Introduction of Financial Management

CHAPTER 2: REVIEW OF LITERATURE

2.1 Introduction

The literature review is to provide the relevant information regarding the topic through observing, identifying, and gathering from journals which revised from past researchers. In this section, the variables including financial planning budgeting, savings, investment, gaining financial knowledge, changing overspending habits, debt management, effective personal financial management, and quality of lifestyles.

2.2 Introduction of Financial Management

Financial management is the process of managing the financial resources, including budgeting costing, accounting and financial reporting and risk management (Kautz, 2007; Constant and Kigongon, 2008, p.515). It is handling your financial situation in a responsible manner to achieve the desired goals (Mitchell 2007; Constant, and Kigongon, 2008, p.515). While Shim and Siegel (2000) defined financial management as the process of planning decisions and it involves many interrelated functions such as obtaining and using funds, monitoring performance, and solving current and prospective problems in order to maximize the owners' wealth.

For Rokiah (2003), financial management included the activities of investment planning, the planning of the usage of cash and debt, insurance planning, tax planning, retirement planning and welfare, and estate planning. According to the official website of KDU Management Development Centre (KMDC), personal financial management is a process of meet an individual's life goals through proper management of the finances and the life's goal is able to enjoy the future life. I conclude that personal financial management as how to manage, planning and using individual finances such as money resources and assets you own to generate and maximize the wealth.

2.3 The Power of Money

Pahl (2000) defined money as fungible and any unit of wealth is substitutable for any other things. Money is a medium of exchange of livings and survival, but some of them being victimized by money. Some of them view that money is the exchange for friendship, happiness, power, and status (Yip, 2006). They believe with the available of wealth, they can show their higher status and authority.

Wealth is very important in our daily lives. Wealth may not bring much happiness on some person but it did make a big difference between rich and poor person. Every action of our lives involved spending money and it is depends on how to spend it (Nurjehan, 2007). Without money, we may suffer from starving, loss of security, lack of sense of life, and so on. The wealth on an individual is depending on how they view the value of money and the ways they manage their financial affairs.

According to Maslow (1954), there are five levels of individual needs which are psychological needs, safety needs, social needs, esteem needs, and self-actualization. In the lower level of the pyramid is the basic needs which must be fulfill for each individual before the upper level achieved. All of these needs especially the basic needs required financial support. For example, psychological needs included foods, water, and clothing; safety such as accommodation, daily expenses, and general expenses. Without wealth, we are not able to satisfy these needs.

Everyone also wish to be a wealthy person. Research conducted by Ness, Gorton, and Kuznesof (2002) stated that lacking of money is a continual problem happened for students. Attitudes and beliefs of an individual are very crucial because it will bring the impacts of personal finances well being. The attitudes and feelings towards money may integrate into our lives and motivate our behaviors all the time (Penman and McNeill, 2008). Many people underestimate the power of money and suffering lack of money whereas understanding the importance of money will give you extra edge to build into financial success (Yip, 2007).

2.4 Importance of Managing Finance in Effective Ways

Nearly all of us have own pocket money but many found out their money fade away without any notice. Students faced the problems of allocating their financial resources to compete the obligation such as accommodation, foods, clothes, course requirement, and leisure (Ness, Gorton, and Kuznesof, 2002). From the official website of Financial Planning Association of Malaysia, Chua said that many peoples allocate their financial resources poorly.

Somebody may save a lot; some prefer collect information before purchasing while some always follow their feelings in managing personal finance (Funfgeld and Wang, 2009). According to Matthewman (2003), a sound financial management need creating and following budget, knowledge, strategic planning, meeting the needs, forecasting future needs and planning for future income.

There are only few people able to keep financial record on regular basis and make regular check on their net worth and proper diversification of their assets (Northcott and Doolin, 2000). This is because many peoples ignore the importance of managing their finance as well as their future wealth due to lack of foundation of financial awareness.

