Don't let it control our life. Let us take control instead...
1. Take calculated risks and invest our money. Inflation is around 6-10% every year, do we still want to put our money in Fixed Deposits and get only 3% return, making a net loss of 3-7% yearly?
1. Take calculated risks and invest our money. Inflation is around 6-10% every year, do we still want to put our money in Fixed Deposits and get only 3% return, making a net loss of 3-7% yearly?
Ensure that our net assets are growing at a faster rate than the rate of inflation.
2. Eliminate all credit card debt. It's pointless investing our money and getting returns of 8-13% if our credit card is shrinking our money by 18% every year.
3. Be careful when taking personal loans, ensure that the rate they offer you is the 'effective interest rate' and not the 'fixed rate'. For eg, if fixed rate for a personal loan of 5 years is 5%, effective interest rate is about 9.17%. If your effective interest rate is 9.17%, we're better off not taking the loan. Avoid taking unnecessary loans if you don't need the advance cash.
4. Calculate how much we may need when we retire and work towards how to achieve that target.
5. Calculate how much you may need for your kids' education and work towards it while they are still in diapers. Power of compound interest works in our favour the earlier we start.
6. Insurance is important if we have children depending on us financially, but buy term insurance and invest the rest. It's less costly and it comes with higher coverage. Insurance is for protection. If you're looking for investment with returns higher than inflation, look into other options.
7. It's ok to invest in property but do not overbuy. Remember that we are borrowing to invest, thus our nett return may not be that great. For example, if we are getting 8% in property appreciation but paying interest of 4.8% yearly, our net return is only 3.2%. Minus inflation of 6%, your money is shrinking by 2.8%. Is it worth it? There are many hidden costs also in property investments such as yearly quit rent, assessment, repairs and maintenance, renovation expenses, security and utility costs and capital gains tax! Work out your NETT returns before you decide to embark on another property investment. (Furthermore, housing loan rates are usually tagged to the BLR, when BLR increases, the tenure of our loan will increase exponentially)
8. Set aside a fund for yearly family holidays, we need to live a life too.
9. Luxury bags can be put on hold until kids are older, don’t succumb to peer pressure. (unless you got it from US factory outlets, :-))
10. Don’t own more cars than we need. Buy a basic car just enough to fulfil family needs so that you can ease up your cash flow for savings/investments.
11. List out all our monthly expenses on a spreadsheet and check which areas are draining our cash-flow. Make sure we include an additional RM 300-500 for unforeseen expenses like wedding ang pow, sudden emergency shopping, etc.
Money is important but don’t let it affect our relationships with our spouses and children. It will cause much unhappiness among the children, stress and breakups in relationships. Changes you are making now can lead to a financially better life tomorrow. Short term pain for long term gain.
“Time, not money, is your biggest asset in life. You need time to invest in relationships (with yourself and your family) or to chase your passion.
Think again if you are still trading off time for money.
Let your money work for you. You don't work for money. That is exactly what Financial Freedom is...”
― Manoj Arora
Think again if you are still trading off time for money.
Let your money work for you. You don't work for money. That is exactly what Financial Freedom is...”
― Manoj Arora
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