CHAPTER 1 : INTRODUCTION

1.1

BACKGROUND OF STUDY

1.1.1 Overview on the factors that influencing personal finance planning management.
Personal financial can be defined as a principle that teaches an individual how to
manage their money and monetary decisions into appropriate manner. Individuals
deal with financial management on a daily basis, and whether it is budgeting for
groceries, buying clothing, purchasing a home or car, or paying for college, many of
the financial decisions people make today can have residual effects that last a
lifetime. A bad credit score can lead to a higher mortgage interest rate, which can
lead to less purchasing power when buying a home and paying thousands more in
interest during the life of the mortgage. Learning to manage money wisely is a
challenging task for many, even more so for individuals who lack basic financial skills
and who have little to no experience with financial management.
Personal finance is the application of the principles of finance to the monetary
decisions of an individual or family unit. It addresses the ways in which individuals or
families obtain, budget, save, and spend monetary resources over time, taking into
account various financial risks and future life events. Components of personal
finance might include savings accounts, credit cards and consumer loans, retirement
planning, investments and insurance policies and income tax management. The
personal financial planning process enables to understand a financial plan and
develop a personal financial plan. The simple objective of financial planning is to
make the best use of the resources to achieve financial goals.
The first factor influence personal financial planning is gender. Females have
often been found to possess less financial knowledge and interests compared to
males. Females are intrinsically right brain thinkers which serve them better in

nurturing roles as wives, mothers and homemakers rather than financial matters.
Despite being responsive to financial education, females were found to possess a
lower retirement age and income goals. Females also tend to be risk adverse in
financial choices.
Women know less about financial management than men. In comparison to
men, women share a larger burden of raising families, start to work later and earn
less during their careers, live longer, have inadequate pension or survivors' benefits,
and face more challenges in financial management. Risk adverse behaviour of
women in their retirement planning will likely result in significantly lower pension
wealth than men.
Second factor that influence personal financial planning is age. Generally,
older individuals are more conservative and risk adverse. The deeper life
experiences may encourage the acquisition of skills to secure their financial
aspirations in their life. Nowadays, youth prefer to use credit cards which is can
cause them to become bankruptcies in early ages. Low financial knowledge may
leading to high level debts, risk of bankruptcy and lacking retirement planning skills
among youth. Age can influence personal financial planning management among
people.
Third, factor that can influence personal financial planning management is
personal income. Personal income can influence people by different level of income
that different people monthly. It is also linked with age. Typically, people with low
incomes fall into the very young or very old age groups. Tax management is
important in order to avoid loss in their income. Sources of income which can be
taxed includes gains and profits from trade, profession and business, salaries,
remunerations, gains and profits from an employment, dividends, interests or
discounts, rents, royalties or premiums, pensions, annuities and others.

Fourth, another factor that can influence personal financial planning

management is level of education. Level of formal education is a controllable factor
that significantly affects the income. More high education tends to get great earning
in their life. Less knowledgeable investors are more prone to hold a widely diversified
asset portfolio, financial knowledge has also been found to positively reinforce
financial satisfaction. Financial literacy improves the exposure and understanding of
the risks associated with the complexity of retirement, insurance and investment
planning. Thus, higher education levels are expect to be associated with higher
financial awareness among people.
Fifth, investments planning also can influence people in their personal
financial planning. Investment planning is the part of financial planning that pertains
to the allocation of investment assets. There are a variety of different types of
investments

available

today,

which

are

short-term

investments,

long-term

investments, and as many different investment strategies as there are investors.

Obviously, there are differences between short-term and long-term investments.
Short-term investments are designed to be made only for a little while, and hopefully
show a significant yield, for examples shares, insurance, securities bought and
others. Long-term investments are designed to last for years, showing a slow but
steady increase so that there is a significant yield at the end of the term for example
bonds, gold, long term notes, and others.

Sometimes the individual have failed to make a successful financial planning.

Most of the time, they cannot balance between the saving, expenses and investment
portion. A key component of personal finance is financial planning process and it has
six major steps, which are define financial goals, develop financial plans and
strategies to achieve goals, implement financial plans and strategies, periodically

develop and implement budgets to monitor and control progress towards goals, use
financial statements to evaluate results of plans and budgets by taking corrective
action, redefine goals and revise plans and strategies.

