Here are the calculations to complete Hyeri's financial plan: FINANCIAL PLANS INCOME AND EXPENDITURE FINANCIAL PLAN (RM) Net income Net salary 8500 Passive income (rent received) 600 Total monthly income P = 9100 Minus fixed monthly savings 850 Minus savings for emergency fund 200 Income balance Q = 8050 Minus monthly fixed expenses Housing loan installment 1800 Car installment 900 Total monthly fixed expenses R = 2700 Minus monthly variable expenses Children's education 500 Petrol expenses 400 Utility bills 300 Telephone bills 200 Groceries 800 Gym 100 Travel 200 Total Monthly Variable Expenses

1. CHAPTER 10: CONSUMER MATHEMATICS : FINANCIAL MANAGEMENT
10.1 FINANCIAL PLANNING AND MANAGEMENT
Financial Management is a process that involves managing money from sources of income into savings,
expenses protection and investment.
Financial
Management
Process
Setting goals
Evaluating financial
status
Creating financial plan
Carrying out financial
plan.
Reviewing and revising
the process

2.  Setting goals is the first step
 Financial goals set must be prioritized and specific.
SMART Financial Goals
Specific A goal must be specific
Know what you want!
Measurable Goal can be calculated – how much money is needed?
Attainable Can it be achieved with the current income/savings?
Realistic Can it be achieved? Is it logic?
Time-bound Have to achieve in ______________ ?
Short-term financial goals
 Can achieved in less than a year
 Do not involve a large amount of
money
 Eg., purchasing a laptop, furniture, a
cell phone and others.
Long-term financial goals
 Can achieved more than 5 years
 Involve a large amount of money
 Eg., savings for retirement,
children’s education, medical
expenses and others.
Setting goals

3.  Assets & Liabilities - benchmarks for evaluating financial status
 Evaluating financial plans helps us to measure our performance in the effort of achieving our
short-term and long-term goals
Evaluating financial status
Assets
 Has value or benefits
 Valuable things that you own.
 Eg., cash, savings, real estate
investments, fixed deposits, unit
trusts or company shares, gold.
Liabilities
 Something that YOU owe money to
 Eg., bank loans, credits card debts
and other financial obligations.
 Outstanding payments such as
unsettled rent, utility bills, credit
cards bills and others.

4.  Life management based on financial planning helps us to monitor our cash flow.
 Two important components in constructing a financial plans, namely the sources of income and
expenses.
 𝑻𝒐𝒕𝒂𝒍 𝒊𝒏𝒄𝒐𝒎𝒆 > 𝑻𝒐𝒕𝒂𝒍 𝒆𝒙𝒑𝒆𝒏𝒔𝒆𝒔 = 𝒑𝒐𝒔𝒊𝒕𝒊𝒗𝒆 𝒄𝒂𝒔𝒉 𝒇𝒍𝒐𝒘𝒔
 𝑇𝑜𝑡𝑎𝑙 𝑖𝑛𝑐𝑜𝑚𝑒 < 𝑇𝑜𝑡𝑎𝑙 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠 = 𝑛𝑒𝑔𝑎𝑡𝑖𝑣𝑒 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤𝑠
Creating financial plans
Active Income
 You are doing something to achieve
that income.
 Eg., salaries, allowances, commission,
financial resouces.
Passive income
 Earning regular income with little
to no effort.
 Eg., rent received, interest
received, dividends etc
Fixed expenses
 Expenses that must be paid or spent
 Due on regular basis (has a due date)
 Eg., rent, insurance payments,
housing loan installments, car
installments and credit car payment.
Variable expenses
 Expenses that will change every
month according to our spending
behaviour.
 Eg., petrol expenses, groceries,
electricity bill payments and water
bill payments

5.  Turning plans into actions that can be implemented
 When carrying put financial plans, we must follow the plan at an early stage.
 We must be ready to change and compare the planned monthly expenses and
actual expenses.
 This is an opportunity to identify any wastage and reduce actual expenses in
order to meet the monthly expenses as planned.
 Must ensure cash flow is always positive. Income > Expenses
 If Income < Expenses, there is negative cash flow (deficit)
 If negative cash flow, prompt action needs to be taken to change the spending
behavior
 If the problem is not resolved, we will fail to achieve the financial goals within a
specific time frame.
 Reviewing and revising the progress of the financial plans from time to time is
important to make sure the cashflow is always positive
 Indirectly help us to achive financial goals as planned
 Be prepared to change financial goals if not realistic to monthly income.
OK SO FAR? :D
Carrying out financial plans
Creating financial plans

