������Ƶ

Many of us look forward to a point in life when we have the financial resources to enjoy our desired lifestyle without having to work—in other words, achieving financial freedom. In reality, financial freedom remains elusive as there are many potential distractions along the way. This brings us to the Money Attitude Alphabet Soup.

Here are some examples we may adopt in life, in varying degrees:

• YOLO (You Only Live Once): Individuals with a YOLO mindset believe in living for the moment, as the future remains uncertain. It emphasises enjoying and living your best life now. It is akin to the actions of the grasshopper (in comparison to the ant) in the renowned Aesop’s fable. At the end of the day, the YOLO mindset will lead to more current spending, leading to a low personal savings rate.
• FOMO (Fear Of Missing Out): The FOMO attitude drives individuals to compare themselves with their peers to fit in. In this digital era of social media, advertising, and influencer culture, FOMO can increasingly generate social anxiety about being left out and the pressure to “Keep up with the Joneses.” Often, this psychological void can lead to issues of low self-esteem. FOMO can also influence consumers’ purchasing decisions, favouring brands, restaurants and lifestyle activities that align with the group they want to identify with. Many may resort to retail therapy and materialistic purchases to overcome their insecurities (Rippe et al., 2023).
• FIRE (Financial Independence, Retire Early): FIRE campers are willing to live extremely frugal lifestyles to achieve financial independence as early as possible. They would like to take charge of and live life on their own terms as soon as possible. Post retirement, the 4% withdrawal rule will apply to cover living expenses. The FIRE mindset entails making current lifestyle sacrifices with the hope of a better future by taking risks in investments. However, this is easier said than done, and there are no guarantees in investment returns.

The Employees Provident Fund (EPF) has stipulated in the Retirement Income Adequacy Framework that the amounts needed for basic, adequate and enhanced savings are currently RM390,000, RM650,000 and RM1.3 million, respectively. In contrast, the HSBC Quality of Life Report states that affluent Malaysians need an average of USD830,000 or RM3.6 million to retire (HSBC, 2024).  

The stark reality is that Malaysia is projected to become an aged nation by 2040, with the population above the age of 60 accounting for 17.3% (Department of Statistics Malaysia, 2024). It has been reported that about 40% of Malaysians do not have a retirement plan, and only 4% of Malaysians can afford to retire (Kaur, 2024). In December 2024, it was reported that 52% of EPF members below the age of 55 have less than RM10,000 (Hassandarvish, 2024). Without a proper security net infrastructure and individual planning, Malaysians may face a bleak financial future.

There are many things in life that money cannot buy—for example, health, peace of mind, genuine love and relationships, lasting joy (i.e. eudaimonia), and time. However, we need money to sustain our day-to-day lifestyle. Personal financial planning is the process of developing strategies to manage our financial affairs, ensuring we are well-prepared to cope with emergencies in the short term, accumulate wealth over time, and meet our personal life goals. It helps us align our financial needs with our life goals to ensure we have enough to meet them every step of the way. 

Holistic personal financial planning adopts a lifecycle approach that encompasses areas such as cash flow management, determination of affordable debt, tax planning, informed investment decisions, risk management through insurance, wealth distribution, and retirement planning. It addresses issues in the personal lifecycle such as how to initiate a savings plan, prepare for marriage and family life, manage children’s education costs, ensure our loved ones are financially secure after our passing, and work towards building an adequate retirement nest egg. 

We need to start personal financial planning early to leverage the compounding value of money through time via savings and investments. We also need to make trade-offs in our lifestyle choices involving current consumption versus enjoyment in the years to come. If we start saving earlier in life (e.g. in our 20s), we will have fewer family and personal commitments and may be able to take more risks with our investments. Besides, if we fail, we will have time to recuperate. However, if we procrastinate, we will lose out on time, and we may need to prepare more money to achieve our financial goals. If we wait too long, even extra resources will not be enough.

Here are some alternative attitudes on embracing personal financial planning:

• SIRE (Save + Invest -> Retire + Enjoy): Retirement well-being encompasses financial, psychological and social aspects that enhance the overall quality of life. It includes the financial freedom to pursue our desires without being tied down to a traditional job. This involves considering where we will live, what we would like to do, what brings us happiness, and how we will achieve our life goals. As you can see in the SIRE mindset, there is no free lunch. The journey to financial freedom can take time, effort and money. Retirement well-being is the product of the financial planning that precedes it.
• JOMO (Joy of Missing Out): JOMO is about embracing the present and being content with our lives (Fuller, 2018). It is about not worrying over what others say, avoiding comparisons with others, and not allowing background noise to dictate who we should be or what we should desire. JOMO involves embracing an attitude of gratitude by appreciating what we already have. It is an emotionally intelligent remedy to free us from social anxieties and allocate more personal time and effort to pursue what truly matters in life. 
   

Principles and Everyday Practice of Personal Financial Planning, my latest book with ������Ƶ University Press, is a comprehensive money management resource endorsed by the Financial Planning Association of Malaysia. It simplifies personal finance for everyday people and highlights practical examples to consider when making meaningful decisions on the journey to financial freedom. Whether you are a student or simply someone interested in personal finance, this book provides a comprehensive overview of personal finance topics to help you explore your options and guide you on how to improve your financial situation.

Since personal desires, commitments and life goals vary, personal financial planning may need to be tailored to each individual. In other words, there is no one-size-fits-all solution. For this reason, consulting a qualified and licensed financial planner may be necessary. 

References

1. Department of Statistics Malaysia (2024). Population projection. http://www.dosm.gov.my/portal-main/release-content/population-projection-revised-malaysia-2010-2040
2. Fuller, K. (2018). JOMO: The joy of missing out. Psychology Today. https://www.psychologytoday.com/us/blog/happiness-is-state-mind/201807/jomo-the-joy-missing-out
3. Hassandarvish, M. (2024). How much do Malaysians need to retire comfortably? Here’s a complete guide. Malay Mail. https://www.malaymail.com/news/malaysia/2024/12/17/how-much-do-malaysians-need-to-retire-comfortably-heres-a-complete-guide/159854
4. HSBC. (2024). HSBC Quality of life report 2024. https://internationalservices.hsbc.com/content/dam/hsbc/hsbcis/docs/reports/quality-of-life/2024/quality-of-life-2024-report-1009.pdf
5. Kaur, S. (2024, January 1). Poverty after retirement?. Business Times. https://www.nst.com.my/business/corporate/2024/01/996049/poverty-after%C2%A0retirement
6. Rippe, B. C., Smith, B., & Gala, P. (2023). A psychological examination of attachment insecurity, loneliness, and fear of missing out as drivers of retail patronage among emerging adults. International Journal of Consumer Studies, 47,1838–1852.