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Tomorrow’s financial independence starts today 

How many of us can safely say that if we choose to stop working today, we can keep up our purchasing pattern for clothing, holidays, electrical gadgets and toys, and pay for our homes, cars, children’s music lessons and college tuition for years to come? If your answer is ‘no’, or even ‘not sure’, then it is time for you to set your goals and plan how to manage your money better in order to be financially independent. 


Financial independence must not be mistaken with merely earning a high income. An income is just a means to aid your financial independence. The true secret to increasing your net worth is to spend less than you make. It is a basic fundamental and the reality of money.


Don’t you ever wonder why, even as some people earn more, they are more often than not left wondering why financial independence and security are just always out of grasp? That is because they are not aware of the basic understanding that income is not wealth. Hence, if you are reading this, you are well on your way to paving your path to financial independence.


Depending on your lifestyle needs – being single, in a relationship, newly married, married with children – financial independence can be gained in many forms and be designed to suit you at any stage of your life.


Setting your goals

Sure,setting your goals for your next holiday destination, luxury timepiece, sports coupe or electronic toy may be easy. But when it comes to putting aside a much more considerable amount towards a bigger return, it might be a bit more difficult, at first.


To start, pen down your goals. You might discover that it might be more achievable than you initially thought it was. Be realistic and set some big (long-term) and small (short-term) goals. The smaller goals like saving for a deposit or paying off your credit card will be very helpful in supporting your bigger goals like owning a second house or saving for your early retirement.


Working out your goals and knowing your net worth will help in giving you a clearer picture of where you want to smartly place your hard earned money to start the ball rolling towards financial independence.


Keeping the wealth flowing

Building wealth and becoming financially independent takes time and careful planning – but rest assured it will bear fruit in the long run. Simple, every day actions such as cutting your expenses and generating extra passive income via investments, for example, can help you maintain a steady flow in your wealth creation.


With time and the power of compounding, your investment may begin to amount to something bigger. For this to work, you would need to reinvest your earnings and give it time. The more time you give your investments, the more you are able to accelerate the income potential of your original investment, which may help to ease the pressure off you.


Compound interest is what makes financial independence possible despite rising costs of living, inflation, and other costs.


The range of investments is far and wide with many different types to choose from. Broadly speaking, they fit into four asset classes: short term deposits, bonds, property and shares.


As you plan how to grow your wealth and be financially independent, you must also remember to plan to secure the wealth you are building for your family. Writing a Will can be a difficult task to face up to because it’s an acknowledgement that we have a finite time in this world. But having one prepared will ensure that your family will continue to enjoy financial independence if something should happen to you.


A Will lets you take control of what happens to your property and assets after your death, ensuring that your property and assets go to the beneficiaries that you have named in your Will.


“With time and the power of compounding, your investment may begin to amount to something bigger.”


Security through insurance

Some may not know this but insurance is an important part of managing your money matters. It is a way to protect yourself and your family from financial loss if the unexpected happens to the things you own, your health or your ability to earn an income.


The right insurance policy can protect your assets and create peace of mind in case anything does happen. It takes years to rebuild equity. But a good insurance policy provides peace of mind and fewer worries about money.


When you consider getting insurance, you need to weigh the risks of not having the insurance against the costs of buying it. At times like this, insecurities play a big role in purchasing insurance. When managed correctly, insurance increases your financial independence.


Building a nest egg for your children

In today’s economy, knowing that your child will have a better financial and educational future when they are older is something that will ease your mind.


Teaching personal finance at a young age is important. Have your child set aside a certain percentage of the money they receive as early as possible. Since you are paying for their day-to-day needs (home, food, and clothes), saving a percentage of all the money they receive from gifts or part-time work should be easy and simple. 


The percentage that you have set aside will grow over the years through compound interest and when it is time for your child to start college or university there will be no sweat and tears in trying to provide the best education for your child.


Taking up an insurance policy that builds cash value when your child is very young is another good way to start. When they come of age they can decide whether or not to cash it in or keep it to help better protect their own family. 


If you have taken all the right steps and made the right plans, the day your child leaves for college or university will be one the whole family looks forward to. The educational nest egg that you have built up for them to pursue their education overseas can now be made easily available to them no matter where they are through HSBC’s Premier UniKit. Within 10 days after opening a sole or joint HSBC Premier account, both you and your child will have the essential banking tools and can instantly make an unlimited number of free overseas money transfers and manage your accounts from anywhere via online@hsbc. 


Rest assured, wherever your child is in the world, international assistance and rescue is available when required with HSBC Premier.


So, take small steps every day – Rome was not built in a day, neither did Malaysia gain independence overnight. Set your goals, know what you want and work towards it. Write it down, frame it up – whatever it is, let there be a reminder that financial independence is attainable and you are capable of freeing yourself from the anxiety that money troubles can bring forth.


August 2010