HSBC Living Finance
Young Financial Planner Competition 2011
St. Francis’ Canossian College
Participants:
5B – Doris Ko, Dorothy Choi, Winnie Hung, Sindy Chu, Tiffany Ng, Gigi Chan
A. Financial Aims
1. Short term
 2-year part-time Master’s degree course on professional business management (1-year tuition
fee-42,000)
 Rent a flat in Tseung Kwan O ($10,000 per month)
 Marriage (traditional wedding-$200,000 +honeymoon-$60,000)
 Deliver a child (private hospital-$150,000)
2. Medium term
 Buy a car (a small sedan-$150,000+$6,000 per month to run)
3. Long term
 Education planning for the child (before starting kindergarten-$1,500 per month; after starting
kindergarten-$2,000 per month; after starting primary school-$2,000+$1,000 for ECA per
month)
 Insurance (life insurance plan-insured for $500,000)
 Investment ($250,000 in MPF account invested in capital preservation funds)
B. Analysis of present financial condition
1. Stable monthly salary $32,000 (expect to increase 2% every year)
2. Small external burden
 Enrolled in a two- year part- time Master’s degree course on professional business management
one year ago
 Set aside a joint saving account between Mr. Li Chi- keung and Miss Lam Siu- Lai (Mr. Li’s
girlfriend) two year ago - $3,000 per month
 Buy a life insurance (insured for $50,000) two year ago - $4,000 per year
3. No high- valued property
 No personal cars
 No personal flats or house
4. Protected by insurance
 Buy a life insurance (insured for $50,000) two year ago by Mr. Li Chi- keung
 Provided a medical plan by Mr. Li Chi- keung’s Company
5. Mobile cash
 joint saving account between Mr. Li Chi- keung and Miss Lam Siu- lai (Mr. Li’s girlfriend) $144,000 (a)
 Mr. Li Chi- keung personal Hong Kong Dollar account - $300,000 (b)
 Cash - $35,000 (c)
 Credit card balance - $5,500 (d)
 (a) + (b) + (c) - (d) = $( 144,000 +300,000 + 35,000 – 5,500) = $473,500
6. Good overall performance
C. Factors affecting financial status
Financial status can be affected by:
1. Unemployment
 If Mr. Li is unemployed, income , capital 
2. Part-time job
 If Mr. Li has a part-time job, income , capital 
3. Illness
 If Mr. Li has serious illness, medical expenditure  , capital 
4. Time adjustment (getting married and buying a flat)
 If Mr. Li postpone his plan of marriage and buying of flat, he will have more savings for these
purposes
5. Property price
 If property price is expected to rise, Mr. Li have to buy a flat with a higher price if he buy a flat later,
capital 
6. Interest rate
 If interest rate rises, Mr. Li can earn more from his savings account, capital 
7. Returns from investment
 If Mr. Li receives higher returns from his investment, capital 
D． Assumptions
We assume that,
1.
Mr Li and his girlfriend, Miss Lam will have stable marriage.
2.
Miss Lam will not give birth to twins and will only give birth to one baby
3.
Their child will receive 12-year free education (e.g. not attending international school)
4.
The firms they work in will not close down
5.
Both Mr Li and Miss Lam will not be laid off by their firms. (they will enjoy stable employment and
retire at 65 years old)
6.
They will not recive any unexpected income (e.g. Lottery,mark six etc)
7.
They paid credit card payment on time and will not bear any debt
8.
They will not engage in any part-time job
9.
They will receive stable interest from various investment.
10. Their property value will remain stable after they own them (e.g. their new
flats/ cars).
