Financial planning

Savings

Investing your money

Getting financial products

Loans and credit cards

Protecting your money

Getting help on financial matters

Contact details of relevant organisations

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Contents

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PART 1Financial planningFinancial planning is the first step to taking charge of your finances. Four steps are involved:

1. Set your financial goals. 3. Examine your spending habits.2. Know where your money goes. 4. Create a spending plan.

Step 1: Set your financial goalsFinancial goals reflect things you want to do with your money for a given period of time. Setting goals willmake sure you spend and save in a way that enables you to reach your goals.Your financial goals can befor short term, medium term or long term depending on factors such as your age, income, marital statusand family commitments.

Financial Goals Short Medium LongClear credit card debtBuy a carBuy a houseSave for retirement

Term

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X

The booklet is divided into two parts: Part 1 gives you guidance on areas directly concerning moneymanagement such as financial planning, savings and investment. Part 2 concerns other areas on moneyhandling such as getting financial products, financial protection as well as getting help on financialproblems.

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Step 2: Know where your money goesNext, you need to know how you have spent yourincome. Do this by noting down your spending over aperiod of time, say eight weeks.Your aim is not to cutyour spending but to note where you have spent yourmoney.

Step 3: Examine your spending habitsIf you find that you have no spare funds or you wouldlike to grow your savings, you need to examine yourspending habits. Look through your list of spending andask yourself if they are needs or wants.Trim off thewants and look for signs of bad spending habits thatyou need to change.

Step 4: Create a spending planOnce you have studied your spending habits, you cannow create a spending plan that will allow you toachieve your financial goals.You can use Bank NegaraMalaysia’s “Buku Pengurusan Belanjawan Keluarga”(Managing Household Budget Book) which has beendesigned to assist users in creating and monitoring theirspending on a daily, monthly and yearly basis.

• You use your savings to pay current bills.

• You pay the minimum amount which isdue on your credit card.

• You always borrow to make it from onepay day to the next.

• You pay only the minimum amount ofyour repayments which are due and do not

reduce your total debt.

• You find yourself arguing with yourspouse or family members about money.

Warning signs of badspending habits

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SavingsStart to save early. Don’t wait for an idealtime.The sooner you start, the more yoursavings will be. Aim to save at least 10% of

your income every month before you spend.Raise your savings as and when you receive

extra income, e.g. when you receive a bonus.Keep your money in a fixed deposit account.

With higher interest compared to a savingsaccount, your savings will grow faster.

Save before you spend and not vice versa.

Most people do this:INCOME – SPENDING = SAVINGS/ INVESTMENT

The way to go:INCOME – SAVINGS/ INVESTMENT =

SPENDING

In this way, you can be sure that you havesome savings from the income earned

each month.

Consider an emergency fund of three to six months of yourmonthly spending to meet sudden events and payments. Inthis way, you can stay away from getting into debt whenthere is a sudden need for money. However, do not use themoney from the funds to meet your normal spending or tomeet your financial goals.

Steps in building an emergency fund1. Work out your total monthly spending, e.g.

housing, groceries, transportation, utilities and other debt repayments.

2. Decide the number of months of monthly spending you would like to have in your emergency fund.

3. Work out your total emergency fund, i.e. total amount of monthly spending in step 1 multiplyby the number of months in step 2.

4. Put funds into your emergency fund.

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You can grow your wealth through investment if you invest carefully.The types of investment you choosewill depend on your purpose for investing, so start by drawing up your investment goals. Ask yourself:

• What are my goals? What do I hope to get from the investments?• What level of risk can I take?• Do I need my money back within a short period of time?• Do I know how the investment works to allow me to watch it effectively?

Before you invest in any product, find out the risks and returns of the investment. High returns mean highrisks. If you are not prepared to take the risks, don’t invest. Be careful of investment products that promisevery high returns, e.g. those that promise returns that are much higher than the market rate.This is toavoid being cheated in a bogus investment scheme.

Investing your money

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You should only save or invest with parties licensed bythe authorities so that your savings or investments areprotected:

• The institutions accepting deposits that are licensed by Bank Negara Malaysia.You can check their licensing status from Bank Negara Malaysia’s website www.bnm.gov.my.

• Your deposits placed with the financial institutions licensed under Bank Negara Malaysia will be fully guaranteed by the Government through Perbadanan Insurans Deposit Malaysia (PIDM) until December 2010.This coverage is provided automatically at no cost to depositors.To find out more about deposit insurance, visit PIDM’s website www.pidm.gov.my or call PIDM’s toll free line 1-800-88-1266.

