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CONTENTS
Market Update
Companies & Industries Company Focus : Lenovo Grows through acquisition Truly global Chinese enterprise
Editors Note
Career Coach Career Planning: First step: self-assessment
Insider:
Goldman Sachs internship
Consider an MBA program in the
Mainland, where the market is.
Jacqueline Kam, CUMBA Candidate
Biweekly Review: Hang Seng Index climbed Automobile sector leads the market
4
6
15
Columns
1
20 Financial Planning Can you really guarantee your income in the future?
Borizon
People
10
The Launch of Borizon realized my entrepreneur dream
2
A Look into MBA With Jacqueline Kam
6
Issue 2 |Oct 2012
2
Borizon
Editors Note
The past week has been the most exciting week of my university career. The launch of Borizon has realized my entrepreneur dream.
T.K. LO
T hanks to the support from Strategic Investment Society (SIS) and University Professional Enhancement Club (UPEC), our readership reached the 200 mark in a few days.
B orizon aims to be the bridge between students and industries, the gap between Young Post and
Bloomberg, providing you with news
from the industry so you can prepare for
a better career. It is fun for me, as an
editor, to share my 4 years of experience
in university with you. I hope you will
enjoy our stories.
These past two weeks, the stock market has
been going up, we will tell you why. We
analyzed Lenovo (some of you might be
using one to read this!). And we will have
iBanks explained!
M id-term exams are coming, good luck to all of us. Borizon is a platform for students to share ideas with students alike.
We welcome anyone to join us and
contribute to our fellow readers! Make your
voice heard at [email protected].
Indices keep climbing
Automobiles sector leaded the market
If you are a risk taker, its time to put every cents into
stock market. By Joseph Lau
MARKET RECAP
After the holidays, Hong Kong equity market kept climb-
ing due to the steady upward
trending of US stock market.
The Mainland markets will
open on the coming Monday. It
is expected that stimulating pol-
icy will release in the coming
weeks. Market atmosphere will
improve continuously.
Whats now?
Two weeks ago, index constitu-
ents outperformed but the situa-
tion is changing now. Individ-
ual stocks are going to lead the
market. Industries like gold
mining, communication and
automobiles showed a strong
move. As market focus is
switching to small cap stocks,
investors should immediately
adopt relevant plan to ride on
the wave and maximize their
profit.
Our market timing model for
both Hang Seng Index and
Hang Seng China Enterprises
Index shows a Uptrend signal. The trend of individual stocks
and the market is now consis-
tent. The chance of advent of a
brand new bull market is reach-
ing to 75-80%. Investors should
try his very best to find out the
leading sectors and build posi-
tion on the strongest stocks. If
you are a risk taker, it is time to
put every cents into the market
since the winning probability
and expected return is continu-
ously increasing.
HSCEI outperform Hang Seng Index
Hang Seng Index kept breaking new high
4
What is expected return?
Expected return is a measure
of the relative balance of win
or loss weighted by their
chances of occurring.
For example, if a fair die is
thrown and numbers 1 and 2
win $1, but 3-6 lose $0.5,
then the expected gain per
throw is
E(R) = 1/3 1 - 2/3 0.5 = 0
Borizon
Market Update
5
INDUSTRY COMPARE
Leading Sectors of the current
trend are automobile, paper
manufacture and communica-
tion. The strongest company of
automobile is Brilliance China
(01114), the manufacturer of
BMW in China. Its sales in-
crease unexpectedly in Septem-
ber. This great news immediate
stimulated the stock price and
leaded the uptrend of sector.
Geely Automobiles (00175)
surged 20% within a month.
Great Wall Motor (02333), the
major SUV manufacturer, even
made historical high.
The paper manufacturer bene-
fited from the rise of product
price. Lee&Man Paper(02314)
and Nine Dragon Paper(02689)
rose about 20% within one
week. Investors should observe
the change of fundamentals.
Communication industry kept
skyrocketing COMBA (02342),
China Wireless (02369) and
TCL Comm. (02618) continued
its strong move and surged 15%
more these two weeks. Investors
should wait for the consolidation
and consider to take action in the
next breakout.
