How to Achieve Financial Independence in Malaysia

Myra Athena
Date: 28 Aug 2024
Celebrate Merdeka With A New Beginning Towards Financial Independence
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Every 31st August, we celebrate Malaysia’s Independence Day with a deep sense of gratitude for the freedom we enjoy as a nation. However, apart from national freedom, another form of independence is equally important — independence from financial debt.

Regardless of our background or financial situation, the dream of living debt-free is something we all aspire to achieve. So, how can we turn this dream into a reality?

Let’s explore some debt repayment methods that can help us achieve the financial independence we dream of. 

Debt avalanche method - focus on the debt with the highest interest rate

Settle the debt with the highest interest rate first. By focusing on these debts, you can save more on high-interest payments, which helps accelerate the overall debt repayment process. Moreover, consistent payment of these debts will positively affect your CCRIS and CTOS reports which can increase your credit score.

Example: Ali and Mariam, a newlywed couple, have three main debts: a credit card with 18% interest, a car loan with 7% interest, and a student loan with 5% interest. They decided to allocate more on their credit card while making minimum payments on their other two debts. Once the credit card debt is paid off, they will redirect those funds to pay off the car loan faster.

Debt snowball method - start with small debts to spark motivation early on

Pay off the smallest debts first to gain early satisfaction and motivation to tackle larger debts.

Example: Chong has three debts: a personal loan of RM1,000, a student loan of RM5,000, and a car loan of RM10,000. He starts by paying off his RM1,000 personal loan first. Once that loan is settled, Chong uses the same amount of money to pay for his student loan, and then his car loan. These small wins give him the boost to continue working hard to clear his debts while improving his CCRIS record. 

Debt snowflake method - use extra money to tackle debt payments

Use the extra money saved from daily activities to make additional debt payments. Even small amounts can significantly accelerate the repayment of outstanding debts and positively impact your credit record.

Example: Gunalan, a student, saves RM10 daily by bringing food from home instead of buying lunch. Instead of letting that RM10 sit around, he puts it toward his student loan. Even though the amount might not seem much, over time, it makes a big difference, speeding up his loan repayment and giving his credit score a boost.

Debt consolidation - combining debts into a single payment

Combine all your debts into a single new loan with a lower interest rate. By consolidating your debts into one monthly payment, you not only simplify your financial management and reduce stress, but you give yourself more room to plan for a debt-free future.

Example: Maria, a single mother with multiple credit cards and personal loans, chose to consolidate all her debts into one new loan with a lower interest rate. By doing this, Maria only has to make one monthly payment, simplifying her financial management and reducing her stress.

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The next step towards financial independence

Achieving independence from financial debt is a highly valued milestone. By applying these methods, you will move closer to becoming debt-free and, in turn, build long-term financial stability.

Remember, every financial situation is unique. Hence, consult with an EPF Relationship & Advisory (RA) Officer to ensure the steps you take are tailored to your needs. Financial independence is achievable — start your journey toward freedom today!

Get Your Free Professional Consultation from EPF Now!