Achieve financial freedom

MOTIVATIONAL guru, life coach, and self-help author Anthony Robbins has released yet another bestseller, this time exploring the area of financial freedom.

For those of you unfamiliar with his work, Robbins, who has inspired more than 50 million people globally, is a world prominent speaker and coach.

His list of personal coaching clientele ranges from the world’s finest athletes, entertainers, Fortune 500 CEOs, and even former US president Bill Clinton.

During the global financial meltdown in 2008, Robbins witnessed a mass number of people losing their homes and entire net worth.

Having experienced poverty himself, Robbins was driven to find an answer, to teach others in the simplest steps on how to get out of these troubles and be financially free.

In his book Money: Master The Game, Robbins picks on the minds of the world’s most brilliant financial minds such as Warren Buffett, Ray Dalio, John C. Bogle, Marc Faber, Sir John Templeton – of whom are worth billions – to get insights into achieving financial freedom.

Many of us have an innate fear of another financial crisis looming around the corner. Yes, the possibility is there, however, fear alone isn’t the solution.

Here, I’ve highlighted four of Robbins’ seven-step financial freedom blueprint, and will explore on how it can impact you.

1. You cannot earn your way to financial freedom

Robbins outlines the hard truth – if you want to achieve financial freedom, earning your way through a nine to five job isn’t going to cut it.

Some of the world’s biggest talents in the sports and entertainment industry such as Mike Tyson, M.C. Hammer, and Michael Jackson – went from being worth millions, to being broke, because they failed to save and optimise their money.

I’ve always been an advocate of money optimisation. To reinforce Robbin’s standpoint, I would like to draw reference to the Money Matrix in my 2012 book entitled Set Yourself Free.

The money matrix summarises the difference between money making (earning power) only, money optimisation only, and the power of combining the two to reach financial success.

If you rely only on your ability to make money solely through earning active income, you may be able to progress from poor to middle class to rich when your money making ability increases.

However, the pitfall to this strategy is that without money optimisation, there is no way you can get out of the rat race and achieve financial freedom.

Once the work stops, the money stops. There is no buildup of reserves to help you to sustain your lifestyle.

As Robbins puts it, trading your time for money is about the worst trade you can make. “Why? You can always get more money, but you can’t get more time.”

In order to achieve financial freedom, you cannot solely rely on earning power – you need to make that earned income work for you.

2. Know the price of your financial freedom

What does financial freedom mean to you? This is what you need to work out if you are serious (and you should be) about attaining financial freedom.

Many of us fail to set a proper financial goal. When we set unclear or unrealistic goals, we won’t feel certain that we can achieve them; and certainty is a powerful motivational tool to achieving any goal, financial or not.

How do you calculate the price of your financial freedom? While Robbins touches on some aspects of how to put together a financial target, the idea could use a little more expansion.

In comparison to the simple retirement calculation in Robbin’s book, we must use a holistic approach to look at financial freedom. A holistic approach looks at all your financial needs and wants in your lifetime at the same time and shows you if you have enough financial resources to meet them all.

For this, I’ve developed a tool known as The Roadmap to Financial Freedom to help the middle-income class map out their personalised journey to financial freedom. By using the Roadmap, you won’t get lost. Or take a detour.

Once you have your price tag for financial freedom, only then will you be able to work out a measurable and actionable plan, and be certain of reaching the goal.

3. Diversify, Diversify, Diversify

When it comes to investment, I cannot emphasise enough how important diversification is.

You should never ever put all your eggs in one basket. Allocate your assets throughout different areas of investments – i.e. cash, bonds, property, commodities, stocks, foreign currencies, etc in different part of the world – in specific proportions or ratios according to your current goals, financial situation and your tolerance for risk.

On a related note, now that our ringgit has weakened, I have been facing many questions from clients and peers: Should I diversify into different currencies now?

My response is always the same: If you keep searching for the “right” time to invest, you’ll never really capitalise from it.

On the other hand, if you invest and diversify right from the start, you would not have to worry about timing and predicting the market.

4. Know what you are paying for

When optimising your money, it is crucial for you to know where your money is going, and for what purpose.

In Malaysia, when buying into a unit trust fund, the sales charges can go as high as 5.5%. This means if you have put in RM100,000, you only end up having RM94,500 actually invested in the fund.

While you may think that a few per cent here and there is negligible, when it is compounded over time, the effect that it has on your ROI can be phenomenal. It could well be the determinant between you retiring at ease, or retiring with a strict budget.

Robbins highlights this in his book. Many believe that their brokers or agents have their best interest at heart and expect that they will get good returns for their investment. But unless they are independent advisers, they either have a sales quota to fulfill, or a commission to benefit from – which renders them biased. Therefore, Robbins believes that the fee-paying for “tied advisers”, are non-value adding and not justified.

To receive conflict-free advice, he suggests that we must align with an independent financial adviser (IFA) with fiduciary duty. A fiduciary IFA is the financial adviser who gives unbiased advice, hence value-adding.

For some IFAs, the advisory fee that you pay is based on the value of your assets. This means that if your assets grow, the fee would grow too, thus providing the IFA with the motivation to provide the best holistic solution.

A good IFA does everything from draw up a holistic financial plan, study your current financial situation, identify financial loopholes, develop a holistic action plan, and coordinate your way to financial freedom.

Final thoughts

Given today’s increasing costs, we need now more than ever, to set in motion the mechanics to ensure our financial success. As Robbins puts it, “You either master money, or, on some level, money masters you!”

Do not wait for the next disaster to hit. Rethink your financial goals, optimise your money through investment, diversify your assets, and scrutinise any hidden costs that you have overlooked. With this, I wish you all the best on your journey to financial freedom!

Correction for “Is private equity unit trust fund for you?” published in The Star on Feb 21, 2015...the private equity unit trust fund referred in the article is intended to be a wholesale fund available only to sophisticated investors as specified in Part 1, Schedule 6 & 7 of the Capital Markets & Services Act which include individuals whose total net personal assets exceed RM3mil (excluding value of primary residence) and institutional investors.

> Yap Ming Hui ([e-mail]) is a bestselling author, TV personality, columnist and coach on money optimization. He heads Whitman Independent Advisors, a licensed independent financial advisory firm which has helped people to optimise their wealth and achieve financial freedom since 2000.