Roadmap to Financial Freedom [1]

I came across this meaningful article about financial freedom some times back, and decided to share it here. It shows the important of having roadmap to financial freedom in our personal life. This article was published in the Malaysia newspaper, New Sunday Times under "Your Money" section. As it is quite lengthy, so I organize it into three parts.

Source: New Sunday Times, May 3, 2009
Author: Yap Ming Hui, Managing Director of Whitman Independent Advisors Sdn Bhd

A roadmap to financial freedom lets you enjoy clarity of mind and control of your personal finances. As a result, you become the master of your money. Without such a roadmap, you are in the dark as far as personal financial management is concerned. You are always trapped by your money problems. 

You worry that you overspend. You worry that you under-save. You worry that your investment return is too low. You are not sure if you can provide for your children’s tertiary education. You are not sure if your wife can stop working to take care of the family full time. You are not sure if you start your own business or even change jobs to increase your income. And you are not sure when you can retire. You have so many questions about money in your life with no certain and clear answers. In short, your life is always troubled by money worries and concerns.
Without clarity, you end up making a lot of life-shaping decision based on money as the top priority. You look for jobs that give you the highest return, not the job that suits your strengths. You look for investments that give you the highest return, not the investment that fits your risk profile and time horizon. Money, or more money is always the major consideration in your life and it drives your decision-making. In that case, you are not the master of your money – the money is the master of you and your life.

I have a friend, Chris, who has been done very well in business and has prospered all these years. Lately, Chris has been hurting for a house close to his parents’ home. He wants to live nearby so that he can take care of them and they can keep an eye on his children. One day, I asked him how the house-hunting was going.

“The owner of a house two doors away from my parents’ home want RM250,000,” he replied. “He bought the house 10 years ago for RM190,000.”
“Are you taking up the offer?” I asked. Guess what was his answer?
“I think that the price is rather expensive. I will buy only if it’s RM220,000. I believe that the price will drop further if the economy worsens. In the meantime, I can invest money in the stock market to generate more return,” he said.

This is one of many examples of making life decisions where money is the priority. In the first place, Chris is doing well financially. Second, he is not buying the property as an investment. He is buying the property to be near his parents’ home so that he can better care for them.

However, because of the habit of making money control in all his decision-making, Chris can’t help but confuse himself in this matter. His mind is dominated and influenced by the urge for more money. In addition, the house is not that expensive. It has appreciated only 24 per cent over the last 10 years. That’s annualized growth of around 2.8 percent. Yet, through habit, Chris can’t help but put financial gain at the centre of his decision-making. Instead of thinking whether the house was suitable for his purpose, he jumped straight into money consideration.

This is one example of what I mean by letting our money run out lives. A roadmap to financial freedom can help you put your money into its proper context, which is to support and serve your life. A roadmap to financial freedom serves to remind you that money is only a means to attain the end. It is never, and should never be, the end of your life. From there, you can command how you will make your money work to support the good life you want and not the other way round.