth is the

assets minus the liabilities. Assets define as something that you own where there are your

possessions even if you owe money on them while liabilities define as something that you

owe where it is adebt that must be repay in the future. By calculate the net worth, we can

know how much money you have left after the everything you owe is converted into acash

and used to pay-off the debt. Based on the balance sheet above, Zika ’s total assets is

RM835,654 and Zika does not have any liabilities, so the net worth is RM835,654.

Net worth= Assets –Liabilities

= RM835,654 –RM0

= RM835,654




Personal Income Statement


Salary 859680

Total revenue 859680


Investment linked policy 200000

Critical Illness 100000

Payment per monthly of critical illness 2400

Personal accident insurance 200000

Monthly premium of personal accident

insurance (RM250*12month)


Total expenses 505400

Net income 354280

From the income statement above, Zika earn RM72000 per annum. So, she decides to

retirement on 55 years. Which is RM72000 ?22 years and she get the income before the

drawn is RM1584000 that she still working until her retirement. Before that, Zika need to

drawn her money 2 per 3 before retirement. So, the total income that she have afer the

retirement is RM859680.

After Zika has listed all her sources of income, she has to make a list of all her

expenses during the month. She has to go through her debit and credit card history for the

month and relate each withdrawal or charge to the expense that it relates to. She only has

to list the ones where the good or service was consumed for her life. Her total expenses for


the investment is RM200000. She also pay for the year for critical illness which is 100000.

And she paying itfor amonth is RM200. Zika was paying for her personal accident insurance

for ayear. The total for the personal insurance is RM200000 and she paying amonth RM250.

After the total revenue minus the all expenses that Zika paying and investment, the

total net income that she have after her retirement is RM354280.



1. Saving ratio

Annual saving

Annual income

131645 = 0.15


The savings ratio is expressed as a percentage and is computed by dividing average

household savings by average household disposable income. So in essence, Zika savings

ratio is how much money her save on an annual basis as apercentage of income. For Zika,

0.15 saving ratio from her income.

2. Liquidity ratio

Liquid asset

Monthly expenses

105000 =1.46


Zika has RM105000 in cash assets and monthly expenses of RM72000, their liquidity ratio is

3.0. The higher the number, the better the ratio because it means that more months of

expenses can be paid from acash reserve.


1. Galen Herbst De Cortina. “The 6 Step Financial Planning Process -Do It Like The Pros.

Retrieved on 6 December from


About the author

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