The increasing in life expectancies, rising health care costs, the state of Social Security, economy pressure on businesses and changes in attitude lead peoples to understand it is crucial to prepare their own finance (James, Leavell, and Maniam, 2002). This is to ensure they have a desired financial support in the future life. This can also help to reduce the stress from financial problems and increase quality of life and happiness of an individual.

According to Rokiah (2003), managing finances may ensure a brightly future life because of the humans' life expected to increase, medical costs and many cost are also increasing. A good financial management may help in achieving long term financial goals. Rokiah (2003) also said that not only undergraduates which going to work need managing finances, but also the working peoples as well as rich peoples also need manage their finances. No matter how much we earn, manage the financial smartly is always a good alternative because financial management can help to avoid financial distress and growing the wealth in the lifetime.

When a person manage their personal financial affairs, they are attempt to achieve a level of financial independence that allows them to meet not only basic human needs, but also the higher level of needs for self-development and self-improvement (Callan and Johnson, 2002). Yee (2009) concluded that as well as the cash flow able to support the expenses and current lifestyle, it may consider as financial independently and free.

Garman and Forgue (1997) acknowledged that financial achieve success when pursuing maximum earnings and wealth, efficient consumption, life satisfaction, reaching financial security and accumulating wealth for retirement and estate to leave to heirs. Yee (2009) defined success as when someone achieving complete financial, personal freedom, and control over how you spend your time; while those who have extraordinary wealth but enslaved by money and those earning money but ties entire live with that goal consider not success.

The Asian financial crisis in 1997 caused the property market become poor affected by currency depreciation, the flight of foreign capital, financial distress of financial institution, unemployment and unstable economic conditions (Ting, 2006). Malaysia facing recession and lost the economic stream in late 2008 and the growth almost reach the halt (Teng, 2009). The unstable economy forced everyone to manage their personal financial to avoid financial difficulties occurred.

2.5 Financial Planning/Budgeting

The official website of Financial Planning Association of Malaysia defined financial planning as the process of meeting the life's goal through proper management of finances and the goals included buying home, save for child's education, starting business or planning for retirement (www.fpam.org.my). The official website of banking info acknowledged that no matter earn more or less, budgeting and planning the finances smartly is crucial for managing money wisely because this can prevent inaccuracy by always tracking your money spent (www.bankinginfo.com.my). By the way, a good financial planning needs to derive from the knowledge of the individual.

According to Butters (2004), a good financial planning is prerequisite for individual psychological needs and it is the foundation to build a sound retirement in the future. A good financial planning included planning your finance by forecasting your income and expenses. It can be forecast from the previous spending pattern, current income, new debt, current assets, etc. After this, try to cut down the expenses which are not necessary and try to spend it in more beneficial ways. Try to control cash flow each month to ensure that the balance is sufficient before the month end. For example, write down monthly income and daily expenses, then set aside the fixed expenses and flexible expenses. If the expenses surpass the income, try to review spending habit by reducing the flexible expenses.

Seer (2000) stated that a strategic plan allows you to express a vision by implementing the products and services that meet your specific research needs. Some of the students do not aware of what is their income and expenditure. From the strategic financial planning, you have to assess what you owned and what you owed.

According to the official website of credit counseling and debt management agency (AKPK), the financial planning is all about knowing the current situation, where you want to go and how you go there (www.akpk.org.my). To obtain a good financial planning, first have to know the current resources, then set your goals whether it is short term or long term. Assume which level you wish to spend your money and try to prepare a spending plan to achieve the goals. The goals set must be realistic and it is depend on your personal value and life's value. The values may influence how your financial planning practices. Then try to achieve the goals with most effective and efficient methods.

The spending plan does not mean to cut the budget but is note the direction of the spending (www.bankinginfo.com.my). Each time after spending, figure out how you spent the money, where did you spend it and why the money spent in such way. This would encourage you to track your expenses and use the money within the budget. This will forced to spend less than ever and reduce waste.

Emojorho (2004) stated that budget is vital to ensure effective financial management and avoid waste of resources. Emojorho (2004) pointed that Ifidon (1999) declared budget is a formal way of preparing statement and allocates all available financial resource. A good budget derived from a good financial planning and controls the cash flow effectively. A budget can be divided into many categories and then estimate the expenses under your budget.

