Moving away from the financial rat race
Nadzir Mansor
Helping Professionals Nearing Retirement Build Lasting Wealth. Licensed CMSRL & FAR.
Continuation of the first article here: https://lnkd.in/g2SzycpG
The North is the opposite of The South, where he knows he doesn't have to do reckless action with his money in order to achieve his unique financial goals.
Why do we say it's unique?
Because every people have their own perspective in achieving financial freedom, be it getting a handsome passive income for the rest of their life, free of debt, etc.
In his book, Yap Ming Hui define financial freedom as:
"An optimum financial position whereby your wealth is optimised to match your optimum financial needs and wants."
Yap Ming Hui, Roadmap To Financial Freedom
The North understands that his financial condition is fluid and dynamic in the sense that every life change could impact his wealth, but with holistic management, he can ride with the tide, with peace of mind. The North simply has three zones to achieve its financial freedom peacefully:
THE NORTH
Safety Zone
Safety Zone is a little bit different from the Comfort Zone as I shared in the previous article. While Comfort Zone defines your money as lazing around, Safety Zone defines your money as a safeguard.
Just like a bunker.
A bunker is a "defensive military fortification designed to protect people and valued materials from falling bombs or other attacks".
This means to say, your money bunker or cash reserves must be sufficient enough to cover your living expenses, children's tertiary education, and any essential needs for example going for Hajj, additional medical funding that's not covered in your insurance/takaful policy etc.
Most articles out there mentioned having at least 6 months of cash reserves but in this period of time, 12 months is strongly recommended to hover during this global recession. For a retiree or pre-retired, 36 months is a good benchmark as your money bunker.
Why do we need that?
A client of mine just got retrenched but thankfully she got excess money of RM1.5M in her EPF, so she's eligible to cash out RM 500K from that and I recommended her to put it in liquid instruments like Tabung Haji, ASB, or money market to cover her total cash reserves.
As she went to her bank to move her money, she's being bombarded by her relationship manager to invest in a structured global equity fund, to get a higher return.
Question is: what if she invested there without prioritizing her cash reserves first, then suddenly 3 months later the market drops by 40%?
领英推荐
Won't it jeopardize her money and mind?
Now, when we have sufficient cash reserves, then we can move to the second zone.
Optimal Zone
This is where your money works efficiently for you. It is more certain, holistic, and compounded in the long run without taking unnecessary risk.
Human by nature loves excitement and thrills in their life. But it doesn't mean that you have to sacrifice your life just for the sake of getting higher returns.
Having said that, to be in this zone effectively you need a holistic financial roadmap that defines:
"Manage your money in a way that helps you sleep at night."
Morgen Housel, The Psychology of Money
700% Zone
When we have more money, more wealth, then it's a good chance our money can do good for us.
It's not wrong to yearn and pray for more wealth so that we could make a good cause to this world, by paying zakah, giving sadaqah, and contributing waqf.
Because Allah promises in the Quran:
"The parable of those who spend their substance in the way of God is that of a grain of corn: it grows seven ears, and each ear has a hundred grains. God gives manifold increase to whom He pleases: And God cares for all and He knows all things"
(Quran 2: 261)
Give more, then in return, Allah will provide us with more wealth not just in the form of monetary, it could be a peaceful life, a loving family, good health, sustainable jobs or businesses, etc.
In summary, there are three zones in The North that you should be focusing on to make your life more easier:
In need to recalibrate your Money Zone effectively? Get a free one-hour consultation HERE