6. Identify short-term financial goals and long term financial goals.
A. Identify the active and passive income for each of the following income.
 Dividend
 Allowance
 Rent received
 Commission
 Bank savings interest
 Salary
Active income Passive income
Short-term financial goals Long-term financial goals
Buying a PS5
Savings for children’s education
Opening a restaurant
Buy an Iphone12
Vacation to Japan
Buying a bungalow

7. B. Identify the fixed expenses and variable expenses for each of the following income.
 Petrol
 House installment
 Groceries
 Insurance payment
 House rental
 Internet bill payment
Fixed expenses Variable expenses
C. Calculate the monthly cash flow for each of the following individual.
1. Kim Tan
Active income RM1800
Passive income RM120
Fixed expenses RM800
Variable expenses RM200
2. Krystal
Active income RM2000
Passive income RM220
Fixed expenses RM1900
Variable expenses RM450

8. State the financial goal according to the SMART
approach.
1. Jaemin wants to buy a set of sofa which costs RM4000. He aims to buy the sofa within 8
months. Jaemin needs to save RM500 from his monthly income of RM3500 to achieve
his financial goals. Is Jaemin’s financial goal is a SMART approach?
Specific Buy a set of sofa
Measurable It costs RM4000 and requires a monthly saving of RM500 to achieve the goal.
Attainable Can achieve a monthly savings of RM500 from the monthly income of RM3500.
Realistic RM500 from monthly income of RM3500 is 14.29% of his income
Time-bound 8 months is enough to raise RM4000 with a monthly savings of RM500.

9. 2. Within 10 months, Mr Baek wanted to buy a vehicle to facilitate his return to workplace. He
opted to buy a motorcycle which worth RM5 000. Mr Baek needs to save RM500 a month from
his monthly income RM3 000 to achieve his financial goals.
Specific
Measurable
Attainable
Realistic
Time-bound

10. 1. Chris received an active income of RM2800 and a passive income of RM500 a month. Chris
also incurs fixed expenses at RM1200 a month and variable expenses of RM300 a month.
Calculate Chris’ monthly cash flow. Explain your answer.

11. Irene received an active income of RM3000 and a passive income of RM600 in a month. Irene also
incurs fixed expenses of RM1600 a month and variable expenses of RM500 a month.
(a) Calculate Irene’s monthly cash flow. Explain your answer.
Cash flow = Total income – Total expenses
= (𝑅𝑀3000 + 𝑅𝑀600) − (𝑅𝑀1600 + 𝑅𝑀500)
= 𝑅𝑀1500(𝑃𝑜𝑠𝑖𝑡𝑖𝑣𝑒 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤)
- can invest the money
- use the money/save it for future emergency situation
(b) Explain Irene’s cash flow if her passive income does not exists and the total expenses also increases
by 50%.
Cash flow = Total income – Total expenses
= (𝑅𝑀3000) − (150% × 𝑅𝑀2100)
= −𝑅𝑀150 (𝑁𝐸𝐺𝐴𝑇𝐼𝑉𝐸 𝐶𝐴𝑆𝐻𝐹𝐿𝑂𝑊)
- She might end using her credit card or loan money to solve financial problems

12. 2. Ms Kim is a secretary at a private company. Ms Kim receives a monthly salary of RM35000 and
also receives RM400 from teaching tuition at a tuition center. Ms Kim has to pay RM2000 for
her monthly expenses. The variable expense of RM500 is the allowance for her parents.
a) Calculate Ms Kim’s monthly cash flow. Explain your answer.
b) Explain Ms Kim’s monthly cash flow if Ms Kim’s passive income does not exist and the
total expenses also increases by 50%.

13. EXAMPLE 1
Puan Aminah plans to buy a car worth RM50 000 within a year. She plans to pay a down
payment of RM7 500 with her savings. Puan Aminah does not have any savings. She wants to
get a car loan from a bank. Bank X offers several options. After evaluating her financial status,
Puan Aminah chooses to pay the monthly instalment for seven years as that is what she can
only afford.

15. How to evaluate the feasibility of a short-term and long-term financial goal?
The information below shows Encik Yusuf’s income and expenses for December 2019. Encik Yusuf works
as an insurance agent while his wife is a housewife. They have three children who are still studying.
Encik Yusuf wants to buy a Fast brand computer which costs RM6 000 to improve his insurance
sales within a year.