11. The percentage of income to be allotted into the MPF remains unchanged every year
12. Li’s family including Miss Lam will not immigrate to other countries
13. The maximum MPF per month is $1,000
E. Forecast
Li Chi keung’s Income Statement
Year 0
Year 1
Year 2
Year 3
Year 5
441,462.5
459,297.6
$
Income
Major income
Salary
416,000
424,320
432,806.4
$
Expenditure
Living expenses
Life insurance
4,000
4,000
4,000
4,000
4,000
Education
42,000
42,000
8,000
8,000
8,000
Transportation
18,000
18,000
18,000
18,000
18,000
Books and Stationery
5,000
5,000
5,000
5,000
5,000
Salaries Tax
24,000
24,000
24,000
24,000
24,000
Entertainment
36,000
36,000
36,000
36,000
36,000
MPF
12,000
12,000
12,000
12,000
12,000
Holidays
15,000
15,000
15,000
15,000
15,000
Household expenditure
24,000
24,000
24,000
24,000
24,000
Joint savings account
36,000
48,000
48,000
48,000
48,000
Charitable donation
5,000
5,000
5,000
5,000
5,000
Other expenses
60,000
60,000
60,000
60,000
60,000
Wedding
/
/
200,000
/
/
Honeymoon
/
/
20,000
/
/
Sedan
/
/
/
150,000
/
Car cost
/
/
/
72,000
72,000
Delivery cost
/
/
/
150,000
/
Child’s fee
/
/
/
18,000
18,000
Rental cost
/
/
120,000
120,000
120,000
Surplus
135,000
131,320
-166,193.6
-327,537.5
-9,702.4
416,000
424,320
432,806.4
441,462.5
459,297.6
Li Chi keung’s Income Statement
Year 7
Year 9
Income
Year 10
Year 20
Year 30
618,154.1
753,526.4
$
Major income
Salary
477,853.2
497,158.5
507,101.7
$
Expenditure
Living expenses
Life insurance
4,000
4,000
4,000
4,000
4,000
Education
8,000
8,000
8,000
8,000
8,000
Transportation
18,000
18,000
18,000
18,000
18,000
Books and Stationery
5,000
5,000
5,000
5,000
5,000
Salaries Tax
24,000
24,000
24,000
24,000
24,000
Entertainment
36,000
36,000
36,000
36,000
36,000
MPF
12,000
12,000
12,000
12,000
12,000
Holidays
15,000
15,000
15,000
15,000
15,000
Household expenditure
24,000
24,000
24,000
24,000
24,000
Joint savings account
48,000
48,000
48,000
48,000
48,000
Charitable donation
5,000
5,000
5,000
5,000
5,000
Other expenses
60,000
60,000
60,000
60,000
60,000
Wedding
/
/
/
/
/
Honeymoon
/
/
/
/
/
Sedan
/
/
/
/
/
Car cost
72,000
72,000
72,000
72,000
72,000
Delivery cost
/
/
/
/
/
Child’s fee
24,000
36,000
36,000
36,000
/
Rental cost
120,000
120,000
120,000
120,000
120,000
Surplus
2,853.2
10,158.5
20,101.7
131,154.1
302,526.4
477,853.2
497,158.5
507,101.7
618,154.1
753,526.4
Year 3
Year 5
286,000
310,000
Li Chi keung Balance Sheet
Year 0
Year 1
Year 2
$
Assets
Investment
MPF (capital and returns)
250,000
262,000
274,000
$
Current assets
Joint savings account
144,000
240,024
336,057.6
432,100.8
624,677.0
Personal HKD account
300,000
435,043.5
566,646.7
300,483.1
272,127.9
Cash
35,000
35,000
35,000
35,000
35,000
729,000
972,067.5
1,211,704.3
1,153,593.9
1,042,639.9
$
Current liabilities
Credit card balance
5,500
5,500
5,500
5,500
5,500
Net asset value
723,500
966,567.5
1,206,204.3
1,148,093.9
1,037,139.9
Li Chi keung Balance Sheet
Year 7
Year 9
Year 10
Year 20
Year 30
490,000
610,000
2,075,152.0
3,048,195.1
$
Assets
Investment
MPF (capital and returns)
334,000
358,000
370,000
$
Current assets
Joint savings account
817,445.9
Personal HKD account
62,756.7
75,174.5
85,341.5
781,012.5
2,915,803.8
Cash
35,000
35,000
35,000
35,000
35,000
3,381,164.5
6,608,998.9
1,249,202.6
1,010,407.6 1,106,960.8
1,478,582.1 1,597,302.3
$
Current liabilities
Credit card balance
5,500
5,500
5,500
5,500
5,500
Net asset value
1,243,702.6
1,473082.1
1,591,802.3
3,375,664.5
6,603,498.9
F. Suggestions
We suggest Mr. Li to:
1.
