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Chapter 1  Introduction to Household Financial Management
SINOPSIS <ul><li>Pengurusan pendapatan; perancangan kewangan dan perbelanjaan.  Masalah kewangan isirumah. Alternatif dala...
Financial Management <ul><li>Financial management involves the use of financial resources to achieve one’s goals  </li></u...
Financial Management (cont.) <ul><li>In financial management, the following strategies should be considered: </li></ul><ul...
Financial Management (cont.) <ul><li>Several aspects of financial management must be considered; </li></ul><ul><li>It is a...
Financial Management (cont.) <ul><li>Financial planning involves the following components; </li></ul><ul><li>Job selection...
Financial Management (cont.) <ul><li>Cash-flow management </li></ul><ul><ul><li>Budgeting - Plan spending carefully so tha...
Financial Management (cont.) <ul><li>Savings & investment </li></ul><ul><ul><li>To be able to save in achieving specific f...
Financial Management (cont.) <ul><li>Managing risk </li></ul><ul><ul><li>Make sure risk is managed with suitable insurance...
Time Value of Money <ul><li>Making choices among various financial decisions needs to consider the time value of money – t...
Time Value of Money (cont.1) <ul><li>3 amounts are used to calculate the time value of money for savings in the form of in...
Time Value of Money (cont.2) <ul><li>1. Future value of a single amount </li></ul><ul><li>Amount to which current savings ...
Time Value of Money (cont.3) <ul><li>Eg. RM500 deposited in 6% account for 6 years </li></ul><ul><li>This is to determine ...
Time Value of Money (cont.4) <ul><li>2. Future value of a series of deposit </li></ul><ul><li>Sometimes deposits are made ...
Time Value of Money (cont.5) <ul><li>Eg. RM50 deposited in 7% account for 6 years </li></ul><ul><li>This is to determine f...
Time Value of Money (cont. 6) <ul><li>3. Present value of a single amount (aka discounting) </li></ul><ul><li>Current valu...
Time Value of Money (cont.8) <ul><li>4. Present value of a series of deposit </li></ul><ul><li>To determine how much you w...
<ul><li>Chapter 2 </li></ul><ul><li>The Role Of Individual/Household In The Economy </li></ul>
Individual/Household in the Economy <ul><li>Financial & Personal Aspects of Career Choice </li></ul><ul><ul><li>Trade-offs...
Individual/Household in the Economy (cont.1) <ul><li>Career opportunities are based on </li></ul><ul><ul><li>Social influe...
Individual/Household in the Economy (cont.2) <ul><li>Employment Search Strategy </li></ul><ul><li>1. Obtaining employment ...
Individual/Household in the Economy (cont.3) <ul><li>2. Career Information Sources </li></ul><ul><li>Library </li></ul><ul...
Individual/Household in the Economy (cont. 4) <ul><li>3. Identifying Job Opportunities </li></ul><ul><li>Job advertisement...
Individual/Household in the Economy (cont. 5) <ul><li>Financial & Legal Aspects of Employment </li></ul><ul><li>1. Accepti...