Brilliance China (01114) leaded the industry
Great Wall Motor (02333) broke new high
Strongest 5 in
dustries
1) Au
tomobiles
2) Paper ma
nufacture
3) Communi
cation
4) Mainland
securities
5) Gold mini
ng
Weakest 5 industries 1) Luxury 2) Cosmetic 3) i-phone related 4) Gamble 5) Utilities
Market Update Issue 2 |Oct 2012 Automobiles
Winners of this week
6
Borizon
Companies & Industries Lenovo grows through acquisition
The truly global Chinese enterprise
Lenovo
W henever you read some global brands rankings, you will see a lot of Chinese companies on the lists, and you are bound to see more. However, as these rankings usually give weight to the companies profit and market capitalization, there exist some Chinese companies which are not well-recognized globally but are ranked high on these lists thanks to the huge China market.
Among all the Chinese companies on these lists, Lenovo is one of the few companies which stepped out of the China market and successfully built their brands globally. Founded in 1984, Lenovo is now the worlds second largest PC vendor and the top one in China. What has Lenovo gone through in these years to make it a truly global Chinese enterprise?
Company Fundamentals
The operation of Lenovo can be divided into four categories: notebook, desktop, mobile internet digital home (MIDH) and other businesses including servers, software and etc. As of Q1 FY13, 54.1% of the total revenue was generated by its notebook business; 31.8% was generated by its desktop business; the remaining revenue was from the mobile internet digital home (MIDH) and other business. It can be seen that the companys performance is largely determined by its notebook and desktop sales.
The shining record of Lenovo Over the past few years, Lenovo exhibited a
rapid growth in its PC market share. In Q1
FY13, Lenovo achieved a record-high
worldwide PC market share of 15%, just behind
HP for less than 1%. As predicted by Jay Parker,
the vice president and general manager of
Lenovo North America, Lenovo will surpass HP
to become the No.1 PC maker in terms of sales
within 6 months. In my eyes, the day is just
around the corner, with HP losing its market
share rapidly. So, what has made Lenovo grew
so fast that it took the company less than 30
years to catch up with HP which has more than
70-year history?
Lenovo is ranked the 23rd most valuable Chinese brand in 2012. Source: Millward Brown Optimor
Benefited from the rise of China
The fast-paced growth of Lenovo could be partially attributed to the increasing PC demand in mainland China. For the past 15 years, Chinas PC market has been booming. According to a report by HIS iSuppli Research in April, China PC market shipment has increased from less than 40 million units in 2007 to 73.9 million units in 2011, representing a CAGR of more than 16%. Analyst also forecasted that China will overtake U.S. as the worlds largest PC market this year. Against this backdrop, Lenovo has surpassed Dell last year to become the worlds second largest PC vendor.
Along with the booming PC market in China, governments policy also played an important role in the success of Lenovo. To stimulate the countrys domestic demand, China government has promoted the sales of home appliance through rural subsidy program in which certain home appliances are subsidized by the government. With some desktop, notebook and mobile models included in the scheme, Lenovo has benefited from the rural subsidy program and increased its penetration in rural area of China.
Acquisition of IBMs PC division Apart from the rise of China, acquisition of IBMs PC division also contributed to the expansion of Lenovo. Since its acquisition of IBMs PC arm in May 2005 for USD 1.25 billion, Lenovo has successfully turned the acquired business into a profitable one. While the PC business was still in IBMs hand, it recorded a loss of $171 million in 2002, $258 million in 2003 and $138 million in the first half of 2004. When Lenovo acquired the business, it also had to assume the debt of around $500 million. And, that is the reason why IBM wanted to spin out its PC division. Then, what inside this PC business attracts Lenovo?
Despite the fact that the acquired PC division had been operating at a loss for several years and had a net debt, Lenovo saw an opportunity in it. Through this acquisition, Lenovo extended its business beyond China and became the third largest PC Vendor in the world at that time. With the popularity of IBM and ThinkPad, Lenovo became a truly global brand. The Think-branded product line makes Lenovo the worlds second largest commercial notebook company, having a 16.8% share of worldwide commercial PCs market in FY12.
7
Issue 2 |Oct 2012
Rural subsidy program by government stimulates the sales of Lenovo. Source: Xinhua
Market was once pessimistic about the acquisition of IBMs PC arm, which eventually turns out to be a successful milestone of Lenovo
What is rural subsidy program? Rural subsidy program was originally intended to improve the quality of life among people in rural areas. It was, however, used as a tool to expand Chinas domestic demand in order to combat the countrys export contraction due to the financial crisis in 2008. Under the scheme, a 13% subsidy will be offered to rural consumers for buying designated home appliance.