Budget is a detail statement to forecast income and expenses expected for some period in the future and also a management tool that control the financial health and force you to be accountable in a structured and objective way (Seer, 2000). We can estimate our budget according to regular expenditure categories which experience from past spending. For examples, the undergraduate budgets' have to consider the categories of tuition fees, meals, accommodation, reading materials, transportation, phone bills, entertainment, personal expenses, general expenses and others. Then, they have in mind how much is available to spend and spend it within the budget checklist which are set earlier of each categories to prevent the expenditure exceeded monthly income. Budget checklist is a list to record down the limit amount to be spent for each category. It has to evaluate the performance regularly and adjust it. If the categories are not meaningful in the future or there are new categories added, they may shift the categories by adjust or restructure it.

In the other way, Linn (2007) argues that budget is not only mean for planning various revenue or control for an administration from spend too much or a process to coordinate many activities, it is also an important technique for setting the organization priorities by allocating scarce resources to official activities. An organization is functional all depends on the planning, control and budget implementation while budget is a plan for the future financial activities of an organization (Caroline, 2005).

According to Jones (1998), the research carried out the result of most organization used budget to evaluate performance and aid the control. Jones (1998) research's result shows that UK hotel operators use budget to motivate managers, and aid long term and short term planning. These statements show that planning and budgeting techniques not only useful for an individual, even the larger organization as well utilizes this technique to operate their activities to be successful.

2.6 Savings

Saving enough to pay for the retirement is very important because anything failed later will require this fund to be supported (Edmunds and Potter, 1999). Savings is very important to ensure your future wealth and it also can be used for emergency funds like illness, losing jobs, spoiled stuff and many other else. Savings can also be a beneficial tool to manage your income well. It is also useful in the future purchase such as further education, buying car, house, retirement funds, etc. According to Butters (2004), the registered retirement savings plan is one of the best retirement savings vehicles in Canada. People who have savings find they have secured financial to cover negative consequences of unforeseen events (Funfgeld and Wong, 2009). Hence, always keep on the additional income into savings.

Entrepreneurs usually start up their business with personal effort and savings (Gabrielsson, Sasi, and Darling, 2004). The Prime Minister also launched the nation-wide savings program to encourage citizens to cultivate savings habit to prevent they spend it easily (www.duitsaku.com). At the same time as those who control their financial affairs and save regularly may enjoy a greater sense of security (Livingstone and Lunt, 1993; Northcott and Doolin, 2000).

However, in today's financial environment, as many as 20 million households show no intention of savings (Richman, 1993; James, Leavell, and Maniam, 2002). This is happened as there are many peoples found out they do not have excessive money to save. Peoples in the early stages of career do not save and favor in spending and borrowing because they assume they are able to get strong earnings in the future (Chien and Devaney, 2001; Loughlin and Szmigin, 2006). Most of them have the idea of enjoying first rather than save for their future. So they used up all their income to cover the expenses.

Bedingfield (2005) declared that the starting salaries for graduates would be lower so it is better to save and make more money now. There are students able to accumulate their wealth because they spend on what is necessary and saves the rest of their income. You have to force yourself to save by contribute the percentage of your income for savings. You may break up the percentage like 10% for savings, 30% for meals, 30% for accommodation, 10% for personal expenses, and 20% for general expenses. When you distribute all these categories items well, then you may control your savings habits. Besides, try to save the money in savings account or fixed deposit with bank and reduce the usage of Automated Teller Machines (ATMs) card as it is easier to withdraw money to spend and caused lower savings rate.

The pocket money book or “Buku Wang Saku” produced and launched by Bank Negara Malaysia is to assist student in monitoring their spending habits as well as educate students to save and record balance from their pocket money everyday. HSBC also visits schools and teaching children about the financial options available and encourage them to open junior or teenage account (Bedingfield, 2005). This can motivate the students to save a lot of small sum of money. Do not think that saves small sum of money does not make sense, it may become a huge amount when accumulate it regularly. By saves more money, the consumption will become lesser.

