Setting a financial goal in 2017 can be tricky with the discouraging economy outlook, which makes it more important to for us to set a clear path for ourselves to achieve financial freedom.
If you are in the midst of planning your financial goals next year, this article might just be the one you need. To provide valuable insights, we interviewed Alvin Vong from Equities Tracker International, Kevin Neoh and Kum Phui Lai from VKA Wealth Planner Sdn Bhd, Linnet Lee from Financial Planning Association Malaysia (FPAM), Desmond Chong from AKPK and Felix Neo from Whitman Independent Advisors Sdn Bhd.
1. What are your financial resolutions for 2017?
Kevin: Personally, I want to increase my monthly regular savings and set up a new automated payment account towards my home-related expenses (maintenance fee, parking fees, sinking fund). I’ve actually put systems in place during the Christmas long week to help me achieve these goals by setting up standing instructions with my bank. Basically, I created these two new standing instructions to ease my time, and also make cash-flow more manageable.
My next resolution is to be healthier, this includes physical, mental, and also financial health. This includes a more prudent debt management (yes, a financial planner also has debt like a hire-purchase loan, mortgage, PTPTN loan and sometimes outstanding credit card debt).
I am planning to do an audit on my mortgage and also to cancel off some credit cards and retain perhaps one card since I have been using my Debit card most of the time in the past two years.
Professionally, I have also set a resolution to reach out to more middle class or working class Malaysian families and provide impartial, conflict-free financial advice and hopefully, this will be of assistance to help them handle their personal finance with more confidence.
Linnet: I will review my personal finance budget and be more disciplined on its implementation from 2017 onwards, pay off my housing loan and plan for my home improvement.
Desmond: I will increase savings for child education investment as the weakening Ringgit has placed pressure to build a bigger education fund.
2. What are your financial tips/advice for young Malaysians (aged 25 – 34) to keep in mind for 2017?
- Draw up a monthly and annual budget – have a firm grip on your income and your expenses, and ensure that you successfully capture any surplus as savings.
- Automate savings and investments – don’t procrastinate when it comes to saving and investing. Set up standing instructions to transfer monthly surplus from your salary account into a dedicated savings account. Simultaneously, set up another standing instruction to invest regularly from the savings account. Do it now, and before you know it, you would have a tidy sum in savings and investments by year end!
- Diversify investments – for those who have already started out investing, it’s timely to review your investment portfolio to ensure that you have a well-diversified portfolio across different asset classes, different markets, and currencies to better weather the economic storm.
- Risk transference – while you have your whole life ahead of you and anything is possible so long as you have the passion for making it happen, the reality is that an unfortunate event can hit anyone at any time, irrespective of age. While you’re young, it’s the best time to ensure that you transfer the risk of the occurrence of premature death, medical illness or personal accident that hampers your ability to continue growing wealth and achieving your financial dreams. Consider term life, critical illness, hospitalisation & surgical and personal accident coverage to secure your financial well-being and that of your dependents while you focus on moneymaking and scaling to greater financial heights.
- Grow your financial IQ – continue to invest time and resources to grow your knowledge in the area of personal finance and investments to ensure that you have the mental capacity to manage your net worth growth successfully as your financial resources increase over time.
- Have a clear financial goal for the year, and take meaningful action to work towards it, and more importantly, stick with it throughout, making an adjustment is fine, but don’t forget it or abandon it.
- Resolve to pay off a specific amount of debt per month or over the course of the year, if you don’t tackle your debt issues while you are still young or when it is still manageable, it will then turn on you and it will then dictate (if not manage) your life.
- Be prepared for the unexpected by diverting a portion of your earning into an accessible emergency fund.
3. Could your share your top 3 money-saving tips?
- A budget for specific savings and set an auto debit as soon as your salary is banked in, into a designated bank account which does not have a debit card or internet banking. Reduce the risk of dipping into it unnecessarily.
- Themed potluck hi-tea/lunch/dinner at home is a great, fun and money-saving way of meeting friends. The benefit of having the privacy to chat or watch a movie. Take turns to host the venue & those who are invited must make to effort to bring interesting & healthy food and drinks.
- Before you buy an item, think carefully if you have a similar one at home tucked away or whether you really need it. If your usage is not that high, can you borrow? Also offer to loan some of your stuff to reliable friends. Sharing is caring and save money for a life that is comfier.
- Make saving money an interesting challenge: Start inviting your friends/colleagues to compete for who saves the most.
