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Starting from Scratch in Financial Management: Get Out of Credit Card Debt and Achieve Financial Freedom

The Importance of Financial Management: Why Learn It?

Financial management is not just about handling money—it is the key to taking control of your life. Many people think financial management is only for the wealthy, but in reality, no matter your income level, managing your finances can help you plan for a better future. Here are three core values of financial management:

1.1 It Helps You Achieve Financial Goals

Whether it’s buying a home, getting married, retiring, or traveling the world, all these goals require money. Through financial planning, you can break big goals into smaller steps and achieve them gradually. For example, the average housing price in Hong Kong is about HK$15,000 per square foot. If you want to buy a 500-square-foot flat, the total cost would be around HK$7.5 million. With proper saving and investment plans, you can accumulate this amount step by step.

1.2 It Improves Quality of Life

Financial management is not just about saving money—it’s about making your money work for you. With proper budgeting and investments, you can cut unnecessary expenses while increasing passive income. For instance, saving HK$2,000 per month for investment at an annual return rate of 5% could grow into over HK$300,000 in 10 years. This money could be used for education, travel, or lifestyle improvements.

1.3 It Prevents Financial Crises

Life is full of uncertainties—job loss, illness, or accidents can happen anytime. According to Hong Kong’s Census and Statistics Department, about 30% of Hongkongers do not have enough savings to cover three months of living expenses. By managing your finances well, you can build an emergency fund to avoid falling into debt. For example, setting aside six months of living expenses (about HK$100,000) can help you weather unexpected challenges.

Building the Right Financial Mindset

The first step in financial management is developing the right mindset. Many people get into trouble because they lack proper financial knowledge—such as over-relying on credit cards and accumulating debt. Here are three key steps:

2.1 Understand Your Financial Situation: Income, Expenses, Assets, and Liabilities

You should clearly know how much you earn, spend, and owe each month. Using a table can help:

Item	Amount (HK$)
Monthly Income	30,000
Monthly Expenses	25,000
Credit Card Debt	50,000

By tracking this, you can identify problems, such as overspending or excessive debt.

2.2 Set Clear Financial Goals: Short, Medium, and Long Term

Goals should be specific and measurable. For example:

Short term (within 1 year): Pay off HK$50,000 in credit card debt
Medium term (1–5 years): Save HK$500,000 for a home down payment
Long term (over 5 years): Accumulate HK$5 million for retirement

2.3 Create a Budget to Control Spending

Budgeting is a core financial tool. The "50-30-20" rule is recommended:

50% for necessities (rent, food)
30% for discretionary spending (entertainment, travel)
20% for savings and investments

Practical Steps to Get Out of Credit Card Debt

Credit card debt is a financial burden for many, especially with Hong Kong’s average credit card interest rate reaching 35%. Here are three practical steps:

3.1 Clear Debt: Create a Repayment Plan to Reduce Interest Costs

Prioritize paying off the highest interest debt first. For example:

Credit Card	Amount Owed (HK$)	Interest Rate
Card A	20,000	35%
Card B	10,000	25%

Pay off Card A first since it has the higher interest rate. Consider debt restructuring or low-interest loans to reduce your interest burden.

3.2 Avoid New Debt: Control Spending and Build Good Habits

Many debt problems come from impulsive spending. Suggestions:

Ask yourself before buying: “Do I need this, or do I just want it?”
Use cash or debit cards to avoid overdrawing on credit cards
Delete shopping apps or unsubscribe from promotional emails

3.3 Increase Income: Look for Side Jobs or Freelance Work

Besides cutting expenses, increasing income is equally important. In Hong Kong, part-time opportunities include:

Online tutoring (HK$200–500 per hour)
Freelance work (design, writing, etc.)
Weekend part-time jobs (retail, food service)

Essential Financial Tools

Financial management requires tools. Here are three essentials:

4.1 Savings: Build an Emergency Fund

An emergency fund should cover six months of expenses. If your monthly expenses are HK$15,000, you should save HK$90,000. Open a highly liquid savings account for easy access.