2.7 Investment

The rapid growth of the stock market and the growth of the portfolio investments are new motives to widen the income gap (Edmunds and Potter, 1999). Some of the peoples do not wish to manage their money by savings because they think the interests from banks are low. They may want to put it into investment to generate additional income.

One of the way to manage the finances are investing and if one's have a good strategy to deal with investment, it will bring much profit (Rokiah, 2003). Investment is a good deal to earn more money no matter it is a small or large-size investment. One of the sources of funds from students is come from investment (Ness, Gorton, and Kuznesof, (2002). When there is surplus cash, then use this money to invest especially during the unstable market and cheap stock price. This may gain the advantage with maximize the value and turn it into a positive investment. Students may also spend any amount to invest which can be afforded by them.

Many Canadians have financial advisor to advise them to invest their money into mutual funds, shares, stocks, and bonds (Butters, 2004). This is to ensure their money will be spending in useful way which can gain more return. Most of the millionaires are being rich is because they dare to take the risk to invest and gain the return shortly. The investment risk and expected return have to be concerned to prevent the undesired result occurred in the investment. Do not if unsure about the investment scheme as well as the risk.

According to the official website of Amanah Saham National Berhad, investing in unit trust funds only required small amount of money but enjoy the same benefit of other investment in high-price security and can also obtain return. Thus, it is convenience to invest and can be afforded by undergraduates.

According to Huhmann and Bhattacharyya (2005, p.296), mutual funds are one of the most important financial service vehicles for investment and more than $7.4 trillion are invested in mutual funds in USA. It is also an important financial service in developing country such as India, Indonesia and Malaysia (Huhmann and Bhattacharyya, 2004). The growth of the mutual fund industry resulted in increasing of investment companies in offering variety of funds (Ramasamy, Yeung, 2003).

Furthermore, investing in insurance is also another way to manage the finances to ensure financial stability and security in the future. It is because insurance may protect against the risk of unexpected financial loss and cover the personal protection such as death, disability, and critical illness.

2.8 Financial Knowledge

Shim and Siegel (2000) stated that financial knowledge assist in planning, problem solving, and decision making. Students covered in indebtedness because they have low level of awareness and knowledge towards their own financial situation (Loughlin and Szmigin, 2006). Some of the peoples do not manage their finances properly because they lack of the knowledge on how to manage it. They do not know how to use their money and they need to learn and understand more about financial management practices. There is only some college students study personal finance and only majority of the primary and secondary schools can acquire financial survival skills (Warwick, Mansfield, 2000).

A survey found that most 16-22 years old US high school and college students do not know much about personal finance plus not confident about the knowledge of basic financial matters and less than 40% understand money very well and good in managing their money (Merrick, 1999; Warwick and Mansfield, 2000). In addition, 70% Malaysian felt they average poor to understand money management and personal finances and there is only 10% obtained the information about financial knowledge from financial experts (Triwardhany, 2008). Thus, it is essential to understand the financial products because it may help the students alert in their personal financial management.

According to Matthewman (2003), financial management also needs a complete knowledge as Metropolitan Toronto Lawyers Association provides educational opportunities for their members. Without financial knowledge, managers run the risk of making wrong decision because understanding the financial help to raise the awareness which can contribute cost savings and revenue generation (Macaulay and Pringle, 1994). It can make poor financial performance if failed to understand the financial knowledge such as the underestimate the risk.

According to Yip (2007), gaining personal financial knowledge is important as get an education on financial knowledge enable you to make good decision with managing money. A person who is interested in financial matters is more likely to have financial knowledge (Funfgeld and Wong, 2009). So, financial education such as money management must be educated since younger age.

There are many institution by Bank Negara Malaysia do provide the financial planning education and awareness to schools, university, and national services training centre (Teng, 2009). Those institutions included AKPK (Credit counseling and debt management), FPAM (Financial Planning Association of Malaysia), and many other institutions. Moreover, the official website of Malaysian Investor also provides Cash @ campus program and conduct the seminar to university students for gaining the foundation in financial planning and investing to lead them to the desire financial future.

