Learning financial planning skills

About 30 staff and full-time students of WOU were given pointers on financial planning to achieve financial freedom and build up savings.

Loh Pei Luan, Associate from Amanah Saham Nasional Berhad (ASNB) Penang, was speaking on ‘Personal Financial Planning’ at a public talk organised by WOU’s School of Business & Administration (SBA) at the main campus on July 29th.

Loh encourages planning to realise individual financial goals.

Loh encourages planning to realise individual financial goals.

She suggested adopting a “savings first” mentality and using only the remaining income for expenses and payments. She also asked the audience to reflect and explore areas where they can reduce expenditure.

She quoted statistics that reveal less than 50% Malaysians pay the full credit card amount every month, compared to 89% in Taiwan and 87% in Japan, and therefore incur high interest rates; that one in five Malaysians does not have monthly savings; and that 93% Malaysians do not have any planning.

Loh suggested proper management of finances to fulfil one’s goals like buying a house, children’s education or comfortable retirement.  “Identify your priorities, and short-term and long-term financial objectives. Plan how much to save and allocate that amount.”

Asking the audience about their spending patterns.

Asking the audience about their spending patterns.

She warned that financial deficits can lead to borrowing/debt, reduced living standards, increased use of credit card, stress, and ultimately bankruptcy. Knowing to differentiate between needs and wants will help control debts, she added.

She cited that common mistakes in financial planning are failure to set targets/goals and ways to achieve them; lacking discipline to save systematically; inadequate insurance coverage; refusal to use certified financial advisors; and failure to deal with inflation.

Loh provided seven steps to achieve financial freedom. “First, know your current financial position, your assets (e.g. house, property, savings), liabilities (e.g. car loan balance, credit card loans), and net cash flow (take-home income minus expenditure e.g. loan instalments, petrol, toll, food, housing).”

Full-time students (foreground) at the talk.

Full-time students (foreground) at the talk.

“Secondly, set your financial goal, such as clearing debts within a year. Thirdly, have an action plan, like using credit cards less or postpone buying a car. Next, keep records, namely receipts, cheque butts, and credit card statements to identify and monitor your cash outflow,” she stated.

“Then, prepare a budget based on income and expenditure, remembering to allocate for savings/investment. Sixth, control and settle debts smartly, by cutting down on unnecessary expenses and paying off debts/loans with high interests first. Finally, monitor all spending so that you can eliminate items not needed and make up on savings the following month.”

Loh and her colleague (right) entertain queries on investments.

Loh and her colleague (right) entertain queries on investments.

Regarding investments, Loh said low to moderate risk takers may prefer fixed deposits or unit trusts, highlighting that the inflation rate in Malaysia is 4% while fixed deposit savings offer 3% interest compared to ASNB’s 5% to 9%.