16. Cash flow
= Income balance – Total expenses
= RM4 800 – RM1 500 – RM3 300
= RM0
Based on the financial plan, Encik Yusuf does not have any savings.
So, it is difficult for him to achieve his short-term financial goal.
Help Encik Yusuf to solve his financial problem without using the emergency fund.
(a) Does Encik Yusuf manage his financial effectively?
He does not manage his financial effectively because there are expensesthat can be reduced such
as the spending on telephone, food and drinks. Furthermore, he does not have any investment
plan for his future.
(b) How much monthly savings does Encik Yusuf need to save in order to achieve his goals?
Monthly savings needed
= RM6 000/12
= RM500
(c) How can an additional income be generated to increase the total income?
Encik Yusuf can increase his income by selling more insurance products and recruiting more new
agents.
d) Create a new financial plan based on the SMART concept.
The SMART concept in the new financial plan.
Specific – Buy a computer that costs RM6 000.
Measurable – Save RM500 every month to achieve the goals.
Attainable – Can save RM500 from the income of RM5 000.
Realistic – RM500 is only 10% of the total income of RM5 000.
Time-bound – One year is enough to save RM6 000 with monthly savings of RM500.

17. Encik Yusuf’s new financial plan after considering some measures in terms of variable expenses.
Encik Yusuf’s savings of RM500 a month can help him save RM6 000 by end of the year 2020 to achieve
his short-term goal.

18. How do you evaluate the feasibility of the short-term and long-term financial goals.
A financial plan is developed to achieve our short-term and long-term financial goals.
We have to identify our sources of income and expenses
Effective financial plan – set aside 10% savings of the total income prior to engage to any fixed
expenses and variable expenses
Financial plans should prioritize the fixed expenses payments – monthly installments of cars,
houses and credit card bills.
What should we do if there is a negative cash flow?
- Adjust the financial plan by reducing the variable expenses
- Add sources of income with our skills to keep the fixed expenses unaffected.
To develop a long-term financial plan, key aspects needed to be considered are
- Inflation rate – continuing increase in general price level
- Interest rate – fee paid for money loan
- Personal health – emergency situation

19. Evaluate the feasibility of Encik Yusuf’s financial plan.
Each financial plan should be evaluated from time to time based on several factors. One of the factors
that Encik Yusuf should focus on is the current inflation rates that can lead to an increase in the cost of
living. This can indirectly increase the total expenses. If this happens, Encik Yusuf should take action to
increase his income. However, Encik Yusuf’s financial plan can be achieved as he has invested in unit
trusts. The additional expenses can be covered by the dividends received.
Long-term financial goals.
Long-term financial goals are as important as short-term financial goals. The purpose of the long-term
financial plan is to make sure the goals can be achieved as planned in the initial stage. Long-term
financial plans usually exceed five years such as children’s education, retirement and buying a house. To
develop a long-term financial plan, the key aspects to be considered are as follows:
 In developing a long-term financial plan, it would be better to start saving early because this
practice can help us in achieving our financial goals faster.
 For example, we should prepare for retirement, buy a property and save for children’s
education. Long-term financial plans developed vary for each individual.
 The income of an individual or joint income of husband and wife allows an individual to have
sufficient monthly savings in a shorter period of time.

20. Assume you are a financial consultant. Mr Wong as the head of his family has come to see you with the
information of his monthly income and expenses as shown below. He seeks your consultancy to create a
financial plan to buy a house.
Mr Wong works as a marketing officer in a company while his wife is a housewife. They have two
children who are one and two years old. Mr Wong would like to save an amount of RM150 000 for his
children’s education in 15 years from now. Help Mr Wong to create a financial plan to achieve his
financial goals.

21. Annual savings
= RM150 000/15 years
= RM10 000
Monthly savings
= RM10 000/12 months
= RM833.33
Additional savings needed = RM833.33 – RM650 = RM183.33
How can Mr Wong achieve his long-term financial goal?
Mr Wong needs to increase his monthly savings by RM183.33.
1. He can reduce the amount allocated for travelling by 25% in order to achieve his financial goal of
saving money for his children’s education.
Reduced travel expenses = × RM500 = RM125
New travel expenses = RM500 − RM125 = RM375
2. He can also cut down expenses on petrol by RM100 by car-pooling with his colleagues.
By practising the above two suggestions,
additional savings = RM125 + RM100 = RM225
3. Mr Wong can also consider reducing the variable expenses to achieve his financial goals. Mr
Wong can do some part-time jobs to generate additional income. Besides that, he can invest the
amount of money saved each year to earn passive income, such as dividends, bonus shares and
interest as an addition to the total income.

