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4321 Personal Financial Planning

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End of last year, I blogged about this: Money, money, money

The gist of the post was pretty simple: I was frustrated because I realize the need to make and save more money is imminent.

Personal Financial Planning

A few days ago, I met up with a gal friend and she shared with me about personal financial planning. Basically, the very aim of personal financial planning is to generate income, create future cash reserves and other assets, and meet daily expenses.

Income & Expenses

The main bulk/source of your income should come from the salary you receive from your job monthly. However, if you also have part-time jobs and/or other means of passive income such as investments, these are also qualified as your sources of income. This is known as multiple sources of income.

There are two different kinds of expenses - fixed expenses and variable expenses. Fixed expenses include car loan, house loan/rental fees, any outstanding loans, e.g. study loan. Variable expenses include food, clothes, utility bills, petrol, beauty, health, and fitness, etc.

4321 Personal Financial Planning

The 4321 personal financial planning practice that my friend shared with me is interesting.

Use your nett salary amount for calculation, which is the amount you receive after EPF and PCB (income tax) figures are deducted from your gross salary.

4 = 40%: Fixed expenses. This includes house loan, car loan, study loan, send money for family.

3 = 30%: Variable expenses. This includes food, clothes, mobile fees, utility bills, movies, fitness, beauty saloon, petrol, credit cards payment.

2 = 20%: Savings / Emergency fund. This is to meet unexpected expenses such as car repair and also for future obligations.

1 = 10%: Insurance policies. Life and medical. Make sure that you're not under-insured.

I guess it'd be wise for me to do a recalculation to my current financial planning practice.


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