How Jimmy Does His Financial Planning with Investing – Sample 2

(Disclaimer: following sample serves only to explain how one does financial planning. All cost mentioned in the sample is fictional and it does not reflect the real condition. This sample is designed for those who just or are about to start their working life. Please be informed that the assumption of investing all saving is impractical in real life)

Please read back Sample 1 before you read this Sample 2

  1. Setting Financial Goals
Jimmy has the same financial goal as Benny, which is getting RM50, 000 within 3~5 years.

  1. Listing Out Expenses
Jimmy has the same expenses assumption as Benny, which is RM2, 200 and increase by RM200 every year.

  1. Listing Out Income
Jimmy has the same income assumption as Benny, which is RM3, 000 and increase by RM300 every year.

  1. Adjusting Expenses
As a result, Jimmy has the same cumulative saving pattern as Benny.
Year Cumulative Saving
1 RM6, 840
2 RM 14, 484
3 RM22, 932
4 RM32, 184
5 RM 42, 240

  1. Adjusting Income
When it comes to adjusting income, Jimmy plans it a little bit differently. Jimmy also decided to find a part time job that provides him extra monthly income of RM230. Next, he plans to invest all these earning and saving to a steady blue chip stock that can provide him yearly dividend that is equivalent to 5% of his capital. He then plans to reinvest all dividends into that stock. Hence, his cumulative saving with the RM230 extra monthly income has been adjusted to as following,

Year Cumulative Saving Invested amount Return (5%) New Saving
1 RM9, 600 RM6, 840 RM9, 600
2 RM20, 004 RM 20, 004 + RM480 RM480 RM20, 484
3 RM31, 212 RM31, 212 + RM1, 504.20 RM1, 024.20 RM32, 716.20
4 RM12, 012 RM12, 012+ RM2, 852.01 RM135.81 RM14, 864.01
5 RM 24, 828 RM24, 828 + RM3, 595.21 RM3, 595.21 RM28, 423.21

This little investment planning by Jimmy is going to provide him a surplus of RM2, 716.20 in 3rd year. After spending RM30, 000 in 3rd year, Jimmy continues to invest that RM2, 716.20. This planning will make his final saving in 5th year to reach about RM28, 400. This will make Jimmy to have an extra saving of about RM2, 400 compared to Benny.

This amount may be small, but if Jimmy continues to practice this dividend re-investing method, he is going to accumulate more saving for years to come.

If you are reading this article and find it helpful,