In Macaulay and Pringle (1994) research, they developed awareness training for their employees to have more understanding about the importance of financial management, how financial performance is measured, the meaning of profit, importance and means of cost control, and the flow of money. From the training course, they may improve the knowledge on making decision for their financial matters. Rokiah (2003) noticed that the programs of managing finances held by banking and financial institutions received many responses from the public.

School Adoption Program is developed in primary and secondary school to provide opportunity to cultivate financial management habit among students and educating students on the basis of financial knowledge. Undergraduates also may obtain financial counseling to be taught the personal money management like how they preserve and manage their money if they have limited knowledge on it. They could also understand their strength and weaknesses in financial management.

In addition, the credit counseling and debt management agency (AKPK) has offered financial education programs on basic money management skills as well as tips on how to use credit responsible; and also financial counseling and advice on how to manage your finance wisely from budgeting and money management. In addition, parents also may influence their child on how to manage their finances. As a parent, they have to set a good example to their child and this would track them towards financial success.

Furthermore, emotional education also have to apply by explore the self-motivated of one person's life because it is related to his financial consciousness.

2.9 Changing overspending habits

For the Northcott and Doolin (2000), they think that financial control considers successful when it was associated with security and avoid over-spending. The official website of banking info (www.bankinginfo.com.my) also indicated that the way to manage finances wisely is to assess the spending habits such as determine the warning signal like whether use the savings to pay bills or take old loan to pay bills and do you buy on impulse although could not afford it.

According to Chan (2006), advertising encourages the materialism in this society among Hong Kong citizens. In this modern economy, everyone is looking for materialistic with the advanced technology innovations. They prefer to purchase of branded products to show off especially undergraduates. They have a “living today” concept and easily attract for buying (Laibson, 1997; Funfgeld and Wong, 2009). The spending power of students becomes slightly increasing. Within UK, the facts show that there are 1.9 million students representing a combined spending power of £10 million in a year and 85% in this group mostly in social class categories (Jenkinson, 2000, Ness, Gorton, Kuznesof, 2002).

Later aged female teens desired shops in mall because there have specialty stores and can purchase the things without delay when they believe they need it (Taylor and Cosenza, 2002). From these exciting shopping venues, they are able to get the leisured lifestyles and relaxing by shopping behavior. Older Generation Y which aged from 19 to 25 years old represent a significant opportunity for US retailers today due to buying power is strong which exceeding $200 billion annually (Gardyn, 2002; Martin and Turley, 2004). Teenagers from this range of age prefer to try something new and exciting to enjoy their lives.

According to Kim (2002), consumers today have increased their needs and they want their needs in more entertaining ways. Many teenagers always involves in impulse buying because they do not understand what are their needs and wants and often access wants more than what they needs. Impulse buying means buying non-essential items. For example: eating food is a need but when you want to eat in a luxury cafe, it becomes a wants. The spending power of college students are approximately $30 billion dollars but around 24% spent in nonessential money (Ring, 1997; Warwick and Mansfield, 2000). So before purchasing, list down the item list which consider to purchase and reconsider whether the things will be useful. Once you know what your needs are, you may spend less.

The youth market is more to the brand loyal and brand conscious (Penman and McNeill, 2008). Some of the students bounded with peer pressure and have been brainwashed to think that using branded products such as Nike, Gucci, Guess and other latest and unique stuffs represent their upper standard compare with their friends. Most of the students enjoy experience in university and spending on cars, leisure and not able to control the debt rising. Do not pursuit for something which is beyond the affordability for trying to compare with friends. One of the reasons many students facing insufficient financial support because most of them used all their income to spend (Watts, 2000; Curtis, 2004).

