Question
En. Naufal and Pn. Syazana, a happily married couple, met you upon recommendation by their close friends. They trust that as a certified Islamic Financial
En. Naufal and Pn. Syazana, a happily married couple, met you upon recommendation by their close friends. They trust that as a certified Islamic Financial Planner, you can assist them to prepare a financial plan in realizing their financial goals. After a few meetings with them you have gathered the following information.
Personal Information
En. Naufal (50 years) is a lecturer and his wife, Pn. Syazana (45 years) works as a nurse at a private hospital. They have been married for 16 years. They have two sons (Nasrul 14 years and Nazim 12 years), and a daughter named Syafiya (10 years). The family lives in the same area where you live.
Two weeks ago, on 20th December 2020, En. Naufals mother passed away due to old age. She left assets valued at RM90,000.00. En. Naufal has two sisters and his father is still in good health. His mothers mother (his grandmother) is also alive and lives with the only uncle he has. All beneficiaries to his mothers estate depend on him to get advice regarding the estates distribution.
En. Naufal has been supporting his parents with RM300.00 on a monthly basis. His mother was diagnosed with kidney problem and he spent RM10,000.00 in 2020 for her treatment in a private hospital. Pn. Syazanas mother is a retired government servant while her father passed away five years ago. Pn. Syazana banks in RM250 every month for her mother.
Recently, En. Naufal is diagnosed to suffer from heart-related illness. He is under treatment at the government hospital for the problem. As his health deteriorates, he is concern especially about the education of his children. The couple wish to set up an education fund for the children due to the increasing cost of college education. They do not plan to take education loan and want an estimation of how much money to be invested to cover education cost at tertiary level. It is anticipated that the children will start attending local universities at the age of 20. The average cost of a degree programme including living expenses is estimated to be RM10,000.00 per year for a four-year Social Science programme and RM12000.00 for a four-year Science programme and the cost will rise at a rate of 4% per annum. Nasrul is interested in computer, Nazim loves to learn Japanese language and Syafiya seems to have interest and talent in fashion designing. She designs clothing for her dolls during her free time.
Financial Information
En. Naufal is a senior lecturer at a public higher learning institution with a current salary of RM7,500.00 per month and the salary is expected to grow at 3% a year. As a head of department at one of the faculties (for two-year term until December 2022), he receives administration allowance of RM800.00 per month. Other allowances amount to RM1,300.00 a month until the retirement date. Pn. Syazana currently earns RM5,000.00 a month and the salary is expected to increase by 4% a year. She contributes to EPF and her current balance in the account is RM50,000.00.
En. Naufal and Pn. Syazana submitted separate tax assessment to Inland Revenue Board of Malaysia and both have been paying taxes on yearly basis. They also fulfil their Islamic duty by paying zakat for the past five years. You need to advise them on the current status of tax and zakat payments on their wealth.
They reside in a double storey house since eight years ago. En. Naufal purchased the house using RM170,000.00 Islamic financing for 20 years period at 4% profit rate per annum. The house is currently valued at RM250,000.00. En. Naufal drives a Honda Accord that cost RM140,000.00 when he bought it six years ago. He paid RM30,000.00 as down payment and the balance is secured by a 9-year Islamic hire purchase financing with 4% profit rate. Pn. Syazana, on the other hand, drives a Proton Persona which was bought two years ago at RM45,000.00. She took a 7-year Islamic hire purchase financing with 4% profit rate. Pn. Syazana also owns some jewellery worth RM25,500.00. The cost of living is expected to increase by 4% for next 10 years. Average return for unit trust investment is 6% and 7% for the shares invested.
Other information regarding the current value of their assets are as the following:
| ASSETS | EN. NAUFAL (RM) | PN. SYAZANA (RM) |
| Amanah Saham Wawasan (ASW) | 15,000.00 | 7,000.00 |
| Wadiah Saving Account | 20,000.00 | 5,000.00 |
| Unit trusts (5,000 units) | 15,000.00 | - |
| Tabung Haji | 7,000.00 | 5,000.00 |
| Axiata Bhd Shares (10,000 units) | 17,000.00 | - |
The couple also plan to perform umrah five years from now and hajj a few years after that. They will use the private hajj package which will cost them RM40,000.00 each. You will help them to plan for the fund needed for this purpose. They also plan to purchase a medical plan for the family as their employers medical benefit only cover the employees until they retire.
The following information have been listed regarding the familys expenses for year 2020. En. Naufal and Pn. Syazana planned to cut off some of the expenditures, if necessary, if it creates constraints to their financial goals. They also plan to retire at the age of 60 years old.
| YEARLY EXPENSES (2020) | EN. NAUFAL (RM) | PN. SYAZANA (RM) |
| Groceries | 10,000.00 | 3,000.00 |
| Utilities | 3,600.00 | - |
| Petrol | 4,000.00 | 1,500.00 |
| Books | 500.00 | 200.00 |
| Children education | 2,000.00 | 500.00 |
| Telephone | 1,200.00 | 600.00 |
| Clothing | 700.00 | 1,000.00 |
| Personal expenses | 1,500.00 | 1,500.00 |
| Car maintenance | 3,000.00 | 600.00 |
| Property maintenance | 500.00 | - |
| Car takaful & Road tax | 2,500.00 | 1,200.00 |
| Astro | 1,800.00 | - |
| Internet | 1,560.00 | - |
| Contribution to parents | 3,600.00 | 3000.00 |
| Vacation | 1,500.00 | 500.00 |
| Medical care | ? | ? |
| Zakat | ? | ? |
| Tax | ? | ? |
Based on the information gathered, you are to advise and construct appropriate financial plan to fulfil En. Naufal and Pn. Syazanas goals. You may advise them to cut their spending, if necessary, to allow them to reach their financial goals. You have to prepare the calculation of all the estimates required. Whenever necessary you can make the needed assumptions.
REQUIRED:
- Propose plans for the childrens education.
- Propose plans to fulfill the familys shariah obligation.
- Assess the current investment plan and propose new plan based on available resources.
- Show calculation and distribution of their income and expenses from now (2021) until retirement.
- Show calculation and distribution of their income and expenses during retirement (for 20 years after the start of retirement).
- List all the assumptions made for the proposed solutions.
- Discuss the main answers in your solution in i, ii, iii, iv and v.
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