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Introduction to Household Financial Management

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Introduction to Household Financial Management

  1. 1. Chapter 1 Introduction to Household Financial Management
  2. 2. SINOPSIS <ul><li>Pengurusan pendapatan; perancangan kewangan dan perbelanjaan. Masalah kewangan isirumah. Alternatif dalam penggunaan kredit pengguna, simpanan, pelaburan dan pengurusan risiko isirumah mengikut sistem konvensional dan Islam. </li></ul><ul><li>(Management of income; financial planning and expenditure. Household financial problems. Alternatives use of consumer credits, savings, investments and household risks management in conventional and Islamic systems). </li></ul>
  3. 3. Financial Management <ul><li>Financial management involves the use of financial resources to achieve one’s goals </li></ul><ul><li>It is a financial problem solving process – managing financial matters wisely helps to avoid financial problems </li></ul><ul><li>In managing financial matters wisely, a proper and suitable financial planning using available resources is important </li></ul>
  4. 4. Financial Management (cont.) <ul><li>In financial management, the following strategies should be considered: </li></ul><ul><li>To obtain maximum return or satisfaction from the money owned </li></ul><ul><ul><li>Manage money to meet spending & avoid waste </li></ul></ul><ul><li>To create savings </li></ul><ul><ul><li>Unspent money resulted from wise spending. Savings is important to achieve goals & to face financial emergencies need. </li></ul></ul><ul><li>To control what we have </li></ul><ul><ul><li>By obtaining protection or steps of protection to reduce financial loss </li></ul></ul><ul><li>To increase income </li></ul><ul><ul><li>By investing part of the unspent money </li></ul></ul>
  5. 5. Financial Management (cont.) <ul><li>Several aspects of financial management must be considered; </li></ul><ul><li>It is an overall financial planning </li></ul><ul><li>Spending must be appropriate with income </li></ul><ul><li>Spending must be controlled to enable savings </li></ul><ul><li>It must be able to solve financial problem </li></ul>
  6. 6. Financial Management (cont.) <ul><li>Financial planning involves the following components; </li></ul><ul><li>Job selection: </li></ul><ul><ul><li>Choosing jobs suitable with ones ability; education level determine the job; private or public sector; employer that cares about employee welfare </li></ul></ul><ul><li>Financial situation: </li></ul><ul><ul><li>Determine financial situation (net worth) through the financial records. </li></ul></ul><ul><li>Determine life goals & financial goals </li></ul><ul><ul><li>Determine life‘s goals especially financial goals; short-term (<5 years) or long-term, should be reasonable & appropriate goals. Family members‘ activities & financial situation determine the life‘s goal </li></ul></ul>
  7. 7. Financial Management (cont.) <ul><li>Cash-flow management </li></ul><ul><ul><li>Budgeting - Plan spending carefully so that income is spent wisely, spending less than income; unspent money is the surplus of income </li></ul></ul><ul><ul><li>Expenses involving use of large amount of money for durable goods, credit, transportation, insurance, housing, and tax give high impact on the balance of income, need wise spending. </li></ul></ul><ul><ul><li>Daily expenses gives small effect on the balance of income. </li></ul></ul>
  8. 8. Financial Management (cont.) <ul><li>Savings & investment </li></ul><ul><ul><li>To be able to save in achieving specific financial goal, budgeting is essential. </li></ul></ul><ul><ul><li>Think how to invest extra from income to achieve goals – save or invest, retirement plan </li></ul></ul><ul><li>After spending, refer to the life’s goal to determine whether expenses achieve the goals, need feed-back. </li></ul>
  9. 9. Financial Management (cont.) <ul><li>Managing risk </li></ul><ul><ul><li>Make sure risk is managed with suitable insurance policy; involve family members </li></ul></ul><ul><li>Effect of tax & changes in economic situation </li></ul><ul><ul><li>Study on how tax & changes in economic situation affects your financial situation; income tax; govt. policy on labour & tax </li></ul></ul>