Students regarded as a prospective target for current marketing activity and form long term marketing relationship (Ness, Gorton, and Kuznesof). This is because undergraduates have incomes from parents or part-time jobs and like to spend their money to purchase. Teenagers are an attractive market segment because they influence their parents to spend, and they are not only spending currently and will spend more in the future when they have more income (Zollo, 1995; Martin and Bush, 2000; Shohan and Dalakas, 2003). I noticed that most of the students spend easily because they never work hard to earn the income, that's why they do not really understand the value of the money. Research by Der Hovanesian, (1999); Martin and Turley, (2004) found out those undergraduates spend their cash as quickly as they acquire it.

Many consumers today often spending everything they make or more than they make and not even realizing their expenditures consistently exceed their income (Warwick and Mansfield, 2000). Besides that, Martin and Turley's research studies (2004) also noted the average college student spends nearly $300 per month by spending for food, personal care and music purchases; entertainment, electronics and the clothing shopping is the top activities. They consume according to their desires and do not motivate themselves for self-control.

There are some peoples spending much to purchase but they do not feel happy in their life or only happy for a moment. This may due to what they purchase is not exactly what they desired but it is their attitude and the way they manage their money. Since the money spend in non beneficial way, why don't contribute it by donate to other needed person, this may bring more happiness because helping others may feel more contented.

In Northcott and Doolin (2000) indicated that almost all of their interviewees in their research preferred to pay the expenses using direct debits with lump-sum payment as this it could not minimize the costs and no discount is available in the purchasing process.

According to Seer (2000), one of the ways to spend less is take advantage of all discount programs offered by publishers. This may include cash discount, discount coupons, free gifts, negotiate the lowest price with the seller when buy more, compare the price among competitors, etc. Some of the cafe, hotel and karaoke have place the birthday discount privilege and offer the student price. Kindly utilize this kind of privilege to reduce the spending amount.

There are some peoples shop and buy a lot during the mega sales due to the offer with cheaper prices. Due to they buy a lot of stuffs without considering and end up with larger amount of expenses with the goods which is not worth off. So, use less and reduce the waste. Likewise, prepare a shopping list when shop to make sure buy the things that is needed.

2.10 Debt Management

Many young peoples do not willing and unable to control their spending and caused them socialize into borrowing culture (Loughlin and Szmigin, 2006). The official website of Malaysian Investor argues that one of the mistakes of money which have to avoid is spending future money which mean credit card bad debts (www.min.com.my). Besides, the studies of Loughlin and Szmigin (2006) also emphasize the debt arise among students are credit card, debit card, overdraft and student loans. Tsamenyi M. (2005) investigated the Russian Multinational Company's management realized that planning and control is difficult to implement due to the unstable cash flow and they want to minimize their short term debt since they had a lot of short term debts at the time.

The debtors indicated that the high level of credit debt is the major reason for causing the personal bankruptcy (Dellande and Saporoschenko, 2004). Credit cards are being used extensively currently. Wardwick and Mansfield (2000) studies found out in this credit card society, Baby Busters grew up with debt because of used the credit freely and the number of peoples filed for personal bankruptcy due to the credit card had increase. Wardwick and Mansfield (2000) also mention there are many undergraduates are acquire big credit balances in school and some graduating even graduates with five figure of credit card debt.

Generation Y have been socialize in the debt world rather than savings for their consumption (Ritzer, 1995; Bakewell and Mitchell, 2003). The official website of Treasury Malaysia Ministry of Finance stated that government proposes the service tax of RM 50 a year to be imposed on each principal credit card and charged card as well as RM 25 a year on each supplementary card start from 1 January 2010 for the budget year 2010 because the statistic shows that the number of card used increase from more than two million from year 1997 to 11 million at the end of year 2009, excluding 285, 000 charged card. So they want to reduce the credit card usage to prevent citizens rely much on the credit card (www.treasury.com.my).

Curtis and Klapper (2005) studies found out that some students facing financial status and levels of debt problems on their graduation and the main source of debt is the student loan. Most of the undergraduates start to run into the debt such as education loan, credit card debt, and car loan. At the present time, students living with increasing level of debt and borrowing Student Loans for study as well as credit card debts and owed money to friends and relatives (Curtis, 2004). Curtis (2004) also discovered that student loan became the important source of finance for students as they appear to be trapped into accumulating debts.

