Checklist: Financial Independence

Having financial independence is an outstanding achievement in life. It is the dream of many people because no one wants to live burdened with debt or have to work from morning to night to support themselves and their families.

The definition of financial independence is undoubtedly different for each individual, but what is certain is that it does not mean you are a millionaire or a tycoon; instead, it is more about having a comfortable life without any extreme financial pressure.

Here in Malaysia, some say that if you can take a squid menu at a Mamak restaurant without blinking an eye, you have already reached the level of those with financial freedom.

According to Investopedia.com, financial independence means you have enough savings, investments, and cash to finance the lifestyle you want for yourself and your family.

According to Nasdaq.com, financial independence is a phase where you have complete control over your finances, which allows you to make choices based on your desires and goals without having to overthink about the costs that need to be incurred.

This means you have enough income or savings to cover expenses, giving you the freedom to live the life you want.

Achieving financial freedom is closely related to how you manage your money. Spending beyond your means and accumulating debt are the two greatest hindrances in your journey to achieve financial independence.

Some of us face the harsh reality that when a significant crisis occurs in life, such as a natural disaster or epidemic, our lives are destroyed, and all that is visible is a leak in our financial safety nets.

Do you think that you already achieved financial freedom or are on the right track to achieve it? Let's see if your current financial situation meets the following criteria or if you are already heading towards attaining financial freedom, which is the dream of many.

1. Debt-free or only with manageable debt

You don't have outstanding high-interest debt such as credit cards, personal loans, or even worse, loans with Along or illegal cetis.

You have no problem paying the monthly installments for all your loans, such as housing and car loans, and for credit cards, you can always pay off the debt within an interest-free period.

You know that you can only take a loan for something that adds value, not to pay to satisfy your wants.

2. Emergency Fund

You already have an emergency fund that exceeds 6 months of your current salary as a safety net if something unexpected happens.

You understand the meaning of emergency and refrain from withdrawing the money from the fund for something that is not necessary.

Therefore, the emergency fund you invest Amanah Saham Bumiputera (ASB) and bank fixed deposits have the opportunity to continue to grow. What is more critical for you is having a safety net that is strong enough in case the unexpected happens.

3. Comfortable Life

You have enough passive income to finance the lifestyle you envision for yourself and your family. You can sleep peacefully at night as you are confident that your income is more than enough to pay for the bill and your future needs.

4. Retirement Fund

You keep monthly contributions to your retirement fund, which shows positive growth. You know that retirement is coming soon, and you want to prepare to enjoy a comfortable life after retirement.

As such, you happily let your money keep growing in EPF, as you know the importance of having a retirement fund big enough to cover your lifestyle after retirement.

5. Own a Home

It doesn't matter the size of your house, but what is more important is your ability to own a place called home. As your level of debt is manageable, you certainly do not have any problem paying the monthly installment.

You can breathe a sigh of relief as you are sure you can settle the housing loan before you retire at the age of 60. For now, you have already insured your house for any unfortunate event.

6. Realizing Dreams

You can now go on vacation, travel, or buy the things you want without going into debt or tightening your belt. The ability to purchase things that once were considered a want is a significant achievement which you should be proud of.

7. Peace of mind

Most importantly, you have peace of mind because you feel safe and stress-free when talking or thinking about your current financial situation.

8. Financial Literacy

You have a basic understanding of how you can manage your money wisely. You understand the basic concepts of interest rate, risk and return, and loan and investment to make a simple yet profitable and wise decision regarding money management.

Do you meet the above criteria, or are you on your way toward achieving financial freedom? Either way, managing money requires discipline, commitment, and continuous effort to ensure we will not suffer losses in a way we never imagined. It is attainable with proper planning, knowledge, and wise implementation strategy.

Whatever your current situation is, remember that by managing your money wisely, avoiding unnecessary debt, living below or within your means, and investing, you are one step closer to achieving financial freedom.