  10. 10. Time Value of Money <ul><li>Making choices among various financial decisions needs to consider the time value of money – the increases in an amount of money as a result of interest earned. </li></ul><ul><li>Saving or investing RM1 instead of spending it results in a future amount greater than RM1 </li></ul><ul><li>An RM1 received today is worth more than an RM1 received one year from today, as the RM1 received today can be saved or invested. </li></ul>
  11. 11. Time Value of Money (cont.1) <ul><li>3 amounts are used to calculate the time value of money for savings in the form of interest earned </li></ul><ul><ul><li>Amount of savings (principal) (P in RM) </li></ul></ul><ul><ul><li>Annual interest rate (i) </li></ul></ul><ul><ul><li>Length of time the money is on deposit (T in year) </li></ul></ul><ul><li>Interest earned = P x i x T </li></ul><ul><ul><li>Eg. RM500 deposited at 6% for 6 months </li></ul></ul><ul><ul><li>Interest earned = RM500 x 0.06 x 6/12 = RM15 </li></ul></ul><ul><li>The increased value of money of interest earned can be calculated in two ways: </li></ul><ul><ul><li>Total amount available later – future value </li></ul></ul><ul><ul><li>Current value of an amount desired later – present value </li></ul></ul>
  12. 12. Time Value of Money (cont.2) <ul><li>1. Future value of a single amount </li></ul><ul><li>Amount to which current savings will increase by interest rate & time </li></ul><ul><li>RM100 deposited in a 6% account for 1 year </li></ul><ul><ul><li>Future value = RM100 + (RM100 x 0.06 x 1 year) = RM 106 </li></ul></ul><ul><li>If more than 1 year, eg. 2 years; Future value calculated as </li></ul><ul><ul><li>= future value 1st year + interest earned in 2nd year </li></ul></ul><ul><ul><li>= RM106 + (RM106 x 0.06 x 1 year) = RM 106 + RM6.36 = RM112.36 </li></ul></ul><ul><li>Future value table simplify the above calculations: table for future value of single amount </li></ul><ul><li>The table provide a factor value for certain interest rate & time period. Interest rate must be constant & full year for the deposits for this table to be used </li></ul><ul><li>Future value = The factor multiply with the amount deposited </li></ul>
  13. 13. Time Value of Money (cont.3) <ul><li>Eg. RM500 deposited in 6% account for 6 years </li></ul><ul><li>This is to determine future value of a single amount deposited </li></ul><ul><li>From table, the factor is 1.419 </li></ul><ul><li>Future value = RM500 x 1.419 = RM 709.50 </li></ul><ul><li>Future Value of Single Amount </li></ul>Year 5% 6% 7% 5 1.276 1.338 1.403 6 1.340 1.419 1.501 7 1.407 1.504 1.606
  14. 14. Time Value of Money (cont.4) <ul><li>2. Future value of a series of deposit </li></ul><ul><li>Sometimes deposits are made regularly by year (annually) </li></ul><ul><li>Series of equal deposits or payment annually is called annuity. </li></ul><ul><li>Use table Future Value of Annuity (or series of annual deposits) </li></ul><ul><li>Interest rate must be constant & full year for the deposits for this table to be used </li></ul>
  15. 15. Time Value of Money (cont.5) <ul><li>Eg. RM50 deposited in 7% account for 6 years </li></ul><ul><li>This is to determine future value of a series of equal deposits with constant interest rate </li></ul><ul><li>From table, the factor is 7.153 </li></ul><ul><li>Future value at end of 6 years = RM50 x 7.153 = RM 357.65 </li></ul><ul><li>Future Value of Annuity </li></ul>Year 5% 6% 7% 5 5.526 5.637 5.751 6 6.802 6.975 7.153 7 8.142 8.394 8.654
  16. 16. Time Value of Money (cont. 6) <ul><li>3. Present value of a single amount (aka discounting) </li></ul><ul><li>Current value for a future amount (known) based on interest rate & time period </li></ul><ul><li>Can determine how much to deposit now to obtained desired amount in the future. </li></ul><ul><li>If you want RM1,000 in 5 years time, & will deposit money in a 5% account, you need to deposit </li></ul><ul><ul><li>Refer table Present Value of Single Amount , the factor is 0.784 </li></ul></ul><ul><ul><li>amount deposited = RM1,000 x 0.784 =RM 784 </li></ul></ul>
