Let’s get our first article of the new year of 2020 started with an interesting case study about Ahmad and Siti at their 30s.

Undeniably, 30’s is always a pivot point in lifestyle transition, be it having a child or buying a house, everything requires one to make well-informed financial decision. To achieve it, a thorough financial analysis of current cash flow and asset/liability situation is undoubtedly crucial. Let’s see how Ahmad and Siti are preparing themselves to welcome their new-born.

Let’s have a look of the couple’s financial analysis.

From the financial analysis, clearly, the couple has a positive net worth of RM450,000. However, most of their assets are made up of properties which are illiquid. The couple is highly leveraged with a large housing loan, two car loans and an outstanding balance on their credit card.

Next, let’s look at the couple’s monthly and yearly expenses and the cash flow analysis.

Based on the cash flow analysis, it is shown that the couple’s total yearly income is RM164.400 but their annual living expenses including debt repayments come up to RM163,716. This means that their monthly is just about “breaking even” and they have only a small cash surplus of RM684 a year.
The table above shows that Ahmad and Siti need RM4,229,633 to fund their goals. However, if they maintain their current employment, lifestyle and investment approach, there is a capital shortfall of RM595.926. In other words. the couple are not able to fund their life goals.

Another issue is as Ahmad is the main breadwinner, the risk that he may be unable to do so should be considered. The family faces a capital shortfall of RM1,463,619 if Ahmad were to pass away. If he becomes totally or permanently disabled, the family will be short of RM 5,397 a month.

Let’s ponder and think upon what actions can the couple take and what changes can the couple make.

The recommendation of answers will be revealed in the coming article on next Tuesday. Stay tuned and have fun reading this case study !

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