The credit card companies said the target of university students using credit card to support their lifestyles are increasing (Bianco and Bosco, 2002; Penman and McNeill, 2008). Some of the undergraduates might not own their credit card; nevertheless they are holding the supplementary card from their parents, relatives or friends. The used of credit card has expanding in this world and it had contribute to the higher purchasing power because it is used like free money. Everyone can pay the bills without taking out their cash and this caused them to spend more. Even those peoples are able to manage the debts also admit the credit card facilitate bad habits (McGinn, 2001; Dellande and Saporoschenko, 2004). If desire to use the credit card, ensure the amounts used are within the capability of repayment and pay it during the maturity date to avoid the excessive debt full with interest charges. If could not control the credit card usage, debit card may be another better choice to control the money spent.

Most of the credit card's holders often hold more than two credit cards at the same time. They apply the card wherever especially in the shopping center because of the gift received and ending with a lot of card and the credit debt. The credit card is a trap to encourage spending. Try to avoid or reduce the usage of credit card and prevent the installment payment to avoid the interest charged for the card usage. Avoid bank overdrafts or borrowing consumption because debt aversion is the key issue in financing decision and credit cards was perceived as a threat to savings objectives due to the high credit limits provide convenience of usage and caused people in debt (Northcott and Doolin, 2000).

Student loans are the second most important sources of income for students (Penman and McNeill, 2008). Some of the students even use the balance from education loan (PTPTN) to spend and pay the other unnecessary items when there is insufficient of money and end up with much debt. As a result, their life incurring with debt and they might not be able to repay it. So, try to reduce the debt to increase the wealth and assets because debt brings much negative impact and may cause mental stress.

2.11 Relationship between Effective personal financial management and Quality of lifestyles

According to Kucukemiroglu (1999), lifestyles defined as how one's lives and it describes the behavior of individuals in marketing approach and relates how peoples live, how they spend money and time allocation in economic level.

Styles of life was created by Alfred Adler refer to the goals that peoples share and the ways they use to reach their goals and this lifestyles are influenced by resources available combined of education, capital and income (Lazer, 1963; Todd, Lawson, and Faris, 1998). Values and lifestyles are psychographic variables that give clearer direction to identify the natural consumer segment and it consists of balance life (Fraj and Martinez, 2006). In addition, Fraj and Martinez (2006) also conclude the effective lifestyles type included free of stress and healthy consumption habits.

The attitudes towards lifestyle focus on consumption habits and debt (Penman and McNeill, 2008). Nowadays, everyone is seeking for higher standard of living even the kids. Lifestyle for kids these days are influence by desires created by advertisement, promotion, media, magazines, fashion, and digital device and these stimulus caused them value the money less by exchanging it with entertainment, friendship, and confidence (Yip, 2006).

With a sound financial management, it will increase the power of money thus increase the living standard and lifestyle. Yip (2007) claimed that with the money, we can buy wonderful things and experiences such as nice house, good foods, holidays, best education and health care as well as contribute to charity. In the other way, the misuse of money may be misery and lead to arguments and illegal activities.

Younger generations like to associate with higher price materials with improved quality and worth compared with older generations and these development steadily increase the importance of having more money (Bakewell and Mitchell, 2003).

When it comes to manage personal finances, it related to living standard and savings, investing, purchase insurance and portfolio allocation for protection as well as reducing spending behavior are the ways to smooth, protect and raising high living standard (Teng, 2009). According to Teng (2009), the level of one's living standard will fall if one's performing their assets poorly while maximize the utility direct to achieve the higher standard living. Triwardhany (2008) acknowledged that educating children on how to spend, save, invest, and manage debt wisely and the more important is financial education can help to improve the quality of lives.

Financial satisfaction is part and parcel of overall life satisfaction (Sun, Horn, and Merritt, 2004). Consumers from Britain and USA consider themselves manages their finances better thus make them more brand-savvy, travel-oriented, satisfied their lives, financially satisfied and optimistic (Sun, Horn, and Merritt, 2004).

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