Five important aspects of financial foundation

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When it comes to starting one’s own financial journey, many people often ask the following questions. How much should I save? How much should I invest? What to invest in? Crypto? Stocks? Options? And yada yada yada…

While such questions are not wrong per se, it misses one critical fundamental aspect, which is that of financial foundation.

Put simply, the term financial foundation refers to the bedrock and footing that would shape and support one’s financial journey. This typically consists of physical actions such as investing, saving and getting adequate insurance.

However, for this post, I will instead be focusing on the mental side of things when it comes to personal finance. More specifically, good financial mindsets and habits that one should adopt in their own financial journey.

Thus, if you are just starting out or already in the midst of managing and growing your own wealth, I hope this post would be useful either as a starting point or a reminder for yourself. Without further ado, these are five key fundamental aspects I feel that everyone should be clear with when it comes to managing your own finance.

1) Know the difference between assets and liabilities

In the realm of financial planning, assets and liabilities hold a more complex meaning than just whether they hold positive or negative economic value. Personally, I see assets as things that appreciate in value, provide positive cash flow and are rather liquid (meaning they can be monetised quickly) in nature. Cash flow from assets has to beat the inflation rate too, otherwise, I would consider them as ‘liabilities’ instead.

Expectedly, liabilities are the direct opposite, they depreciate in value and generate negative cash flow. If you are not careful, liabilities can cause a huge financial strain too, a state you definitely do not want to be in.

When evaluated in such terms, some common examples of assets are as follows:

  • Stocks/REITs/ETFs
  • Commodities
  • Bonds (if the yield is more than 3%)
  • Cryptocurrencies (if you buy the good projects)
    • Decentralised finance products
    • Non-fungible tokens (NFTs)

On the other hand, these are some common liabilities:

  • Vehicle ownership
  • Personal loans
  • Credit card debt
  • Endowment plans
  • Most luxury items

From the above list, you would realise that I left out property ownership. This is due to the fact that owning a property can either be an asset or a liability.

If you are buying a house to stay in with little to no intention of selling, it is technically a liability as you are paying for the mortgage without gaining any financial value. Property only becomes an asset if you are receiving a rent that covers your miscellaneous and mortgage costs or when your future selling price is able to cover the associated costs of owning the property.

Now that you know what assets and liabilities are, make sure you prioritise accordingly to grow your wealth.

2) Prioritising needs rather than wants

Besides knowing what makes your wealth grow, it is also important to be in control of your spending. After all, it is no use if your spending always exceeds how fast your wealth grows.

So how do you be in control of your spending? Well, by knowing what are your needs and wants of course.

Needs are basically your daily necessity expenses, such as utilities, food and groceries etc. If you are running a business or side hustle, needs can also be materials that you need to sustain or start the business.

On the other hand, wants are unnecessary stuff that you satisfy or treat yourself with. At times wants can be more expensive versions of needs, such as an expensive phone, fine dining or that expensive coffee you buy on a daily basis. I would also classify convenience spendings such as private hire rides and food deliveries as wants too.


While it is not wrong to spend on wants from time to time, it becomes an issue when it turns habitual and you mistake your wants as needs. For example, some people might treat that daily breakfast at Starbucks as a need even though you can spend way lesser (and make it healthier) by simply having breakfast at home. Another classic example is to always purchase the new iPhone whenever it launches even if your current phone is working perfectly fine. Thus, to be more financially prudent, always ask yourself if you really need that thing which you are going to purchase.

By mixing up your wants and needs, you are literally throwing away money that could potentially make you more money. Hence, if you want to accelerate your wealth creation, be clear of what your needs and wants are control your spending accordingly.

3) Do not be a cash hoarder

When we were young, most of our parents will teach us to save money whenever we can. This is correct and fundamentally important if you want to build your wealth since you do need some capital to start investing. However, it becomes a problem if you are just simply saving and not putting that money to work.


By just purely saving your money, you are technically losing money since the interest rate of banks would be lower or equivalent to the inflation rate. Hence, while saving is important, it is even more crucial to invest if you want to increase your wealth over the long term.

To get out of a pure saving mindset, you can perhaps start by dollar-cost-averaging (DCA) into an ETF that tracks the S&P 500, Hang Seng Index or STI. Once you are more comfortable with market volatility, you can then transit into DCAing into individual stocks. Of course, please do your research beforehand.

Lastly, if you are purely saving in anticipation of a major market crash, please do not do that as you could be missing out on huge returns. Instead, you might want to invest either regularly every month or periodically during slight market corrections. After all, it is not timing the market that is important but rather time in the market.

4) Differentiating good and bad debt

At its core, debt is a double-edged sword. Use it right and it can accelerate your wealth creation while using it haphazardly can potentially lead you to financial ruin. While many of us are aware of the latter, the former is not talked about much. This is where the concept of good debt comes in.

Simply put, good debt is debt associated with the purchase of assets. Doing so allows one to extrapolate the returns from the invested asset. Another aspect of good debt is that it enables one to purchase an asset otherwise unattainable without debt. Of course, this is assuming that the cost of debt is lesser than the return itself.

A good example of this is when debt is used to purchase a property for investment. However, it should be noted that the mortgage is only considered a good debt when the monthly rental exceeds the associated monthly repayments and maintenance fees.

On the other side of things, bad debt is when debt is utilised to purchase wants that are not within your reach. Classic examples are vehicle loans or using credit card/personal loans to pay for lavish spendings.

As a whole, only utilise debt if you are financially disciplined and confident that your investment return can more than ‘pay’ for the debt. Otherwise, you would be better off just using what you have or finding ways to increase your income.

5) Invest in your health too

In the pursuit of wealth, the aspect of being healthy is often overlooked. This is not really surprising given that money is often considered to be ‘sexier’ than being healthy. However, I would argue that being healthy and building wealth actually go hand in hand.

Think about it, what is the use of being wealthy if your health is not the best? Would it then not be stupid that all the wealth you had created is channelled to your medical needs? Furthermore, you also have to be healthy to actually enjoy the fruits of your labour in the latter years of your life.

With that in mind, I thus feel that everyone should invest the time and effort in having an active and healthy lifestyle. This is doubly important when many of us in modern societies are leading rather sedentary lifestyles. By being active and watch what goes into our body, we can significantly reduce the rate of muscle degeneration and weight gain. This also results in you being in a better shape to perform your everyday activities.

Besides physical health, also invest time in your mental health. This means taking a break every now and then to alleviate stress and prevent burnout. Doing work that you find fulfilling also greatly helps in the long run.

Remember, each of us only has one human body to live with, so it is best that we maintain it in the best shape possible. Thus, apply the same vigour in building your wealth towards leading a healthy lifestyle. If you can merge both together that would definitely be the best way forward.


So, there it is, the five critical aspects of financial foundation that I feel everyone should be aware of. Although I cannot guarantee that you would be rich, I can assure you that you would lead a comfortable life.

What are some other aspects of financial foundation you find essential? Let me know in the comments below! Also, if you are looking at what you should know before investing, do check out this post.

Till the next post, invest and manage your money safely and rationally.

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