8
Borizon
Companies & Industries
New businesses, new markets
Despite being a PC giant in China, Lenovo did not feel complacent and satisfied. Instead, the company actively expanded its business beyond PC and existing markets through partnership or acquisition of other companies. Last few months witnessed a lot of strategic development taken by Lenovo. For example, few weeks ago, Lenovo announced its acquisition of Stoneware Inc., which is a U.S. based software company specialized in cloud computing. In early September, the company confirmed its acquisition of CCE, the largest electronic maker in Brazil, to exploit the promising growth of electronic market in the South American country. Back in August, the company also announced its partnership with EMC Corp. to develop and sell servers and network storage. The above decisions demonstrate that while maintaining its leadership in PC market, Lenovo is also trying to diversify away the risk of over-relying on its PC business and existing markets by expanding its reach into other products and countries.
MIDHThe new profit driver Mobile internet digital home (MIDH) is one of the new businesses of Lenovo that has grown quickly. MIDH turns Lenovo from a purely PC company into an electronic company. Tablets, smartphones and smart TV are the main products in the MIDH business. As revealed by its 1Q FY13 result, Lenovo achieved an explosive 173% year to year sales increase in its MIDH business. Launching its smartphone business in 2010, Lenovo is now the second largest smartphone providers in China, just behind Samsung. Its share in China smartphone market jumped to 13.1% in June 2012 from 1.7% a year earlier. When it comes to tablet market, Lenovo is the largest Android tablet provider in China.
Lenovo is entering a PC+ era, with its business not longer being confined to PC
but expanded across tablet, smartphone, smart TV and other services such as
cloud computing. Given the higher margins in tablets and
smartphones than PC and the rising sales contribution by MIDH group, it is expected that MIDH will
replace the PC business to drive the companys profit
growth.
LePhone K860, a flagship smartphone by Lenovo, with quad-core CPU and a 5 inch display
What is cloud computing?
Cloud computing refers to the use of computing resources such as software, infrastructure and etc as a service over a network. Online storage provided by Dropbox is an example of cloud computing through which we can gain access to our uploaded data wherever there is internet.
0%
10%
20%
30%
40%
50%
60%
70%
Q1FY11 Q3FY11 Q1FY12 Q3FY12 Q1FY13
Revenue by product
Notebook Desktop MIDH (Mobile) Others
9
The future
Lenovo has been growing rapidly for the past years, thanks to the enormous China market. However, as China economy is cooling down, people cannot help but ask: can Lenovo continue its growth?
In 2012, China accounted for 42% of the Lenovos total revenue. Under the Protect and Attack strategy laid out by the company, China will continue to be a core market defended by Lenovo. Yet, emerging markets will be the new attacking target of company, as shown by the companys recent moves in acquiring Brazilian CCE and launching smartphones in India, Philippines and Indonesia. When it comes to product lines, MIDH will be the next area in which the company gains its market share. As shown by company reports, MIDH business is contributing more and more revenue to the company. The key to sustaining its skyrocketing growth lies in whether Lenovo could successfully expand its presence in emerging markets and attack the MIDH market. From its determination and actions, I bet it could.
Company Focus Lenovo
LePhone K860, a flagship smartphone by Lenovo, with quad-core CPU and a 5 inch display
Issue 2 |Oct 2012
Revenue contribution by MIDH is on the rise. Source: Company report
In 2012, Lenovo generated 42% of its total sales in China
Recent strategic developments of Lenovo
Date Details
Oct 2012 Established a manufacturing base in North Carolina, U.S., for production of the Think-branded line.
Sep 2012 Expanded its cloud-computing solution through the acquisition of Stoneware, a U.S. software company.
Sep 2012 Acquired CCE, a Brazilian consumer electronics company, to expand its presence in the South-American country, which is one of the world largest and fastest-growing PC markets.
Aug 2012 Announced strategic partnership with EMC, a U.S. enterprise storage company. Lenovo will sell EMCs storage products, develop servers with technology support from EMC and together they will set up a joint venture controlled by Lenovo.
Jun 2011 Developed its business in Europe through acquisition of Medion, a German consumer electronics company. The acquisition allowed Lenovo to have more than 14% share in Germany market and about 7.5% share in Western Europe market.
Jan 2011 Acquired the PC business of NEC, a Japanese IT company, and together they formed a joint venture. In Q2 2012 Lenovo ranked first in Japan PC market with 25 % market share, up from 5% before the acquisition.
