Nicholas is a promising young man with a vision to succeed. He is in full control of his finances. The 29-year-old, who works as a retail business consultant, is a detailed and organised person. He knows precisely the details of his spending, including the status of his assets and investments. It is indeed heart-warming to see a man with such a clear vision as many young adults are still struggling with credit card debt. Table 1 shows his assets and liabilities. His net worth is RM234,332.

Nicholas has an annual income of RM101,280, which includes his bonus and allowances. He manages his cash flow very well by putting RM1,000 to RM1,500 into his savings every month . He currently has a surplus of RM47,000 a year. I suggested that he invest the sum to earn better returns than keeping it in his savings account. He told me that his surplus cash will drop to RM19,000 next year when he starts paying his house and car instalments. I allocated RM12,000 of his savings to meet his goals, which are as follows:

1. Marriage in three years’ time (RM50,000);

2. New car instalments (RM1,000 a month);

3. Accumulate RM1 million by age 50;

4. Purchase low-cost property below RM250,000 for rental purpose; and

5. Annual vacation (RM10,000 a year).

After reviewing his financial position and considering his priorities, I identified a strategy that will allow him to best meet his objectives. The revised Life Goals Analysis illustrates the impact of adopting what I recommend as his personal financial strategy.

Nicholas has no problem with his first goal of having RM50,000 to walk down the aisle with his beautiful bride. He will be driving a new car next year because he has enough cash flow to take care of the instalments.

He can still allocate RM10,000 for his travelling expenses every year until his retirement. But looking at his current financial position, he will not be able to achieve his retirement amount. He will need to save more and have a structured investment portfolio. Since he is still many years away from retirement, he will be able to make the necessary changes to achieve his goals. I will do a yearly review, so any changes in Nicholas’ goals at retirement or before that will be taken care of.

For his new rental property, I have set aside RM30,000 for the initial payment. So, he should have no problems with that.

His goal of accumulating RM1 million by the age of 50 is currently not achievable. But all is not lost as I believe it is his asset allocation that is holding him back. Even though he started out as a conservative cash investor, the investments he holds today are not all conservative. I believe with the proper understanding, he will be comfortable taking on some calculated risks in his future investments. Being young, his ability to accept risk is better than that of an older person. His next strong point is that he controls his expenses very well. Given the right asset allocation and periodical review, he will be able to achieve all that is close to his heart.

In time, his goals will be achievable. However, with only RM50,000 insurance coverage, he needs additional cover to give him peace of mind while he is busy building his “empire”. Nicholas is very clear about his goals. He just needs to keep saving that extra ringgit, make it work harder for him, be prepared for the unexpected and soon, he will be on the road to success.

Irene Lee is a licensed financial planner with CWA

All information contained herein is solely for educational and awareness purposes and should not be construed as an offer or a solicitation of an offer to purchase or subscribe to products offered by CWA. No representation or warranty is made by the said financial planner and/or CWA nor is there acceptance of any responsibility or liability as to its accuracy, completeness or correctness.

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