Financial Freedom : Focus on These 6 Elements
Financial advisors will focus on these 6 elements to assist you in achieving financial freedom. Let us learn more about these 6 elements.
Financial planning requires high commitment and discipline. Monitoring cash flow, managing debt, and investing consistently are among the essential skills that will help us manage our finances properly to eventually achieve financial freedom.
Effective financial planning should start from the first paycheck and continue until the day we die.
In developing a sound financial plan, there are six areas that we need to pay attention to :
- cash and debt management,
- investment planning,
- risk protection,
- retirement,
- taxation; and
- inheritance.
If all these 6 elements were appropriately managed, we would have no problem achieving financial freedom.
Cash and Debt Management
We must analyze our current financial position to develop a solid financial plan. This step will help us determine our financial standing and readiness to build wealth.
For those who just started working, create a budget and follow it rigorously. Make sure that you put investment as part of the monthly commitment. Start your working life by exploring investment instead of building a debt.
Managing cash and debt will help you control how you use your income so that you will have excess money for investment.
Investment Planning
Start investing immediately if you have excess cash. Don't delay because it might cause you to spend on other things. Learn about risk and return so that you can plan and strategize your investment to get a good return from each sen you earn.
Prioritize investment by adopting a lifestyle that prioritizes investment. In managing your investment, an automatic investment facility, for example, Auto Labur by ASNB, will help you to invest consistently.
A wise investment planning will help you to create wealth via returns generated consistently.
Risk Protection
Protect yourself from unexpected events that might reduce your wealth by taking insurance or takaful.
This is especially important if you are the primary source of income for yourself and your family.
Plan your risk protection with suitable coverage to ensure that you will have adequate compensation in the event of a disaster.
Good risk protection planning will help you recover to a position as before the disaster happened without significantly affecting your wealth standing.
Retirement
Financial planning should focus on retirement as it is the key to financial freedom.
Building retirement savings takes a long time, so your investments must be made in instruments that give higher returns than inflation, such as ASB or fixed deposits.
Meanwhile, insurance/takaful continue to be activated as long as you are alive, especially those related to medical financing.
Taxation
Sound taxation planning will help you minimize the total tax you must pay.
By focusing on the relief and rebates provided by the government, such as purchasing books, sports equipment, health check-ups, insurance, and education in everyday spending, we can reduce the tax payable.
Since we paid taxes in installments through the Monthly Tax Deduction (PCB), filling in the Income Tax Return Form (BNCP) should be a routine that can not be missed every year. This will ensure that excess tax (if any) can be reclaimed and used for investment or paying debt.
Inheritance
You accumulate assets for yourself and your family. You want your heirs to receive their respective shares without dispute when you're gone. Disputes between heirs often cause the inheritance left behind to lose its value and not be beneficial.
As such, it is crucial to manage your assets while you are still alive using the methods allowed in Islam, such as will, grant, trust, and waqf.
This step does not mean we forget about Faraid, but rather to ensure that the inheritance management can run smoothly without causing misery to any heirs or other parties who deserve the inheritance.
Summary
In summary, an excellent financial planning document will guide us in every step that needs to be taken in our journey toward financial freedom.
As such, build your plan, document everything you need to do and monitor, and, if possible, get expert advice to ensure your dream will finally become a reality.