Achieving Financial Freedom in Malaysia
•By Mahersaham
Artikel ini juga tersedia dalam Bahasa Melayu
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According to a statement by the Employees Provident Fund (EPF), most Malaysians are unable to retire with sufficient finances.
The EPF explained that 70% of members who withdraw their savings at age 55 exhaust their funds within less than 10 years after retirement.
Meanwhile, life expectancy in 2019 stood at 73 years for men and 79 years for women.
If Malaysians rely solely on their EPF savings, it will not be enough to cover expenses after retirement. This is because the amount saved simply cannot last.
Overspending is the MAJOR reason most EPF contributors end up financially struggling between the ages of 61 and 75.
Every worker or individual needs to plan their finances for the future. The purpose is to ensure you do not face financial hardship in your later years.
Workers must also think about whether their savings will be sufficient after retirement. Among the highest goals in financial management is achieving financial freedom.
When you are no longer burdened by daily financial dilemmas, it means you have achieved financial freedom.
Financial freedom does not mean being completely free from financing or debt. In today''s world, it is unrealistic to eliminate all financing entirely. We rarely hear of people buying houses and cars with cash — it is not impossible, but it is uncommon.
Financial freedom is also associated with the choice of not working for money, because your money works for you. This is called ''passive income'', which typically comes from investments and royalties.
We pursue financial freedom as a long-term plan — spanning 10, 30, or even 50 years into the future.
There is nothing wrong with sacrificing a little now for comfort in the future.
If others have already begun their journey towards financial freedom, why haven''t you started yet?
Feel it is too late? Better late than never! Which is better — starting to plan your finances now, or doing nothing and waiting for a windfall from the sky?
The choice is in your hands. One day, or Day One?
No one else can change or help you unless you yourself strive to improve. Your steps are ultimately for the future security of yourself and your children, without depending on others.
There is no shortage of advice and guidance available in this digital age. This shows that awareness of financial freedom is growing across all demographics — young, old, rich, and poor alike.
Many experienced financial educators share their expertise with the goal of helping Malaysians become more financially literate.
Take their advice and measure it against your own situation. Not every piece of advice will suit everyone, which is why multiple perspectives exist — so you can find what truly works for your circumstances.
Here are several tips for achieving financial freedom:
If you have been blacklisted by financial institutions in Malaysia, it means you have a poor CTOS and CCRIS record.
This means banks view you as someone likely to default on repayments if you apply for personal financing, a home loan, or a vehicle loan. Do not be upset if every bank rejects your financing application — they have their reasons.
Your credit record is important to monitor because it reflects your financial standing and credit health.
Therefore, clean up your credit record by settling all outstanding financing balances and overdue bills. As long as your outstanding debts remain unpaid, you will stay on the blacklist.
Once your credit record is clean, banks will be more favourable towards you.
When you receive your salary, do you allocate it first, or just spend freely because next month''s pay is coming anyway?
The recommended approach is: 50% for needs, 30% for wants, and 20% for savings.
If you are not accustomed to this discipline, it will feel difficult to be consistent. This is especially true if you have been spending first and saving later.
That is alright — change gradually but consistently. If you have never managed to save before, try starting with RM100 as a beginning. That is better than not saving at all, right?
If you are still single, saving is even easier since you do not have family commitments. But do not forget your duty to your parents and siblings even before marriage.
This ratio is merely a suggestion. You can adjust it according to your own situation.
Have you ever heard the saying ''RM1 today is not the same as RM1 ten years ago''?
Or that RM50 in the old days could fill an entire shopping trolley, but today it barely covers rice, cooking oil, and laundry detergent?
This is what we call inflation — your purchasing power is no longer the same due to rising prices.
One of the key reasons to invest is to beat inflation, as investment returns should exceed the inflation rate.
Today, there are many investment instruments available in the market, including fixed deposits, ASB, property, stocks, gold, bonds or sukuk, derivatives, and more.
Before investing, you need to identify whether you are a risk-seeking, neutral, or risk-averse investor, because in investing you must understand the risks involved.
If you are new to the world of investing, it is advisable to start with low-risk investments such as fixed deposits and ASB. Then gradually move to higher-risk instruments for potentially higher returns.
Most importantly, never fall for get-rich-quick schemes. It is impossible to guarantee high returns with minimal capital in a short period.
If you are unsure where to begin, you can attend investment classes conducted by experienced investment educators to gain knowledge first.
With the rise of social media platforms like Facebook, Instagram, and Twitter, the current trend is to showcase a luxurious lifestyle.
For example, the boba milk tea trend — a single cup costs around RM10!
Control your desires and avoid following extravagant trends. You may think it is a small expense since each purchase is under RM100, but when accumulated, the total can be surprisingly large.
Never underestimate the small things that drain your wallet — while each amount may seem insignificant, the total adds up significantly over time.
There is nothing wrong with rewarding yourself, but make sure it is after you have achieved your goals. For example, after successfully saving RM10,000 in a year, reward yourself with a holiday to Cameron Highlands.
Reducing living expenses helps you achieve your financial freedom goals faster. Be smart in distinguishing between needs and wants.
Even better, record all your transactions — money in and money out. This makes it easier to identify where your money is being spent.
Do not forget that taking up insurance or takaful is also important on the journey to financial freedom.
In Malaysia, the penetration rate for conventional insurance and takaful products remains low and far from the set targets.
According to the Chairman of the Malaysian Takaful Association (MTA), many Malaysians still do not have adequate coverage to maintain their current standard of living should the primary breadwinner pass away.
Every Malaysian is encouraged to allocate funds for protection products to reduce the financial burden in the event of accidents, disasters, fires, critical illnesses, or death.
Insurance or takaful protects your finances from severe damage. You have two choices: sell inherited land to cover hospital costs, or get a medical card and contribute monthly?
Additionally, if you work for a company, you also contribute to SOCSO (Social Security Organisation) as workplace protection. Make sure you understand the benefits you receive from your SOCSO contributions.
Sometimes it is not easy to pursue financial freedom on your own. You need guidance to ensure the steps you take are suitable for your financial situation.
You are advised to seek professional services for matters involving investment, retirement, tax, cash flow, education, and more.
Remember, if you engage professional services, ensure they are registered with authoritative bodies such as Bank Negara Malaysia and the Securities Commission Malaysia.
You need to work harder and maintain discipline in achieving your financial freedom goals. If you wish to retire at age 45, then put in every effort to make it possible.
Do not give up easily, because nothing worth having comes easy. Every change faces difficulty at the beginning but becomes easier as you approach the end.
Successful investing begins with solid knowledge.
Investment Basics:
Download our free ebook for a complete guide.
Open a CDS Account:
Ready to start? Open a CDS account today.
Financial freedom means a state where your passive income is sufficient to cover all living expenses without the need to work actively, allowing you to retire early if you choose.
According to the EPF, 70% of members who withdraw savings at age 55 exhaust their funds within a short period due to lack of financial planning and insufficient passive income.
The first step is to set clear financial goals, manage your cash flow wisely, and begin building investment assets such as stocks, property, or business from an early stage.
Yes, a professional financial adviser registered with Bank Negara or the Securities Commission can help plan investment, retirement, and tax strategies that suit your financial situation.
Financial freedom begins with small steps — start your investment journey today for a more secure future.
Open a CDS account today to start investing in stocks on Bursa Malaysia and build your long-term investment portfolio.
Download our free stock basics ebook to understand the fundamentals of stock investing as your first step towards financial freedom.
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