Guide: 7 Steps to Achieve Financial Freedom in Malaysia

Hey, you. You want to achieve financial freedom in Malaysia, but don’t know how. You may not even know what that entails. Financial freedom is like one of those meaningless phrases, like ‘paradigm shift’.

Let me help.

Earlier in my personal finance journey, I came across Dave Ramsey’s 7 Baby Steps to Financial Freedom, and the information helped me make sense of it all. It gave me clarity, it gave me focus, it made the process of achieving financial freedom look less daunting.

financial freedom in malaysia

financial freedom in malaysia

In this article, I’d like to give you my own version of 7 Baby Steps. Call it Suraya’s 7 Baby Steps to Financial Freedom in Malaysia. The original version is already good (see above pic), but what I’m doing here is tweaking it so that (1) it’s more relevant for Malaysians, and (2) it suits more life aspirations.

Use these steps to guide your personal finance journey. Some of you may be at Step 1, some of you at Step 5. Some of you may find that you’re doing Step 4 when you should really do Step 2 first.

Obviously, do whatever is best in your situation, but if you feel overwhelmed, it’s not a bad idea to follow these 7 steps to help you decide on your immediate next actions.

Let’s go.

Step 1 – Have RM1000 in emergency fund

Estimated time: A few weeks to a few months

In this step, your priority is to have some sort of financial buffer against life’s unexpected expenses.

If you’re starting your journey here, it’s okay to suffer for a little bit, while you build up your emergency fund. Some examples include:

  • Eat instant noodles to save money
  • Take the cheapest possible option to go to work
  • Reduce your rent by sharing living spaces with housemate(s)/roommate(s)
  • Take up low-paying jobs and work without rest

Yes, those situations are not ideal, but having no emergency savings whatsover makes you extremely vulnerable, and those sacrifices is still the lesser of two evils.

Whatever you choose to do to have at least RM1000 in emergency fund (more if you can, but that’s the minimum I feel), know that it’s temporary.

Once you hit that amount, you don’t have to be too strict on yourself. Don’t sacrifice your physical and mental health for too long, that’s not what I’m advocating here and that’s not worth it at all.

Step 2 – Pay off debt

Estimated time: a few months to a few years

In Malaysian context, two of the most common bad debt would be personal loans and credit card debts. If you have those, yeah don’t wait to pay them off, do them as soon as you completed Step 1.

You can use the Debt Snowball method to pay them off, another great financial tip from Dave Ramsey. This is something I’ve covered before in the Explaining Snowball Method, The Best Way to Pay Off Debt article so do check it out if you’re doing this step.

You’re not alone in this. Lots of Malaysians are on the debt-free journey. Lots of people post their updates and progress on instagram under the hashtag #debtfreemalaysia

financial freedom in malaysia 3

A lot of people focus on (1) cutting back on expenses and (2) increasing income in order to get out of bad debt faster. They also avoid, by hook or by crook, accumulating more debt.

Here are some articles that may help:

It is not uncommon for people to start Step 1 all over again, due to bad luck. Financial emergencies happen. Dust yourself off and do it again.

Step 3 – Build up 3-6 months of emergency savings

Estimated time: A few months to a few years

Now that you’ve got your high-interest debt paid off, your focus is to grow your financial buffer or savings. That’s 3-6 months of monthly expenses, not 3-6 months of monthly income. That needs to be said as some people spend more than what they bring in.

This step, you can do at your own pace, you’re no longer racing the clock. Fast is good, but slow is fine too. Slow progress is better than no progress.

By this step, many people have exhausted most money-saving options that work for them/their family, so the only way forward is to earn more money.

The fastest way to earn more money for most people is by earning higher salaries – here’s how to get that. Or just browse around my articles about earning money for ideas/step-by-step guides.

The money, in my humble opinion, should be kept at places that are easy enough, yet hard enough to access. Bonus if the money generates interest too. Here are some good options to put your emergency money – 5 Best Places to Save Money in Malaysia, Ranked

Step 4 – Invest your money

Estimated time: lifelong, up until retirement (If you want to retire faster, find your FI/RE number)

Now, finally, we have arrived at the investment part. If you’re efficient, you’re already investing at Step 3, by doubling your savings-earmarked accounts as investments. But if not, here are all investment-related articles that I’ve written for you to binge-read. It’s a very big topic.

Whatever you do, do NOT skip Step 1 or 2 to get here!

For some of us, Step 4 requires the least actions. All you have to do is set up automatic deduction systems into the investment vehicle of your choice – weekly, monthly, quarterly, whatever – and your investment is set for life.