buy a second-hand car ($29,800) instead of a new car
2.
rent a flat from year 2 to year 6 then buy a flat in year 7.
consider a mortgage plan at a loan to valuation ratio of 70% with a tenor of 20 years
down payment can be withdrew from joint savings account
3.
choose schools located in Cheung Kwan O for his child to save transportation cost
4.
put his savings in Dah Sing Bank for higher interest (below $500,000: 0.01% per year, above $500,000:
0.05% per year)
5.
buy education funding for his son in year 7 ($39,748.8 a year until year 22) which assist him in paying
the education fee when he enters the university
6.
choose MPF of equity funds outside Hong Kong (e.g. Greater China) due of asset diversification which
is with a higher risk and returns
7.
buy bonds (HSBC bank PLC) with $100,000
(coupon rate: 6.75%, redemption date: after 3.5 years)
8.
put $15,000 cash into the personal savings account in year 11 to year 12 to avoid negative savings
G. Budget
Li Chi keung’s Income Statement
Year 0
Year 1
Year 2
Year 3
Year 5
$
Income
Major income
Salary
416,000
424,320
432,806.4
441,462.5
459,297.6
Bonds (capital +
/
/
/
/
/
returns)
$
Expenditure
Living expenses
Life insurance
4,000
4,000
4,000
4,000
4,000
Education
42,000
42,000
8,000
8,000
8,000
Transportation
18,000
18,000
18,000
18,000
18,000
Books and Stationery
5,000
5,000
5,000
5,000
5,000
Salaries Tax
24,000
24,000
24,000
24,000
24,000
Entertainment
36,000
36,000
36,000
36,000
36,000
MPF
12,000
12,000
12,000
12,000
12,000
Bonds
/
/
100,000
/
/
Holidays
15,000
15,000
15,000
15,000
15,000
Household expenditure
24,000
24,000
24,000
24,000
24,000
Joint savings account
36,000
48,000
48,000
48,000
48,000
Charitable donation
5,000
5,000
5,000
5,000
5,000
Other expenses
60,000
60,000
60,000
60,000
60,000
Wedding
/
/
200,000
/
/
Honeymoon
/
/
20,000
/
/
Sedan
/
/
/
/
/
Second hand car
/
/
/
29,800
/
Car cost
/
/
/
72,000
72,000
Delivery cost
/
/
/
150,000
/
Child’s fee
/
/
/
18,000
18,000
Rental cost
/
/
120,000
120,000
120,000
Annual mortgage
/
/
/
/
/
/
/
/
/
/
135,000
131,320
-266,193.6
-207,337.5
-9,702.4
416,000
424,320
432,806.4
441,462.5
459,297.6
repayment
Annual premium for
education funding
Surplus
Li Chi keung’s Income Statement
Year 7
Year 9
Income
Year 10
Year 20
Year 30
$
Major income
Salary
477,853.2
497,158.5
507,101.7
618,154.1
753,526.4
Bonds (capital +
126,156.2
/
/
/
/
returns)
$
Expenditure
Living expenses
Life insurance
4,000
4,000
4,000
4,000
4,000
Education
8,000
8,000
8,000
8,000
8,000
Transportation
18,000
18,000
18,000
18,000
18,000
Books and Stationery
5,000
5,000
5,000
5,000
5,000
Salaries Tax
24,000
24,000
24,000
24,000
24,000
Entertainment
36,000
36,000
36,000
36,000
36,000
MPF
12,000
12,000
12,000
12,000
12,000
Holidays
15,000
15,000
15,000
15,000
15,000
Household expenditure
24,000
24,000
24,000
24,000
24,000
Joint savings account
48,000
48,000
48,000
48,000
48,000
Charitable donation
5,000
5,000
5,000
5,000
5,000
Other expenses
60,000
60,000
60,000
60,000
60,000
Wedding
/
/
/
/
/
Honeymoon
/
/
/
/
/
Sedan
/
/
/
/
/
Second hand car
/
/
/
/
/
Car cost
72,000
72,000
72,000
72,000
72,000
Delivery cost
/
/
/
/
/
Child’s fee
24,000