  17. 17. Time Value of Money (cont.8) <ul><li>4. Present value of a series of deposit </li></ul><ul><li>To determine how much you will deposit if you want to withdraw equal amounts each year </li></ul><ul><li>Current value for a future amount (known) based on interest rate & time period with condition of withdrawing equal amounts annually </li></ul><ul><li>If you want to withdraw RM400 annually in 9 years & will deposit money in an 8% account, you need to deposit </li></ul><ul><ul><li>Refer table Present Value of Annuity (Series of Deposits) , the factor is 6.247 </li></ul></ul><ul><ul><li>amount deposited = amount withdraw x factor value = RM400 x 6.247 =RM 2,498.80 </li></ul></ul>
  18. 18. <ul><li>Chapter 2 </li></ul><ul><li>The Role Of Individual/Household In The Economy </li></ul>
  19. 19. Individual/Household in the Economy <ul><li>Financial & Personal Aspects of Career Choice </li></ul><ul><ul><li>Trade-offs of Career Decisions </li></ul></ul><ul><ul><ul><li>Also involved risk & opportunity cost (What you give-up by making a choice or trade-off decision) </li></ul></ul></ul><ul><ul><ul><li>Family values & personal fulfillment versus money gain </li></ul></ul></ul><ul><ul><li>Career Training & Skill Development </li></ul></ul><ul><ul><ul><li>Education, training </li></ul></ul></ul><ul><ul><li>Personal Factors </li></ul></ul><ul><ul><ul><li>Abilities, interest & personal qualities </li></ul></ul></ul><ul><ul><li>Career Decision Making </li></ul></ul><ul><ul><ul><li>Changing personal & social factors </li></ul></ul></ul>
  20. 20. Individual/Household in the Economy (cont.1) <ul><li>Career opportunities are based on </li></ul><ul><ul><li>Social influences </li></ul></ul><ul><ul><ul><li>Demographic, geographic trends </li></ul></ul></ul><ul><ul><li>Economic conditions </li></ul></ul><ul><ul><ul><li>Interest rate, inflation, consumer demands </li></ul></ul></ul><ul><ul><li>Industry trends </li></ul></ul><ul><ul><ul><li>Foreign competition, changing use of technology </li></ul></ul></ul>
  21. 21. Individual/Household in the Economy (cont.2) <ul><li>Employment Search Strategy </li></ul><ul><li>1. Obtaining employment experience </li></ul><ul><ul><li>Part-time employment </li></ul></ul><ul><ul><li>Voluntary work </li></ul></ul><ul><ul><li>Internship </li></ul></ul><ul><ul><li>Campus project </li></ul></ul>
  22. 22. Individual/Household in the Economy (cont.3) <ul><li>2. Career Information Sources </li></ul><ul><li>Library </li></ul><ul><ul><li>Government materials, industry brochures </li></ul></ul><ul><li>Media </li></ul><ul><ul><li>Newspaper, magazines, television, radio </li></ul></ul><ul><li>Internet </li></ul><ul><ul><li>World wide web, e-mail contacts </li></ul></ul><ul><li>Campus </li></ul><ul><ul><li>Students affairs office </li></ul></ul><ul><li>Community organisation & professional association </li></ul><ul><ul><li>Job training, employment service, meetings, publication </li></ul></ul><ul><li>Business contact </li></ul><ul><ul><li>Friends, relative, teacher, employers </li></ul></ul>
  23. 23. Individual/Household in the Economy (cont. 4) <ul><li>3. Identifying Job Opportunities </li></ul><ul><li>Job advertisements </li></ul><ul><li>Career fairs </li></ul><ul><li>Employment agencies </li></ul><ul><li>Job creation </li></ul>
  24. 24. Individual/Household in the Economy (cont. 5) <ul><li>Financial & Legal Aspects of Employment </li></ul><ul><li>1. Accepting an employment position </li></ul><ul><ul><li>The work environment – management style, work intensity, dress codes, social interactions </li></ul></ul><ul><ul><li>Factors affecting salary –education, training, company size </li></ul></ul><ul><li>2. Evaluating employee benefits </li></ul><ul><ul><li>Meeting employee needs </li></ul></ul><ul><ul><li>Comparing benefits </li></ul></ul><ul><li>3. Employment rights </li></ul><ul><ul><li>No discrimination </li></ul></ul><ul><ul><li>Work’s compensation, social security (SOCSO), employer provident fund (EPF) </li></ul></ul>

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