- Make saving automatic: Auto debit partial of your salary account to direct investment.
- Change Budget Format: Income minus saving first (minimum 10-20%) then only allocate your expenses.
- Eat breakfast, a self-made kind, this not only saves money but also helps to build a better diet.
- Stop collecting items with questionable value like for instance water tumblers, or toys (for instance McDonald toys etc). These are often wastages that seem small during purchases but when you pile it up over time, it can become an expensive hobby or habit.
- Avoid making impulse purchases by asking the reason you are buying it or whether you actually need it. Try to delay purchasing on impulses, if it can persist after a couple of weeks and you still have the urge to buy it then it probably means you really wanted it but not wholly due to impulses only.
4. What are some financial pitfalls/common resolutions that you feel actually waste money?
Alvin: The first financial pitfall that fresh graduates make in particular is purchasing a new car. This decision can set you back in your financial goals. Resist the temptation to buy because cars are depreciating items and will not work in favor of building your wealth. Just don’t do it and if anything, there are always rideshare apps to help you get around.
The second pitfall that young Malaysians fall into is buying their first property and to live in it. Don’t forget – the first property you purchase should always only be for investment purposes. Rent instead of buy, because once you are locked down with a long-term bank loan that generates no income, it is an opportunity lost to grow your wealth.
Kevin: Setting resolutions or goal that is not well-thought of, or goals that are not specific, without reason to support the motivation or the need to accomplish those goals will render those goals ineffective and have no ‘power’ to draw the person to take action.
Sometimes, people set goals that are not in-line with our logic that is to do better in our life and to accomplish our life goals. That is when people set goals such as “I want to change my current car to this new model that cost me a certain amount of money by November 2017”.
This type of goal is specific, have a time deadline, but it is a goal that sees the person eventually spending huge amounts of money, instead of investing the money or monthly cash flow to grow their investment portfolio. This is irrational yet widely practised among Malaysians.
5. What would be smart investments to make in 2017, in your opinion?
- Always remember to invest in yourself
- Invest in stocks using the right mindset. Pick your shares not through hearsay or speculation, but through sound education and informed decisions
- Don’t be in a rush to make huge gains immediately for wealth creation takes time
Felix: Given the challenging economic backdrop we face, I believe that the smart investment move to make is to understand your ideal asset allocation and move your assets towards this goal. Many of us might be overweight in certain asset classes, and therefore may be underweight in others.
As an example, and to keep things simple, let’s assume a young adult (age 25-35) has a moderate risk profile. In this case, ideally, he should strive to have about 10% of his funds in low-risk assets (e.g. bank deposits, capital guaranteed funds, etc.) and another 10-20% in high-risk assets (e.g. equities, small cap funds, etc.).
The remaining allocation should be in moderate risk assets comprising of investments such as properties and balanced funds. If you find that you’re underweight or overweight in certain asset classes, then take the opportunity of the New Year to commit to restructuring your investment asset allocation to one that better matches your risk profile.
This way, your ideal strategic asset allocation would enable you to better withstand the short-term market volatility and eventually help you grow your net worth optimally in the long run.
6. Any key titles/books that you would suggest reading? How can Malaysians continue to boost their financial literacy levels?
Desmond: There are 3 books published by AKPK namely Power! (Pengurusan Wang Ringgit Anda in 4 languages: Malay, English, Mandarin and Tamil), Money Sense (3 languages) and Financial Comics (Old Master Q in 4 languages).
Alvin: “One Up on Wall Street” by Peter Lynch, where the legendary mutual fund manager explains the advantages that average investors have over professionals and how they can use these advantages to achieve financial success. It is a great book for beginners and experts alike.
Kevin: I recommend reading a book titled “No Fear, No Excuses”, this book talks about what we need to do to have a great career. It touches aspects that could be served as a wake-up call for many who are living their life in a shell.
Another book that I think is a good read is titled “The $100 Startup”. This books talks about how to lead a life of adventure, meaning, and purpose – and earn a good living.
It also exposes readers to the idea that the old teachings we learn may actually be obsolete for those who are living in the 21st century, and how we can combine our passion, interest to help make the world a better place and at the same time enrich ourselves and live our true potential.
Be it debt consolidation, optimising credit card usage, money-saving tips, or investment, you have to figure out the right financial plan for yourself and your loved ones to make 2017 a great one! Feel free to reach out to us if you have any comments or questions!