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How do I become financially independent?

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Money talk. Do you like talking about it? Or is this something you would shy away from?

A recent S&P Global Financial Literacy Survey found that financial literacy among Malaysian women is at 33%. We thought that sounded alarmingly low. Knowledge is power. The lack of understanding in managing your capital can often lead to oppression, feelings of insecurity and worthlessness. Women need to take greater control, and acquiring financial literacy is crucial.

Women face unique challenges

Here is the reality all women must face- we are paid less than men, and we spend less years working especially when we choose to have children. For many that opted-out of their career at one point, returning to the workforce is difficult. In a study by Harvard, 93% highly qualified women wanted to return to work, with nearly half citing “having their own source of independent income” as the main reason. However, only 74% could do so. All these translate into less earnings and potential savings in the bank.

We also typically live longer than men. Hence, it is important for women to build a nice little nest egg and plan for their retirement.

Do you play a role in financial decisions in your household?

When we set out to discover the role women play in their own households, we were happy to learn that 83% of our readers responded that they play a role in making financial decisions.

This is in line with recent findings that 90% of women are taking “more responsibility for managing household long-term savings and finances.” Despite this, it is disheartening to learn that while women are creating meaningful and impactful changes, be it in the boardrooms and in the political arena, women still lack confidence in deciding their financial future. Nearly 60% women in the same study responded that they wish they are more confident in the decisions they are making!

When we delved deeper into how our readership are securing their financial independence, the responses were varied.

Those that do not play a role responded that they are held back by not earning an income and by debt. A reader pointedly shared that “I recognise that the ability to save has got to do with privilege.”

However, great tips and advice were shared by our readers. It is clear that as women, we do want to learn and take the steps that will set us on the path to financial freedom.

Here are our top picks:

1. The 50-30-20 Rule

We know how tempting it can be to be on top of your game and get the latest hair drier, buy a membership at the new gym in town, or purchase that shiny cookware. Although you may say that these things are worth splurging on (we know how important a good hair drier is!), it is imperative to first set aside a certain percentage of your income every month.

What is your magic number? Our readers responded with different percentages, from 5% to 15%. But, Senator Elizabeth Warren outlined the “50-30-20 budget rule” in her book, All Your Worth: The Ultimate Lifetime Money Plan. After paying your income tax, 50% of your income should be spent on ‘needs’, which could include your mortgage, car loan, groceries and healthcare insurance. 30% could be spent on the optional ‘wants’, and 20% should go into savings and investments.

If that sounds like too much to commit, start small until you are more financially stable. As the popular Malay saying goes, “sedikit-sedikit, lama-lama jadi bukit.”

2. Make a plan

If you have a family, you will need to have a frank conversation with your husband or partner on the family’s financial budget. What are your monthly expenses? Do you or your partner have any debts? How much money are you setting aside for your children’s education? What about medical insurance? If you are a housewife and don’t make any income, having this conversation can help you plan and protect your self.

A reader responded that she and her partner set financial goals together and divide their financial obligations fairly. “It’s okay to cover each other once in a while, but if one side is slacking too much, talk it out again and find the root cause of the problem and address it together. Bottom line, be truthful about your finances with each other!”

 

3. “Everyday I’m hustling”

With the inception of the internet, starting a business has never been easier. You could build an empire without stepping out of your home. Many mums are taking advantage of this opportunity and setting up businesses. And this is the case for some of our readers.

If you are unsure of your product or service, test the idea out with friends and family first- they would be happy to give feedback without a filter. If a business sounds like too much commitment, you could try doing freelancing work. Websites like Fiverr, Upwork and Freelancer.com offer brilliant solutions for you to generate extra income.

4. Hire certified advisers

We are constantly flooded with information on what is supposedly the best thing to do for yourself. To help you filter through all that ‘noise’, it may be helpful to engage with a wealth management service. Companies like iFAST Global Markets (iGM) offers experienced investment analysts that could furnish you with focused information (especially if you are too busy or lack the knowledge to invest on your own), and help you actively monitor your portfolio to achieve your financial goals.

When choosing a wealth adviser, some factors to consider are:

  • You want an adviser who is looking after your interests and goals. When an adviser has a fiduciary duty, it means that they have to put your needs ahead of the company they work for.
  • It can be intimidating to meet with a wealth adviser who might overwhelm you with fancy jargon and complex statistics. Stay calm, keep a clear head and ask all the questions you want. You should feel comfortable as it will be a long-term partnership.
  • Finally, know what you are paying for. Engaging with a wealth adviser is also an investment. Find out the charges for the services that you will be receiving.

5. Diversify

A popular savings option for our followers is Amanah Saham Bumiputera (ASB). However, it is always better to have a few separate funds to mitigate your risks. Insurance-linked investments, properties, mutual trusts and gold bars were other options shared by our readers. One financially savvy reader even responded that she is investing in “index funds, REITs, FDs, and diversified shares in strong currency countries.”

If you are unsure which option would work for you and what your ‘risk appetite’ could be, speak to an investment analyst that could help you out.

6. Reduce spending

This is a no-brainer, really! Reducing your consumption will not only benefit your pockets; you will be kinder to the environment too.

Several of our followers shared their experience embarking on a no shopping challenge for a year. If the thought sounds scary to you, why don’t you give it a try for six months first? The idea is not to freeze your spending for a year, but to help you understand the difference between your needs and wants, and to take control of your purchases.

7. Unconventional “forced savings”

Our readers shared different ways they are saving for their future. “I put aside RM20 and RM5 notes every time I receive it. For emergencies and holidays,” shared a reader. “I hide 50s all over the house. When emergency breaks, it’s nice to suddenly find some,” said another.

But, one of the answers did surprise us. Growing up, it wasn’t uncommon to hear our mums having their “gang kutu.” It seems that this old-school method is still being practiced, with 38% of our readers responding that they are still playing “kutu.” For those uninitiated, “main kutu” is the method of saving money with family or friends. You put a certain amount in the pot every month and take turns to get paid out. There is no contract or agreement, and everything is based on trust. As with everything, there are risks involved, so practice wisely.

8. Educate our children

Our children are our future. It is never too early to teach them the value of money and to empower them with the financial skills to navigate through life. You want them to live financially fit lives so you won’t have to carry the burden at a later stage. Many of our followers also shared that setting aside funds for their children’s education is their top priority.

There are certainly many more tips that could be added to this list. If you have not already, check out makchic‘s sharing session on our Instagram highlights to learn what our followers had to say.

If your partner is the one making all the decisions, maybe it’s time to empower yourself, get involved, do more research, and seek ways to be financially independent.

 

By Liyana Taff

 


This post is sponsored by iFAST Global Markets Malaysia.

iFAST Global Markets (iGM) is a private wealth management service that offers high-level investment expertise and bespoke client services. The team of trustworthy wealth advisers and experienced investment analysts will be able to guide you through the complex and challenging journey that is investing. Click here to book an appointment with iFAST’s wealth advisers in Kuala Lumpur, Sitiawan, Johor Bharu, Penang, Kota Kinabalu, and Kota Damansara. 

 

From our team of purposeful, multi-faceted mummies. For editorial or general enquiries, email to us at [email protected]

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