1.2

PROBLEM STATEMENT
Todays financial world is highly complex when compared with that of a generation
ago. Several past years, a simple understanding about saving, budgeting, retirement
plan, investment and others thing about personal finance may have been sufficient.
Now, consumers must be able to make a good saving, plan for their family futures to
make sure that they are financially prepared when they retire, lost their job or
something emergency happen. People also need to understand about personal
finance because nowadays there are many finance products and services. So to
make sure that people do not choose the wrong finance products and services, they
need to understand the basic about personal finance. So that they only can choose
the products and services that only give benefit to them.
Everyone has heard about making a decision about what to buy, making a
credit purchase and also use credit card every day but no one really understands the
full impact of their decisions. For example, people that cannot manage their financial
or cannot pay their overspending credit card bill and also fail to pay their loan
monthly payment may entering into the debt trap and then may charge with personal
bankruptcy. Sometimes people may choose short cut by borrow the money from the
loan shark. Then they need to pay high interest and if they fail to the money, they will
be blackmail and it becomes a criminal and their life feel uncomfortable because of
always disturbing by the loan shark.

Financial planning is important because a fast-paced world an everincreasing number of financial alternatives are presented. Moreover, information
through all kinds of media, including the Internet is available to help people to make
selection which make wise decision can help people to achieve their goals. Financial
planning also includes gaining insight into the efficient way to perform a task and
then handling it in a logical, disciplined way, enables to further the objectives.
Understanding personal financial planning and being comfortable with own planning
efforts have important benefits for society as well. It allow people dedicate full efforts
at work to the job at hand. It also make people more effective at that job since the
household and the business approach many problems in the same way, and, many
personal financial planning techniques are useful in work-related situations.
Based on this nowadays situation, so, this study focuses on the factors that
influencing personal financial planning management with age, gender, personal
income, level of education and investment among the people at Kota Bharu,
Kelantan.
1.3

OBJECTIVE THE STUDY

The main objective is to identify if there are any relationships between age, gender,
personal income, level of education and investment planning towards the factors of
influencing personal financial planning management.
In order to achieve the main factor, this research will specifically:
1.3.1 To identify that early age of people at Kota Bharu are more concern about
personal financial planning management.
1.3.2

To identify which gender are more concern about personal financial planning
management matter.

1.3.3

To identify level of income can influence personal financial planning

management.

1.3.4

To identify the level of education can influence personal financial planning

management.

1.3.5

To indentify the pattern about investment planning among people at Kota

Bharu.

1.4

RESEARCH QUESTIONS
To investigate the four areas of concern, the following research questions guided the
study:
1.4.1
1.4.2

Does ages influence the personal financial planning management?

Does gender influence the personal financial planning management?

1.4.3

Does

personal

income

influence

the

personal

financial

planning

financial

planning

management?
1.4.4

Does

level

of

education

influence

the

personal

management?
1.4.5

Does investment planning influence the personal financial planning

management?

1.5

THEORETICAL FRAMEWORK

AGE

GENDER

PERSONAL INCOME

PERSONAL FINANCIAL
PLANNING MANAGEMENT

LEVEL OF EDUCATION

INVESTMENT PLANNING

INDEPENDENT VARIABLES

DEPENDENT VARIABLE

Factor personal financial planning can be influenced by gender, because it has differences in
level of awareness about personal finance management between female and male. For the
age, there are differences in the younger and adult level of awareness towards personal
finance management. It is whether young or adult is more aware about personal finance
management. For the personal income, people get different incomes either lower income or
higher income. So the factor towards personal finance management is influenced by the
personal income. For the level of education, people with higher education may have a
difference in their level of awareness towards personal finance management. Investment
planning also becomes factor of personal financial planning management which the amounts
that people invest for their investments influence their personal financial planning
management.

1.6

RESEARCH HYPOTHESIS

The hypothesis of the study is:

Hypothesis I
Ho : There is no relationship between age and factor influencing personal finance
management.
H1 : There is a relationship between age and factor influencing personal finance
management.

Hypothesis II
Ho : There is no relationship between gender and factor influencing personal finance
management.
H1 : There is a relationship between gender and factor influencing personal finance
management.

Hypothesis III
Ho : There is no relationship between personal income and factor influencing personal
finance management.
H1 : There is a relationship between personal income and factor influencing personal finance
management.

Hypothesis IV
Ho : There is no relationship between level of education and factor influencing personal
finance management.
H1 : There is a relationship between level of education and factor influencing personal
finance management.

Hypothesis V
Ho : There is no relationship between investment planning and factor influencing personal
finance management.
H1 : There is a relationship between investment planning and factor influencing personal
finance management.

1.7 SIGNIFICANCE OF THE STUDY

This study is expected to be contributed significantly on the following aspects:
1.7.1

Consumers
The benefits can be in terms of more understanding about investment planning
and learn how to plan their financial wisely. They can start to control their
spending after this study and this will help them to use money for necessary
things. Thus, they are able to save their money or make the good investment
for emergency situations in the future. Therefore, when they understand about
personal finance, it will reduce the burden of the consumers in the future.