Career Coach
Market Exploration Investment Banking
10
Borizon
Understand the industryInvestment Banking
What divisions are there in an investment bank
In last issue, we introduced to you what career planning is and the first step of career planning, which is self-assessment. In the following issues, we will enter another stage of career planning: market exploration. In this issue, we will have a look into the dream industry of many students Investment Banking.
You may first notice the word investment Bank from your seniors , your fellow friends and maybe news especially in the year 2007. It seems like getting a job in an investment bank is a goal for many of the business students. So, what exactly is investment bank? We will have a look into it.
What is investment Bank?
Like those commercial banks we see on the street, an investment bank is an intermediary that channels capital from people who have capital surpluses to those with capital deficit. The difference between commercial banks and investment banks mainly lies in the type of customers. For investment banks, their clients are usually corporate or institutional ones whose need of capital is so large that it could not be accommodated by commercial banks. For example, when a large corporate wants to expand its business but is short of capital, it will go to an investment bank and seek for capital. The main source of capital can be equity or debt issuance with the investment bank being an arranger. On the other hand, if you need get a mortgage or credit card on a personal basis, you do not go to an investment bank but a commercial bank.
Commercial Bank Investment Bank
Client coverage Individuals/SME Corporate/Institution/Sovereign
Main service Mortgage/Consumers loan/ Commercial loan
Capital raising
Taking Deposits? Yes No
How it runs? The bank takes deposits from many small individuals and gives loans to those who need cash. Loans are asset on the banks balance sheet.
The bank acts as a mediator and raise money on behalf of its client by selling bonds or shares to investors.
Who takes the risk of providing capital?
The bank itself. Any non-performing loan is to be absorbed by the bank. Unless the bank goes bankrupt, depositors basically take no risk
Third party such as bondholders in case of bond issuance or shareholders in case of equity issuance
Other service Wealth management/ Insurance/ Credit Card
Advisory on corporate actions such as merger, acquisition and divestiture. Wealth management for high-net-worth individual
Source of incomes Interest on loans and mortgage/ service fees
Advisory fee which depends on the complexity and the risk level of the project
11
Market Trend
As the Europe debt crisis grows along with the cooling down of global economy, the business environment of investment banking industry remains a challenge. The total fund raised in HK IPO market fell from HK$ 187.2 billion in 1H/2011 to HK$ 30.6 billion in 1H/2012. The sluggish capital market greatly reduces the revenue of investment banks from IPO, which is a pillar for the industry.
Besides, rules and regulations are tightened after the financial crisis in 2008.
For example, Basel III, a global banking regulation is to be put into practice in the forthcoming years. Basel III imposes a higher capital requirement on banks, leading to a higher funding cost for banks. Also, certain regulatory requirements on bank liquidity and leverage are introduced in Basel III, which further hampered the profitability of the industry.
The Volcker rule in U.S. is another example where financial regulations affects the performance of the industry. Under the Volcker rule, which is a section of Dodd-Frank act, banks are prohibited from proprietary tradingwhen a bank trade for its own account to make profit. The fact that proprietary trading has been one of the most profitable activities for banks makes the rule controversial in the industry.
With tighter regulations and uncertain market conditions, the investment banking industry is under pressure to better manage its cost.
Issue 2 | Oct 2012
History Rise of Global Investment Bank In 1999, Gramm-Leach-Bliley Act was passed to repeal part of Glass-Steagall Act. Insured banks was no longer prohibited from being affiliated with firms that are engaged in investment activities. Commercial banks, investment banks, securities firm and insurance companies were allowed to merge. This led to a series of acquisitions of investment banks by commercial banks, for example Chase Manhattan buying JP Morgan, creased a new universal bank model. The universal banks had been very successful as customers prefer one-stop shop. U.S.
DID YOU KNOW?
Hong Kong has been the top IPO destination for three consecutive
years between 2009 and 2011
3
Divisions in Investment Bank Borizon
12
Private Banking Private Banking is a banking service that is dedicated to the high-net-worth individuals. The investment banks offers a wide range of investment products including different investment strategies to suit their own clients tastes .
Asset Management The major duty of Asset Management is to offer and invest in different kinds of investment products on the clients behalf. Product includes Private Equity, Commodities, Real Estate, Fixed Income and etc.
Investment Banking Division (IBD) IBD provides financial advisory services to institutional clients. Advisory services include merger and acquisition, capital raising, hedging, securitization and etc . An investment bank will leverage its exposure in different markets to fulfill their clients needs in the best market.
