In this series of 12 articles, we are going to explain how financial planning is being applied in our day-to-day life as we journey through different stages and challenges in our lives. Let us emphasise again that financial planning is not just for the rich. In fact, financial planning is even more crucial for those just making ends meet. As financial planning forms an integral part of growing up, everyone, no matter young or old, should have some basic knowledge of the fundamentals of finance. As the entire world is going through varying degrees of the current financial tsunami, it is our duty to manage our finances responsibly for our well-being and that of our family.
Introduction
Adam is a fine young man who comes from a humble family. His father works as a technician in a local company and his mother is a secondary school teacher. He is the eldest child in the family and has three other school going siblings. His family is not rich but they have all the basic necessities of life and a little more for occasional family holidays. However, they have never been on any overseas trips before as a family. Adam and his siblings also did not always have it their way when it came to toys and the latest gadgets as their father often chided them, “Do you think that money grows on trees?”
Adam had just finished his STPM exams and while waiting for his results, he managed to get a job as a bank teller with a starting pay of RM800! He was very happy with this as the pay he received was many times more than the RM1 pocket money he used to get from his father during his school days. The first thing he did upon receiving his first pay-cheque was to put aside half of it into his bank account since he saw himself as a ‘banker’. Actually, this practice of saving had been instilled into him by his father. With the remaining balance of his pay, he occasionally took his family out for a nice dinner.
From the second month onwards, Adam decided that he should start budgeting since he is earning an income and no longer received allowances from his parents. He did not want to rely too much on his parents nor did he want his hard earned money to go to waste now that he realises the true value of money! Adam then set out to prepare his budget as depicted below:
|
INCOME |
EXPENSES |
||
|
Salary |
RM800 |
Food |
RM250 |
|
|
|
Transport |
RM150 |
|
|
|
Clothing & Entertainment |
RM200 |
|
|
|
Gift to Parents |
RM100 |
|
|
|
Savings |
RM100 |
|
Total |
RM800 |
Total |
RM800 |
(For the sake of simplicity, let us assume there are no statutory deductions from his salary)
Adam felt that the largest part of his expenses come from food and allocated a budget of RM10 per day (with an average of 25 working days in a month) for lunch and a snack in between. He planned to have his breakfast and dinner at home as this will not only help him save some money (main reason) but also reckoned it is healthier (secondary reason). He purchased the Monthly Travel Card rather than the daily pass which is cheaper if one is a frequent user of public transport. It costs only RM135 per month for unlimited rides on public buses and the LRT. Adam also set aside an additional RM15, just in case he needed to catch a taxi on rainy days. Adam budgeted up to RM200 on clothing and entertainment, like going to cinemas during weekends (he is a movie buff) and occasional outdoor activities with friends and family. Being a filial son, he intended to give RM100 to his parents and the remainder RM100 is to be saved.
Adam worked very hard but enjoyed every moment of it as he went about learning how banking operations work. He was fascinated by the sheer amount of money that changes hands every day and wondered how nice it would be if he could own a bank some day! He learned a lot about responsibility, accountability and prudence in his line of work.
After working in the bank for about six months, it was time for Adam to move on to the next phase of his life. When he heard from the news that STPM results would be announced the next day, he felt both excited and anxious. He informed his supervisor that he would have to stop working soon to pursue his higher education. The supervisor was very supportive throughout his six months in the branch and agreed that Adam should at least acquire a degree qualification. He even offered to employ Adam as a permanent staff upon graduation. Adam was flattered and motivated to study hard.
Initially, Adam felt a little restless about getting his STPM results. However, when he looked at his savings account passbook, he smiled as he was happy that he managed to save almost RM1000 (whatever surplus during the month was channelled into the savings fund) throughout his six months of hard work.
To be continued…
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