1.7.2

Researcher

This research will give the researcher information about the personal financial
behaviour among people at Kota Bharu. From this, the researcher know the
age, gender, personal income, level of education and investment planning can
influence personal financial planning pattern among people at Kota Bharu.
1.7.3

Government
From this study the government can know who understand and do not
understand about personal finance management, so that the government may
pay attention to make a personal finance campaign for the focus group based
on this study. Then the campaign that the government does may be useful
because it is done to the right focus group. It also can avoid from wasting time,
money and energy because of false focus group.

1.7.4

Workers
By using this study, it helps working people in order to manage and plan their
financial. Nowadays, most of them are aware of personal finance but they do
not know how to manage it. By doing this research, it could help them to
manage their personal finance wisely by make investment wisely. They also
can decide which level of age that they should start to make the best action for
their retirement soon.

1.7.5

Bankers
Bankers can use this study as a part of their marketing effort. From this study
they know which area is familiar with the respondent, so that they can use the
information to do marketing to the respondent. It also will ensure that they do
not waste their time and money to market their financial product to those who
do not know about their financial product.

1.8 SCOPE OF STUDY

This study is about the factors influencing personal financial planning management, at
Kota Bharu that represents the urban area at Kelantan. This study will investigate
which factors is more influence about the personal financial planning management.
The respondents of this research are workers in public sectors, private sectors,
unemployed and self-employed that come from Kota Bharu, Kelantan. The area of
observation are at KB Mall, Pejabat Setiausaha Negeri Kelantan, and UiTM Kota
Bharu which participated about 100 respondents.

1.9

LIMITATIONS OF THE STUDY

1.9.1

Budget constraint.
In doing the research, it will incur the researcher many costs. Therefore, in
doing the research, it is important for the researcher to have a strong financial
resource. This is because without financial abilities, it will be difficult for the
researcher to do and complete the research efficiently and effectively. And
with sufficient budget, it will portray the transparencies.

1.9.2

Sources of information.
In order to do the research, information is the most important element to be
included. Without sufficient information, it will be hard for the researcher to
undergo the research. This is because the information will help the researcher
in obtaining findings and finally come out with the solutions for the problems.
It becomes constraint whenever the researcher does get enough access for
the information needed. Besides that, for collecting information about peoples
awareness towards personal finance in Malaysia, the database for the
information is not properly recorded and stored. Furthermore, it is hard to be

found. Therefore, it is a problem for the researcher to get the information. So,
it will also affect the effort of the researcher in gaining the information for the
research.
1.9.3

Timing constraints
Because this research will be done only in one semester only, we do not have
enough time to make a proper research. We only have about 5 months to
complete this research. In order to complete this research on time, we need
to sacrifice much time to make sure the results for this research are useful.

1.9.4

Cooperation constraints
Because this study uses the primary data, the researcher needs to give the
questionnaire to the respondent. But there are respondents whose did not
want to give their cooperation to the researcher.

1.10

DEFINITION OF TERMS
1.10.1

Financial
A branch of economics concerned with resource allocation as well as
resource management, acquisition and investment. Simply, finance
deals with matters related to money and the markets.

1.10.2

Debt
The quantifiable likelihood of loss or less-than-expected returns.
Examples: currency risk, inflation risk, principal risk, country risk,
economic risk, mortgage risk, liquidity risk.

1.10.3

Loan

An arrangement in which a lender gives money or property to a

borrower, and the borrower agrees to return the property or repay the
money, usually along with interest, at some future point(s) in time.

1.10.4

Risk
The quantifiable likelihood of loss or less-than-expected returns.
Examples: currency

risk, inflation risk, principal risk, country risk,

economic risk, mortgage risk, liquidity risk

CHAPTER 2: LITERATURE REVIEW

2.1

INTRODUCTION
This part will discuss the literature review which is relevant to the study. It is regarding
the personal financial planning management among people at Kota Bharu relationship
with the age, gender, personal income, level of education and investment planning of
respondents.