22. The new financial plan after taking into account the suggestions.
Total savings for 1 month
= Monthly savings + Additional savings
= RM650 + RM225 = RM875
Total savings for 15 years
= RM875 × 12 × 15 years
= RM157 500
In fact, the amount of money saved is more than RM157 500 as the savings in banks offer interest
annually.

23. The feasibility of Mr Wong’s financial plan depends on following factors :

24. Construct and present personal financial plans to achieve short-term and long-term financial
goals and hence evaluate the feasibility of the financial plans.
Feasibility – Practicality / Can it be done
FINANCIAL PLANS
INCOME AND EXPENDITURE FINANCIAL PLAN (RM)
Net Income
Active Income
Salary
Allowances
Commission
Passive Income
Rent received
Interest received
Dividends
Total monthly income XXXX.XX
Minus Fixed Monthly Savings
(10% of income)
Minus Savings for Emergency Funds
XXX.XX
XXX.XX
Income balance XXXX.XX
Minus Monthly Fixed Expenses
Housing loan installments
Car loan Installments
Insurance Premiums
Total Monthly Fixed Expenses : XXX.XX
Minus Monthly Variable Expenses :
Children’s Education
Petrol expenses
Utility bills
Telephone bills
Groceries
Gym
Travel
Total Monthly Variable Expenses XXX.XX
Surplus of income/Deficit XXX.XX

25. The following table is the financial plan of Hyeri as a sales executive in a private company. Complete
the financial plan by calculating the values of P, Q, R, S and T.
RM
Net income
Net salary 8500
Passive income (rent received) 600
Total monthly income P =
Minus fixed monthly savings 850
Minus savings for emergency fund 200
Income balance Q =
Minus monthly fixed expenses
Housing loan installment 1800
Car installment 900
Total monthly fixed expenses R =
Minus monthly variable expenses
Home utilities 300
Petrol expenses 450
Insurance premium 150
Toll payments 180
Groceries 650
Allowance for parents 400
Total monthly variable expenses S =
Surplus of income T =

26. Vernon works as a prosecutor at a law firm. His monthly net salary is RM3500. He sets aside 10% of
his monthly salary as a fixed saving and RM120 as a savings for emergency fund. The table shows
Vernon’s monthly fixed and variable expenses.
RM
Car installment 500
Toll payments 180
Petrol expenses 450
Groceries 300
House rental 600
Home utilities 240
Personal care expenses 200
Allowance for parents 350
Complete the financial plan for Vernon.
RM
Net income
1.
Total monthly income 2.
Minus fixed monthly savings 3.
Minus savings for emergency fund 4.
Income balance 5.
Minus monthly fixed expenses
6.
7.
Minus monthly variable expenses 8.
9.
10.
11.
12.
13.
14.
Total monthly variable expenses 15.
Surplus of income 16.

27. The monthly net salaries of Gary and his wife are RM8400 and RM3500 respectively. 10% of their net
income is allocated as a fixed monthly savings and RM500 as a savings for emergency fund. The table
shows the monthly fixed and variable expenses for Gary’s family.
RM
Housing loan installment 2500
Husband’s car installment 1800
Children’s needs 400
Home utilities 350
Petrol expenses 380
Groceries 1000
Toll payments 450
Allowance for parents 450
Nursery 500
Complete the financial plan for Gary’s family.
RM
Net income
1.
2.
Total monthly income 3.
Minus fixed monthly savings 4.
Minus savings for emergency fund 5.
Income balance 6.
Minus monthly fixed expenses
7.
8.
Minus monthly variable expenses 9.
10.
11.
12.
13.
14.
15.
16.
Total monthly variable expenses 17.
Surplus of income 18.

28. Chen works as a bank executive with a monthly income of RM12 000. He wants to buy an apartment
worth RM768 000 after eight years of work. He plans to pay a down payment of RM76 800. The total
monthly fixed and variable expenses of Chen’s is RM 8 800.
a) Calculate the monthly savings that Chen needs to save in order to achieve his goal.
b) Is it wise for Chen to buy an apartment worth Rm 768 000? Justify your answer.

29. Carl and his wife want to buy a shop lot for RM1 200 000 within ten years of their marriage with a
down payment of Rm120 000. Their total income is RM20 000 and their total fixed and variable
expenses is RM3 000.
a) How much monthly savings Carl and his wife must save in order to achieve their goal?
b) Is it wise for Carl to buy a shop lot worth RM1 200 000? Justify your answer.