Financial Plan for Hkd

Introduction

Financial planning is an art of allocating limited financial resource to maximize one’s wealth as well as achieving different financial goals in respective stage of life, the effectiveness of the financial planning is not merely based on the skill and knowledge of the financial planner but the determination and will power of the client also take a crucial role for execution of the plan.

For performing a successful financial planning process, the following steps are usually adopted:

1. Establish client relationship

1. Gather client data and determine financial goals with client

1. Identify current financial situation and problems

1. Structure tailor-made financial plan

1. Implement the financial plan
2. Monitor the financial plan and improve continuously

The following case study is my experience sharing of a financial planning service.

Customer Background

Ms Crystal Cheung aged 28, a Form 5 graduates. She has worked as secretary in a Fine Art School in Shek Kip Mei for five years and her salary is about $12,000 per month.

Crystal’s parents were divorced when Crystal was 12 years old; her mother got married again 3 years ago.  Crystal was living with her grandmother who aged 70 in Kwun Tong.

Crystal is also a part-time beer promoter for one year, 3 times per week, salary was about $3,000 per month and the commission is not stable ranging from $2,000 to about $5,000 per month depends on the location of bars that assigns to her.

Establish client relationship

About 6 months ago, Crystal dropped by my branch for inquiry of personal loan. I referred my customer service staff to help her. Afterwards, she mentioned to my colleague that she would like to know more about our bank’s investment services. Then my colleague referred me to help her.

After self-introduction, I explained to Crystal that there was different kind of investment products. I need to understand more about her financial situation, risk tolerance level and financial goal before making any suggestion to her and she agreed with me.

Firstly, I asked her about the personal loan. She told me that the loan was for her boyfriend, Joe.  She had been with her boyfriend for nearly two years and planned to get married in 3 years time. Her boyfriend was a dart competition organizer. She knew him from a darts competition that she was a champion. Like most of the couple, they were quite happy in the first few months and feeling each other was the perfect beloved one. Joe always spent much on bringing her to those expensive restaurants and bought her branded handbags even Crystal had not requested for.

However, about seven months ago, Crystal found Joe’s credit card statements while tidying up Joe’s home when he was at work and found that Joe owed about HKD 400,000 outstanding credit card payment. From the statement record, Joe only paid for the minimum amount and the total amount was about HKD 15,000 per month. As from Crystal’s understanding, Joe’s salary was about HKD 25,000 and he also needed to pay the rent for HKD 7,000 per month which means every month Joe only had HKD 3,000 left for other expenses. It was very obvious that Joe was in a very bad financial situation and would only getting worse as the high credit card compound interest actually made Joe’s minimum payment growing every month. She was so shocked and thought about how to discuss this with Joe when he came home.

When Joe came home, Crystal asked about his outstanding credit card payments. Joe scolded her for invasion of his privacy and said he could manage it. Crystal told Joe that she really loved him and would like to help him if needed. Then Joe asked to lend her HKD 30,000. Crystal said it was fine and lent the money to him although it was a significant amount for Crystal as her bank account only had HKD 60,000 instead.

As Crystal’s monthly expense was about HKD 10,000 that was already 80% of her income, she decided to work as a part time beer promoter for earning extra money. The job was not an easy one for her but when she thought of her beloved one, she knew that she has to be tough.

After three months, Joe then asked Crystal whether she could help him to borrow money as he had bad repayment records on his credit card. His relationship with his family was also no good and it may not be possible for him to borrow money from relatives or friends. He tried to apply for personal with banks but all banks rejected his loan applications for he was unemployed. He had a great pressure to repay that minimum amount. Joe wanted Crystal to borrow HKD 250,000 to settle half of his credit card debt. Although Crystal was very unwilling to do so, she loved Joe very much and did not want to disappoint him. Therefore, Crystal approached our bank.

However, after Crystal discussed with our bank’s customer service colleague who helped her for the personal loan. She found the fact that the chance for her to apply for a personal loan of HKD 250,000 was very low as most banks and finance companies may grant a unsecured loan for 12 times of monthly salary only. Under this situation, she would try to use her remaining saving to invest to see whether it could earn a much more return so that she could help Joe.

I pointed out to Crystal that investment was unlike gambling. Return on investment within a short period of time may be limited for normal investment. For her objective was to help her boyfriend to settle the credit card debt, there may have other solution. Besides, I asked Crystal whether she had any concern on if in case she could get the loan and helped Joe but Joe did not pay for the installment, she would be legally responsible for the repayment. The consequence may be more serious than she expected. Crystal said she also had concern on this but since she really loved him, she was willing to take this risk.

I then told Crystal that there may have solution she did not need to be responsible for and it was Debt Relief Plan. I explained to her that it was an arrangement between debtor and banks and the interest rate would be more reasonable. Crystal found this may be a good solution and I suggested her bringing Joe to the legal firm or accounting firm that had specialist to handle Debt Relief Plan cases. Crystal was happy to know that although this alternative was not granted yet, she felt more confident on me and providing more about her financial information to me as below.