This is the second article on financial self-testing to gauge your general knowledge on personal financial management. You can find the first posting under the title “Finance: A Self-Test.”
Q1. Person X is 50 years old and never been married. He is planning for his retirement and has set to retire at age 60. His house is worth RM400, 000, his vehicle is worth RM30, 000, his investments (e.g. stocks and unit trusts) are worth RM500, 000 and his personal belongings (e.g. jewelries, family heirlooms) are worth RM100, 000. He owes RM150, 000 on his home and has a RM5, 000 outstanding family debt. Determine Person X’s net worth.
Answer: Net worth = Assets – Liabilities
Net worth = RM1, 030, 000 – RM155, 000 = RM 875, 000
Q2. Person Y is 60 years old and has RM1, 000, 000 in his retirement fund which is earning an average of 7 percent return annually. He plans to retire now. How much can he withdraw per month from his fund and ensure that his fund can last until he is 85 years old?
Answer: I used MyCalculators.com to do the calculation online and get the answer.
• Retire in 0 years
• Spend 25 years in retirement
• Amount saved at the time of retirement = RM1, 000, 000
• Annual interest rate = 7 percent compounded annually
• Annual inflation rate = 3.5 percent
Person Y can withdraw $57, 404.23 at the beginning of each year and will still have RM50, 000 left after 25 years (or at age 85).
Q3. Person Z is a shopaholic and tends to go overboard with her spending. She has been advice to use a “Daily Spending Diary” to keep track of her spending and analyze her spending habits.
Answer: There are many variations to a “Daily Spending Diary.” Below is a sample of a Daily Spending Diary that tracks a person’s spending on a daily and monthly basis.
Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.