With a low-interest-rate environment, it is easy to get a personal loan and credit card offered by the bank if you have a stable job with a minimum yearly income requirement as low as about RM36,000. It provides convenience for people to spend their money first and pay later.  Especially it is helpful to pay the insurance premium, emergency admission to the hospital by pledging your credit card for deposit.

If you are an excellent paymaster to settle your outstanding credit card, most banks will offer you a personal loan as well. The amount provided depends on the affordability of your monthly installment. It can go up to RM150,000 maximum loan amount with an interest rate as low as 3.33% p.a up to 10% p.a. (depending on which bank) with maximum tenure up to seven years without collateral.

Reward ourselves by spending is not too bad after all. We need to strike a balance in life by enjoying our hard earn money such as getting a better gadget, nicer clothes, owning a car, owning a house, starting a family, holidays, etc. But paying for a big-ticket item such as a deposit to pay your property, house renovation, grand wedding reception, an enormous amount of medical bills for your ownself or dependents without insurance coverage, or enrolment for children education study are worrying.

Things can get out of control if the spending beyond the budget when an uncertain event happens, such as the current covid19 pandemic the world experience now.  Pay cuts or loss of a job will lead to mental or emotional stress, affecting the family relationship.    

One solution to solve personal financial stress is to refinance the property to keep cash flow afloat. As many banks offer an attractive restructure mortgage financing with a lower rate than the credit card rate.  Provided the property market value is higher than the current existing mortgage loan. Are these the ultimate solution to solve the personal financial stress problem once and for all?

The answer is YES and NO. 

External Factor

People always focus on external factors like income, assets, business to fix their financial goal desires. The most common one is they want to earn more money and make more money through investment. Look for higher returns with lower risk investment and in a short-term period. Upgrade their lifestyle once they get higher pay, such as stay at a bigger house, eating out at a restaurant, travel, club membership, pets, expensive hobbies, etc. End up as the income increase and the spending increase or borrow more money to sustain the lifestyle.

Spending Habit

In this case, the refinancing method does not work well for those unwilling to change their spending habits. The spending habit circle will repeat, and it is making the personal financial outlook worst. Hence, it will cause the inability to repay the monthly debts repayment sooner or later and live in the dilemma of always running out of money and looking for the following loan to borrow when facing financial difficulty again.   

Define your spending into discretionary expenses, which are the non-essential expenses you can control, and non-discretionary expenses, which are fixed payments. Discretionary expenses such as spending on entertainment, eating out at restaurants, travel, pets, etc. Non-discretionary expenses such as rental, income tax, monthly debts or mortgage payment, medical expenses, groceries, etc.  Cutting down the discretionary expenses, which more to wants instead of need expenses, will improve your cash flow which most matters to you. 

Saving Behavior

Slowly and surely, if you can control your spending, your saving rate will increase.  This saving will build your emergency fund, recommended for three months to one year of your monthly expenses. Life insurance, critical illness, and disability insurance are part of the emergency fund too. If something happens to you, it will provide for those who depend on your income.

Suppose you are on track or fall under this category of the saver.  It will determine your future financial health. 

Invest Based on Risk Profile

The extra money other than the emergency fund needs must be invested to hedge the inflation to achieve future financial goals. Before deciding what kind of investment portfolio vehicle is suitable, understanding your risk profile is very important, like your risk appetite, risk tolerance, and risk capacity.

Risk appetite is referred to the amount of risk that you are willing to take.  Risk tolerance refers to your mental and emotional ability to handle the investment losses impact. Risk capacity refers to your age, wealth, and income, which is the financial risk level that you can conceive.


Once you know well about your financial behavior and be able to control it, as mentioned above. Option to refinance your mortgage loan to leverage on the lower interest rate (currently around 2.90%p.a to 3.20%p.a. for the landed property) payment and grow your money in investment can be considered if you were mainly looking at the time horizon of fifteen, twenty, thirty years period.

Identifying your financial behavior is the most important factor to secure future financial success as it impacts your life financial journey plan. Your belief system, habit, upbringing, culture, experience, and willingness to change and be consistent will make the difference. To have peace of mind without fear of running out of money.

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