Front Office
13
Issue 2 | Oct 2012
Information and Technology Is the fundamental of an investment. A good IT department is essential to an investment bank. High Speed Trading system, secured investment network and powerful in-house database, timely maintenance and system updates are all the essentials .
Legal & Compliance Nothing can be done if it is not legal in the country. Legal and Compliance manages relationship with entities externally and internally. External work is to ensure the services provided by the bank are approved by the local legal entity. Internal work is to make sure the staff of the bank follow the regulation.
Operation Is the execution center of the bank. Whatever the Front office trades, the trade get settled in the operation department. Operation settles up to millions of transaction everyday. Maximize profitability and reduce risk is the objective for operation.
Back Office
Goldman Sachs where the dream starts This time we share the internship experience in
the firm that every business student dreams of
working for, Goldman Sachs. Goldman Sachs is
one of the leading investment banks. Every year,
it attracts many talents to join the company. In
spring, Philip, who shares with us his internship
experience this time, was drawn to the one-year
internship in Portfolio Strategy Team and
successfully got the offer. Philip is a year 4
student in CUHK majoring Quantitative Finance
and Risk Management Science. His personal
experience could shed some light on our career
path.
The application Even though the screening process was long and
tough, having 4 rounds of interviews and weird
questions like how many planes take off from the HK airport everyday?, the job actually does not need skills of rocket scientists to perform.
Philip mentioned that a strong endurance of
stress is essential as the job is rather routine and
tedious than complicated. Therefore, you dont need to be Einstein to apply for the job. He also
said that a good number sense and quantitative
trainings will prove useful. A good number
sense can help you spot out stupid errors in the
data and avoid being scolded by seniors.
Quantitative trainings helps because sometimes
there will be tasks involving mathematical
models.
My responsibilities During his internship, Philip was responsible for
performing data analyses on different areas or
countries. The researches conducted have
themes or are used to prove or disprove
something. Once, Philips research was to see how dependent Asia corporate earnings are on
US/EU economy. From time to time, he has to
use Bloomberg, FactSet, CEIC and Reuters for
data-mining. The data to be found may be the
earnings, PE of a particular sector or other
Macroeconomic data. Then, Philip has to figure
out the trends and patterns shown in the data.
Finally, he reports the data and his
interpretations to the boss. In addition to
producing researches for the company, Philip
needs to conduct other researches on demand by
clients and provide support to ad-hoc tasks.
Feeling.... Great! Despite the immense pressure, Philip
recommends students to go for the job. It is not
just because Goldman Sachs is a prestigious
investment bank, but also you can learn a lot
about the investment banking industry and the
experience can likely get you a really nice grad
job offer in the industry.
Borizon
Internship Experience at Goldman Sachs
Taste a bit of an analyst in investment bank
Insider
15
Issue 2 |Oct 2012
After an undergraduate degree, most students start working and embarking on a career. On the way up your career ladder, you may consider studying an MBA program. It might give you a lift.
For those who aims to take an MBA, here you can find first-hand information about it.
Our CUHK alumni, Ms. Jacqueline KAM, tells you all about MBA.
By T.K. Lo
16
Jacqueline T.H. KAM MBA Candidate, CUHK Current Position MBA Candidate, CUHK with focus in Mar-
keting and China Business
Career Corporate Assistant Sales Manager, Island
Pacific Hotel
Education B.B.A in Hotel and Tourism Management Exchange Program to Cornell University
Borizon
People People is a section of life stories. You can find our how an undergraduate student like you developed their careers. Learn from their stories and build a successful one for yourself!
A Look into MBA
Established in 1966, CUMBA is the oldest MBA program in Hong Kong!
DID YOU KNOW?
First and foremost, I wonder what makes you take up the MBA pro-gram?
The reason for me to study this program is because of my previous job. As I was pro-moted to Assistant Sales Manager, I real-ized I needed to work on projects with a broader scope. After five years of work, in order to move up the ladder of success, I will need to tackle problems with a strate-gic vision. An MBA program can train your strategic thinking as a business leader.
Do you think an MBA degree is a must for today?
Nowadays, more people are with an MBA degree at young age in order to get a job. I think that MBA indeed becomes a part of ones career path. The sharing of experi-ence allows one to obtain more first-hand information of various countries and industries.
Our students can consider doing an MBA in the mainland, where the market is. For in-stance, China Europe International Busi-ness School in Shanghai offers a very good MBA program.
Also, CUMBA is the most prestigious pro-gram in Hong Kong. Our strength lies in our connections to all the different industries, especially Fast Moving Consumer Goods. USTMBA on the other hand, focuses on the financial industry.