2.2 PERSONAL FINANCIAL PLANNING (chapter 2, financial planning)

Personal financial planning is the process of planning spending, financing, and
investing to increase the profit and to optimize the financial situation. In order to
achieve the goals which to increase the worth, the proper financial plan are intended
by specifies the financial goals, describes the spending, financing, investing plans.
Lack of savings will cause many problems which can contribute bankruptcy among
youth, increasing cost of health care and other necessities,(Jeff Madura,2007).
Besides, based on study by Lewis J. Altfest, 2007,personal financial planning
can be thought of as the analysis and decision making extension of personal finance.
Basically, personal financial planning decisions includes consumption and savings,
investments, financing, and risk management.
Personal finance is the application of the principles of finance to the monetary
decisions of an individual or family unit. It addresses the ways in which individuals or
families obtain, budget, save, and spend monetary resources over time, taking into
account various financial risks and future life events. Components of personal finance
might include checking and savings accounts, credit cards and consumer loans,
investments in the stock market, retirement plans, social security benefits, insurance
policies, and income tax management.(http://en.wikipedia.org/wiki/Personal_finance)
Based on journal by Ade`le Gritten,(2011), are mention about a paradigm shift
in consumer confidence has taken place with the worst recession on record forcing
people to evaluate their personal and household finances This journal seeks to explore
the extent to which consumer confidence has been tarnished, and how it has evolved

post-recession. It aims to take both retrospective and prospective views on what has
changed in the British psyche since the credit crunch, looking at where new
confidences have been found and where old confidences have been lost. The
methodology is based on a variety of proprietary quantitative research surveys
conducted by YouGov plc. The findings is provides new insights into consumer
confidence, looking at which aspects of household expenditure and budgets have
been hardest squeezed, and what that means for short- and medium-term futures;
analysing the extent to which the generally lower level of available credit makes
consumers more or less reliant on borrowing as a way of life, and the associated
impact on confidence and decision making/financial planning prioritisation; exploring
the real fears and concerns people have about their future finances and exploring
consumer financial hopes and aspirations in a post-recessionary climate.
Based on journal by Ming Ming Lai And Wei Khong, (2009), mentioned about
the attitudes of

the Malaysians toward personal financial planning, which

encompasses money management, insurance planning, investment planning,

retirement planning, and estate planning . the methodology use a survey data was
obtained from 400 Malaysians by using a set of structured questionnaire associated
personal financial planning efforts with three measures attitudes towards personal
financial planning, factors influencing various aspects of personal financial planning
decision, and frequency of managing for various aspects of personal financial
planning. The results show that the job status of a respondent is the primary factor in
influencing attitudes towards personal financial planning and the frequency in
managing for various aspects of personal financial planning. Demographic
characteristics such as age, race, marital status, gender, and education level are the
secondary factors were concerned. This journal has implications on financial planners
in formulation strategies on how to successfully deploy a personal financial planning
programme for their customers.

2.3

DEMOGRAPHIC FACTORS (AGE, GENDER, PERSONAL INCOME AND LEVEL OF

EDUCATION)
Based on study by Joyce K.H. Nga, Lisa H.L. Yong and Rathakrishnan D. Sellapan,
(2010),this journal are mention about investigate the level of general financial and
product awareness among young adults. This journal also state that demographic
factors have been found to influence consumer behaviour. Besides, socioeconomic
and cultural background also have impact on an individual financial knowledge,
perception risk, consumption and spending patterns.The methodology use a survey
was employed using a sample of 280 student at a private higher education institution
in Subang Jaya, Malaysia. Exploratory factor analysis (EFA) using principal component
analysis (PCA) was used to evaluate convergent and discriminates validity of the
measures for the constructs of this study, namely general financial awareness and
financial product awareness. Hypothesis testing was done using multivariate analysis
of variance (MANCOVA). The findings of the study revealed that the level of education
and majors influence general and financial product awareness among youths. Also,
males were found to have higher levels of financial awareness compared to females.

Based on study by David S. Murphy and Scott Yetmar,(2010) are mention

about to report on a survey about the personal financial planning attitudes of MBA
students in the USA. The methodology use The study surveyed 206 MBA students
about their attitudes to personal financial planning. Participants were asked about
their level of knowledge, whether they had prepared components of a financial plan,
where they might seek assistance in such a process and the criteria for selecting a
financial planner. In addition, participants were asked to indicate their level of
confidence in a financial plans capacity to help them meet their long-term needs and
the likelihood that they would implement such a plan. The findings are indicate that,

while most respondents feel both that financial planning is important and that they
are interested in developing a financial plan, very few feel that they have the
necessary skills and knowledge to prepare their own plan. In addition, the
participants indicated a strong preference for professional personal financial planning
advice. The study also indicates that less than 13 percent have prepared a
comprehensive personal financial plan. When asked to identify the one professional
from whom they would seek advice, certified financial planners were the preferred
resource.
Moreover, based on study by Chen, Haiyang,(2002),are journal mention
about surveying financial literacy among college students, find that women generally
have less knowledge about personal finance topics. Gender differences remain
statistically significant after controlling for other factors such as participants' majors,
class rank, work experience, and age. However, that education and experience can
have a significant impact on the financial literacy of both men and women. Women
generally have less enthusiasm for, lower confidence in, and less willingness to learn
about personal finance topics than men do. Methodology this study uses a
comprehensive survey to determine participants' personal finance knowledge in the
areas of general knowledge of personal finance, savings and borrowing, insurance,
and investments. To cover the domain of the key areas of personal finance, it have
thoroughly reviewed related literature and generated hundreds of questions in these
areas. The findings are on average women know less about personal finance than
men.