(EPF deductions technically counts as a set-and-forget system but please have a couple more investments to be safe. Retirement is kinda expensive)

If it turns out you enjoy investments that require more research, like stocks investing or things like that, then go on ahead too.

Step 5 – Save for children’s college / another big life goal, &

Step 6 – Pay off house / another big life goal

Estimated time: lifelong, up until you hit your goals

Okay! Here’s where my tweak comes in. In Dave Ramsey’s original Baby Steps, he very clearly placed saving money for children’s education and paying off your house mortgage as necessary steps. And it is, for some of us.

But here’s the thing –

  • Malaysia’s education system is WAY LESS PREDATORY than the US’s education system. That’s not a blanket statement, but generally true
  • Not everyone can afford to buy a house in Malaysia, given how the property market is (over)priced and our salaries are not increasing and all

Therefore, in Steps 5 and 6, you can choose your own life goals. Make it saving up for your children’s education (you can use Skim Simpanan Pendidikan Nasional (SSPN-i)), make it paying off your house, or make it anything you want, any life goals that are meaningful to you.

Some of you may have ‘have enough money to start own business’ as a life goal, that’s cool. Others may decide on affording a once-in-a-lifetime adventure. That’s cool too.

Don’t know your life goals yet? That’s okay. You don’t have to have it all figured out yet, and even so it’s okay to change your mind later. I talked a bit about this in my [Personal] Figuring Out My Next Life Goal article.

(And lol you can even make your life goal, ‘save enough money to take 1 year off to travel around the world to figure out your life goal’. What’s stopping you from doing that? No one!)

Step 7 – Give back

Estimated time: lifelong, up until your time to go

Step 7 is giving back. THIS DOESN’T MEAN YOU SHOULD AVOID MAKING DONATIONS UNTIL YOU REACH THIS STEP!!

Perhaps don’t do it while you’re still saving up for emergency funds (Step 1), but go on ahead from Step 2 onwards. Please do give freely to people and organisations and causes you care about, and for Muslims, may I remind you that zakat is one of the five pillars of Islam.

As I understand it, giving back in Step 7 means not hoarding wealth and contributing to wealth inequality.

You may choose to expand your business and hire more people, paying them comfortable salaries. That’s a way to give back.

You may make regular contributions to a women’s shelter, or a pet adoption society. That’s a way to give back.

You can be an angel investor and fund businesses. That’s a way to give back.

Use your money and wealth to enable others. As the saying goes, you can’t take it with you when you go :/

Achieving Financial Freedom in Malaysia

I’m going to be hella realistic. Not everyone can achieve financial freedom in Malaysia. Some of you may get stuck at different steps. Some of you may have exceptionally bad luck in life and have to restart the journey over and over again.

Still, with this information you at least have a fighting chance, and that’s all we can hope for at this point, right?

(Maybe its because I just watched Parasite, so my worldview is a bit bleak right now)

Let me know if you have questions about the 7 baby steps to financial freedom above. Does it help you to focus on your next immediate action(s)? Which step are you at now? Let me know in the comments section!

Author

9 comments

  1. Indeed Dave Ramsey Baby Steps are simple yet proven guide in planning your own personal/family finance. My personal finance improved drastically after I discover it.

    Currently I am at Baby Step 4&5.

    Currently reading The Barefoot Investor by Scott Pape, an Australian version of Dave Ramsey’s Baby Steps. Found the book in airport bookstore in Australia. It introduces
    The 8 Barefoot Steps.

    1. Have to admit, Barefoot Steps sound *hella* Australian

      I’ll look around for a copy, am intrigued 🙂 Thanks for the book recommendation Nizam. All the best in your journey!

  2. Very useful post. This is my first time i visit here. I found so many interesting stuff in your blog especially its discussion. Really its great article.

    1. Thanks, Johnson! Come again and tell your friends about RoR, yeah? I depend mostly on word-of-mouth marketing, ad money is expensive lol

  3. I’ve heard so many good things about the Dave Ramsey’s method but it gives me anxiety to pay off my debt with only RM1k in my bank account, which makes me going straight to Baby Step 3. How eh?

    1. If RM1k in emergency funds gives you anxiety during debt-paying journey, then make it RM2k or any other amount that makes you feel safe. Not too big of an amount though – the slower you pay off debt, the more you pay in interest!

  4. Hi Suraya, I been reading your post especially this Dave Ramsey steps. I’ve been collecting gold bars since it’s easier to keep. Would it be okay if I imply the emergency 1k cash in gold bar form? how bout the 3 months salary savings in gold bars too?

    What is your opinion about gold savings?

    thanks!

  5. alright. noted your opinion here. quite true for the fact that u need to keep cash handy when in need. others could be in other easy liquid savings.

    thanks!

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