Lastly, what are the advices you would like to share with our stu-dents? Do ask for opinions from experienced alumni. We can share useful information before you start planning your future. We are more than happy to help! There is net-working session every month with CU Busi-ness School Alumni, make good use of op-portunities!
17
In her navy blue dress with her signature smile, Jacqueline sat with our editor TK Lo and shared her MBA experience over a coffee.
Jacqueline at a business plan competition
Consider an MBA program in the Mainland, where the market is. Jacqueline
Issue 2 |Oct 2012
18
Jacqueline graduated from CUHK in 2007. She is an alumni of the Outstanding Business Student Academy. Her international exposure includes a semester abroad at Cornell University of the United States.
Island Pacific Hotel is part of Sino Group. Jacqueline worked at marketing at this hotel and built her career from there.
Jacqueline picked up her MBA studies at CUHK. Feeling the growing market in mainland China, she chose China Business and Marketing as her concentrations. She also organized the 2012 CUMBA CSR Conference.
Jacqueline was promoted to Corporate Account Manager of the Island Pacific Hotel. She worked with meeting planers to create meetings and events.
Jacqueline was again promoted to Corporate Assistant Manager. With her outstanding sales record, Jacqueline was awarded the Best Performance Award 2010. At the same time, she realized she needs more tools on strategic thinking to go further in her career an MBA degree.
Borizon
Jacquelines Steps
Just like you and me, Jacqueline was an undergraduate.
2007 Now 2010 2009
CUHK MBA CSR Conference is an annual conference to help develop and generate new ideas about doing business responsibly.
19
Mr. Joseph Y.W. Pang
Executive Director and Deputy Chief Executive of The Bank of East Asia Limited
FAMOUS CUMBA ALUMNI
Dr. Walter P.S. Kwok Ex-Chairman and CEO of Sun Hung Kai Properties
Duration 16 Months (Full-Time)
Cost HKD 459,000
Concentrations China Business,
Entrepreneurship, Finance,
Marketing
Duration 16 Months (Full-Time)
Cost HKD 545,000
Concentrations General Management in China, Finance, Consulting,
Entrepreneurship and Family Business,
Marketing
Ranks 28th (Financial Times, 2010)
Ranks Breakdown Career Progress: 4th
Placement Success: 44th International Mobility: 21th
International Experience: 13th
Ranks 10th (Financial Times, 2010)
Ranks Breakdown Career Progress: 37th
Placement Success: 77th International Mobility: 15th
International Experience: 7th
Strength Alumni Network
China reach
Strength Focus in Finance
Ranking
A lot of you would wonder which school has a better MBA, CUHK or HKUST? Here is a simple comparison.
Issue 2 |Oct 2012
20
Borizon
Financial Planning Issue 2 | Oct 2012
What is financial planning? Why does it matter to us as students? Kelvin Sham, a financial planning practitioner, will share with us.
We all need to do a lot of planning throughout our lives. When we are primary school students, we plan for getting into renowned secondary schools. When we are secondary school students, we plan for getting into universities. Then we plan for our career, buying a house, marriage, kids and so on. Hold on! Have you found out that every step mentioned above needs money? Therefore, when we are making plans for every stage of our life, we have to do financial planning too!
When do you start planning?
Most people feel pretty good when they have just started to make money, because they can spend the money as they want. There is almost no constraint at all. Without a disciplined saving habit, these guys may end up poorer than they are now after a few years. If a person cannot even save money, I see no chance for him or her buying a house. You may argue that your parents can help or you will make a lot of money in the future. However, dont you think you should start helping your parents back instead of the other way around? Can you really guarantee
your income in the future? For yourself and your parents, you should start planning your own finance now!
Allocation of income
Since everybody has different aims, each person has different allocations of income. The most common one is to divide your income in half. One half is for basic daily expenditure like transport and food. The other half is the focus of planning. 10% for self-improvement, such as buying books, taking interest classes, taking driving lessons and etc. 10% for cash saving, this part may be used for traveling or buying the next new iphone or whatever. 10% for long-term saving that provides an interest rate comparable to the inflation rate. Saving plans from insurance companies or time-deposit would be a good choice. 10% should be allocated for investment. Nowadays, you would be a fool not to do investments because inflation is an invisible monster consuming all of us slowly. Finally, the last 10% is for buying insurance. Insurance is a great income protection tool, but why? It will be discussed next time.