• Individuals and companies involved in investment activities are licensed by the Securities Commission.You can check their licensing status at the Securities Commission’s website www.sc.com.my.

How to protect yourselffrom scams?

• Remember the golden rule - if it soundstoo good to be true, it's probably a lie.

• Deal only with licensed financialinstitutions.

• Check with the relevant authority before investing.

• Don't be pressured or rushed into an investment.

• Be extra careful of any investmentopportunity that is not in writing.

• Guard your bank account and credit card information carefully.

Never reveal it to any party.

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When getting a financial product, choose the financial product carefully to avoid any financial loss whenyou decide to withdraw or cancel the product before its maturity. Before you agree to any product,you should:

• Gather information and shop around. Compare prices and product features.

• Seek explanation if you do not understand. Buy the financial product only after you know how it works and its main terms and conditions.

• Find out the fees and charges you may have to pay now and after you have bought the product.This is to avoid any surprise charges which you have not budgeted for.

• Pay attention to exclusions and exception clauses under the contract.

• Take your time to consider any offer. Say “No” if you do not need the financial product that is beingsold to you.

• Be aware that some financial products like unit trust or insurance/takaful allow a “cooling-off period”for you to decide whether you wish to continue with the products after you have signed theagreement.

PART 2Getting financial products

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Loans are facilities provided by financial institutions to help you in carrying out certain transactions orpurchases. For example, when you buy a car or a house, you may need to borrow from a bankinginstitution to finance your purchase. Credit cards are payment instrument that allow you to pay for goodsand services instead of using cash. Below are some of the issues you need to consider when taking a loanor credit card:

• Different loans have different features, interest rates, fees and charges, and terms and conditions. Know what you have agreed with your banking institution.

• Make sure you can afford the monthly payments. As a general rule, your monthly payment on your debts should not be more than one third of your gross monthly household income.

• Pay on time to minimise interest charges.Try to use any lump sum money received, such as bonus, to reduce your loan.

• Exercise more control when using credit cards since you are effectively having cash in hand. If you overspend, you may end up with a huge credit card debt. Remember, finance charges for credit card debt is high, it can be as high as 18% per annum.

• Talk to your banking institution as soon as you can if you have a debt problem.Your banking institution may be able to vary your repayment amount for a short period until your financial position becomes better.

Loans and credit cards

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• Making a complaintBelow is how you can make a complaint against institutions regulated by Bank Negara Malaysia such as a banking institution, insurance company, takaful operator or a non-bank institution that issues credit cards or charge cards.

• Write to the Complaints Unit of your institution.• If you are not satisfied with the decision given by your institution, refer your complaint to the

Financial Mediation Bureau (FMB).The FMB is an independent body set up to deal with disputes between the public and its members (e.g. commercial banks, insurance companies,takaful operators, non-bank institutions that offer credit cards and charge cards).The services of FMB are free of charge.You can get details on the type of complaints handled by FMB from its website www.fmb.org.my.The decision of FMB is binding on your institution but not on you.

• If you are not satisfied with the decision of FMB, you may take your case to the court.• If the complaint does not fall within the scope of FMB, you can refer the complaint to

Bank Negara Malaysia.

• Assistance on debt managementIf you need advice on money management and assistance to deal with your debt, you can contact Agensi Kaunseling Dan Pengurusan Kredit (AKPK). AKPK is an agency set up by Bank Negara Malaysia to provide money management, credit counselling, financial education and debt restructuring services for individuals.The services of AKPK are free of charge. More information on AKPK is available on its website www.akpk.org.my.

Getting help on financial matters

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Contact details of relevant organisations

Bank Negara Malaysia BNMTELELINKJabatan Komunikasi Korporat,Bank Negara Malaysia,P.O. Box 10922,50929 Kuala Lumpur.Toll: 1-300-88-5465 Email: bnmtelelink@bnm.gov.myWebsite: www.bnm.gov.my

Agensi Kaunseling Dan Pengurusan KreditLevel 8, Maju Junction Mall,1011, Jalan Sultan Ismail,50200 Kuala Lumpur.Toll free: 1-800-88-2575Email: enquiry@akpk.org.myWebsite: www.akpk.org.my

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Financial Mediation BureauLevel 25, Dataran Kewangan

Darul Takaful,4, Jalan Sultan Sulaiman,50000 Kuala Lumpur.Telephone: 03-2272 2811Email: query@fmb.org.myWebsite: www.fmb.org.my

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