36,000
36,000
36,000
/
Rental cost
/
/
/
/
/
Annual mortgage
133,308
133,308
133,308
133,308
/
39,748.8
39,748.8
39,748.8
39,748.8
/
75,952.6
-42,898.3
-32,955.1
78,097.3
422,526.4
604,009.4
497,158.5
507,101.7
618,154.1
753,526.4
Year 3
Year 5
286,000
310,000
repayment
Annual premium for
education fund
Surplus
Li Chi keung Balance Sheet
Year 0
Year 1
Year 2
$
Assets
Investment
MPF (capital and returns)
250,000
262,000
274,000
$
Current assets
Joint savings account
144,000
240,024
336,057.6
432,100.8
624,677.0
Personal HKD account
300,000
435,043.5
566,646.7
300,483.1
74,454.1
Cash
35,000
35,000
35,000
35,000
35,000
729,000
972,067.5
1,212,604.3
1,153,754.1
1,044,131.1
$
Current liabilities
Credit card balance
5,500
5,500
5,500
5,500
5,500
Net asset value
723,500
966,567.5
1,207,104.3
1,148,254.1
1,038,631.1
Li Chi keung Balance Sheet
Year 7
Year 9
Year 10
Year 20
Year 30
490,000
610,000
$
Assets
Investment
MPF (capital and returns)
334,000
358,000
370,000
$
Current assets
Joint savings account
317,069.0
509,364.9
605,667.6
1,571,346.7
2,541,865.1
Personal HKD account
64,248.2
99,579.1
56,686.5
238,815.6
2,445,265.8
Cash
35,000
35,000
35,000
35,000
35,000
750,317.2
1,001,944
1,067,354.1
2,335,162.3
5,632,130.9
$
Current liabilities
Credit card balance
5,500
5,500
5,500
5,500
5,500
Net asset value
744,817.2
996,444
1,061,854.1
2,329,662.3
5,626,630.9
H. Conclusion:
For the advantages,
 Mr. Li is now able to buy a residential unit in year 7 that costs about $3,000,000 and buy a sedan in
year 6 that costs around $30,000
 For his children, we have chosen to buy an education fund, in order to get a sum of money to alleviate
the school fee, when his children go to primary school in the future
 We suggested Mr. Li to buy bonds as investment and he will get an extra return of about $20,000
All these advices help to improve Mr. Li quality of life and satisfy his aims.
For the disadvantages,
 Some of the data such as salary tax and MPF returns are inaccurate as the information is not enough
and unclear
 In our budget, there is still negative numbers in some years, however these deficit have been alleviated
later
 Number of statements such as cash and transportation cost need to be kept constant and may cause
error in the plan as there may be changes among them
These cons may cause inaccuracy in the financial plan and lead to unexpected error
Appendix
1. Mortgage
https://www.hsbc.com.hk/1/PA_1_3_S5/content/hongkongpws/mortgages/pdf/mortgage_repayment_t
able.pdf
2. Investment: Bonds
https://www.hsbc.com.hk/1/2/hk/investments/bonds/bonds-detail?prodNum=HKHBAPBOND%20%2
0%20%20%20%20%20%20%20%20%20133079&prodClsCde=P&ES_STATE_RESET=ES_STATE_RESET
3. Education Funding
http://www.prudential.com.hk/PruServlet?type=iPC&module=product&purpose=viewProdDetail&pr
od_cat_id=EF&prod_type=L&prod_cd=GLI
→download brochure
4. Second Hand Car
http://www.28car.com/sell_dsp.php?h_vid=131009401&h_vw=y
5. Banking Interest
http://www.dahsing.com/en/html/program/hong_kong_dollar_deposit_rate.html
6. MPF: Equity Funds
http://www.hkifa.org.hk/eng/download/fundinfo/mpf/MPF_PerformanceMonthly.pdf
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