Malaysian Department of Insolvency had reported a total of 224,943 individual bankruptcy cases from 1990 to 2010 and this number keeps increasing from year to year. This is not a good sign for a developing country such as Malaysia, since it might adversely affects the economic performance of the country in the long term. Poor financial management has been identified as the main contributor to this problem. Early exposure to financial planning is important for the younger generation because they have various obligations such as paying back the loans used to finance their university education even before they graduated. Financial planning is an important aspect of our daily life involving cash flow and liability management.

Some of the most important aspects include the maintenance and enhancement of personal cash flows through a multiplicity of channels including debt control and maintenance of lifestyle. Islam encourages the ummah to have proper financial planning.

In the Holy Quranic verse 12:43-49, the God Almighty (Allah) says in this regard where Yusuf said: “You shall sow for seven years continuously, then what you reap leave it in its ear except a little of which you eat. Then there shall come after that seven years of hardship which shall eat away all that you have beforehand laid up in store for them, except a little of what you shall have preserved. Then there will come after that a year in which people shall have rain and in which they shall press (grapes)”[1].

The lesson from this verse is not only to encourage Muslims to work hard in all their undertakings, save wisely and consume smartly without being lavish and wasteful but also, they are encouraged to have investment for future undertakings.

It is also an Islamic teaching to plan for future endeavors and to balance the pros and cons before embarking on them. Islam, in fact, discourages doing things at random. The Prophet Pubh set excellent examples that showed the importance of planning before taking any action. This was obvious in the plan He puts in place for migrating from Makkah to Madinah, in His interest in the conflict between the two superpowers (Persia and Byzantium), in His sending messengers to the rulers of the world to call them to Islam, etc. This shows clearly that the Prophet with all the confidence He placed in the Almighty, was aware of the importance of systemized planning for future steps.

“Failure to plan means you are planning to fail.” It will not only affect the individual person per se, but generally, it will also affect the whole economic system. Statistics from Bank Negara Malaysia (BNM) shows that, bankruptcy cases keep increasing year after year.

15,868 bankruptcy cases were recorded in 2005

13,590 cases (2006)

13,238 cases (2007)

13,855 cases (2008)

16,228 cases (2009)

18,119 cases (2010)

17,650 cases (2011)

The Director of the Department of Insolvency Malaysia, Datuk Abdul Karim Abdul Jalil specified, on average almost 50% of the cases arose due to mismanagement of the credit cards among people aged below 30 from year 2005 to 2009 [3], which represent the group with high rate of financial debt and credit card use [4]. This age group is prone to financial difficulties and dissatisfaction [5]. This is a serious phenomenon as the number may increase any time if no drastic action is taken at an early stage.

All these figures came out because most of the credit card holders do not have proper financial planning. Early exposure to effective financial planning is important as university students nowadays will be burdened with education loans and personal loan when they graduate. The knowledge and skills can be gained through their university courses and training, or by observing how their parents deal with financial issues.

Regardless of their degree or family background, students usually have limited experience in handling their own money. As early as 18 years old, students face challenging environment when they enter a university. They must know how to manage cash especially for students who rely on their parents to manage their money during the school years. They may fail to budget their expenditure due to inadequate understanding of unexpected expenses.