2.4

INVESTMENT PLANNING FACTOR

According to Lewis J. Altfest,2007, Investment is the result of decision where spend
less today so that people will have enough wealth for future spending needs. The

reason of investment and saving is tp have enough money to live comfortably in

retirement when people no longer have active work-related income. How much
people put aside for investments depends on their goals which are strongly
influenced by the pleasure people get from spending today versus the satisfaction
people get from saving monies so that people live the good life in the future.
Based on study by Tuan Hock Ng, Woan Ying Tay, Nya Ling Tan, and Ying
San Lim (2011), this journal mention about analyses the effect of demographic and
investment experience on retirement planning intention. Recognising the importance
of retirement planning, 300 structured questionnaires were administered in April
2009. The final sample consists of 216 after the account for non-replied
questionnaires and the removal of incomplete data. Pertinently, Malaysia represents
a unique platform for this research due to its multiracial cultures. The methodology
use a total of 300 questionnaires were personally administered in three states in
Malaysia, namely Johor, Melaka, and Selangor in April 2009. Only 250 respondents
attempted this survey. There were 50 questionnaires that were failed to be collected
from respondents. Of the total 250 responded questionnaires, 34 copies were
discarded due to incomplete data, making a sample of 216 copies in the present
study or a total of 72 % response rate. SPSS version 16.0 was used to analyse all
the data collected. The findings of this research show that demographic
characteristics affect behavioural intention, i.e. marital status, age, and income level.
Investment experience is another factor reported to have significantly affected
retirement planning intention in this study.

CHAPTER 3 : RESEARCH METHODOLOGY

3.1

INTRODUCTION
Research methodology refers to a description on data collection methods, sampling
design and statistical technique use for data analysis.

Methodology can be defined the analysis of the principles of methods, rules,

and postulates employed by a discipline or, the systematic study of methods that are,
can be, or have been applied within a discipline or, a documented process for
management of projects that contains procedures, definitions and explanations of
techniques used to collect, store, analyze and present information as part of a
research process in a given discipline. (http://en.wikipedia.org/wiki/Methodology)
3.2

SAMPLING AND DATA COLLECTION

The sampling of data used is simple or convenience sampling. The population for this
study comprised of workers in public sector, private sector, unemployed and selfemployed around Kota Bharu. In this study, the primary data was taken or used. The
data were taken from 100 respondents from Pejabat Setiausaha Kelantan, people at
KB Mall and people at UiTM Kota Bharu by giving them questionnaires that have
been prepared. In this study, the independent variables are gender, age, personal
income, level of education and investment planning.
The researcher used primary data to complete this study. Primary data is the
data collected or obtained directly from the field. The researcher had developed
questionnaires that had been distributed at the fieldwork that is worker in government
sector, private sector, unemployed and self-employed around Kota Bharu.

3.3

SAMPLE AND SAMPLING DESIGN

The structured questionnaire is used in gathering data for completion of this study.
For this study, the question is divided into three different parts. Part A is on
demographic profile that consists of multiple choice questions about demographic
information and introduction about personal finance management. This demographic
factor is the independent variable for this study.

Meanwhile, in Part B the researcher had constructed questions about public

awareness and how respondents manage personal financial planning. In part B the
questions include concerning, budgets, expenditure, expenses and investment
planning and the others that are related to personal finance management. In this part
the researcher will use the multiple choice question.
Last part is Part C, the researcher constructed question about public opinion
which to know what opinion people towards the personal financial planning
management. In this part the researcher will use the Likert Scale question.
3.3.1

Multiple Choice Questions

The multiple choice question is single coded in which the respondent is
permitted to check one and only one answer.

3.3.2

Likert Scale Questions

This scaling technique required the respondents to indicate a degree of
agreement or disagreement with each series of statements. There are five
different scale used to differentiate the degree of agreement and
disagreement. The scales ranges 1 to 5 from strongly disagree to strongly
agree, respectively.