[The ABCs of Financial Management] A complete guide to the basics of financial management that even beginners can understand | Editor: Li Zisheng


💰 A complete guide to financial management basics that even beginners can understand! A must-learn wealth management guide for Hong Kong people📚✨

Dear readers, today I'm bringing you a super detailed guide to financial management! 💪 Whether you're a freshman or someone looking to refresh your finances, this article will help you! According to the latest data from the Investment Commission (IFC), while financial knowledge among Hong Kong adults has improved, their financial management behavior scores have declined, highlighting the "knowing is easier said than done" problem. Furthermore, while the average monthly savings in Hong Kong has reached a record high of HK$9,800, facing inflationary pressures and retirement planning needs, more comprehensive financial management knowledge is still needed.

631 Financial Management Rule Allocation Chart, showing how income should be allocated to living expenses, savings and investment, and risk management

🌟 Chapter 1: Basic Financial Management Concepts - Establishing a Correct View of Money

💡 What is financial management? Why does everyone need it?

First, I'd like to explain that financial management is not the same as investing! Many people think financial management is just about buying stocks and mutual funds. In reality, financial management is about managing your money, including income management, spending control, risk planning, and investment growth.

According to the IFRC, financial management is about helping you develop and implement a feasible financial plan to achieve your goals. Simply put, financial management is about helping you:

🎯 Achieve life goals: Buying a house, getting married, retiring, children’s education, etc.
🛡️ Dealing with emergencies: Unemployment, illness, unexpected expenses
💰 Asset preservation and appreciation: Fight inflation and increase wealth
🔒 Reduce financial risks: Diversify investments through insurance

📊 Hong Kong people's current financial situation

Let me share some data to let you know about the financial status of Hong Kong people:

Savings habits:

  • The average monthly savings of Hong Kong residents is HK$9,800, an increase of nearly 10% compared to last year.

  • 67% of respondents have a saving habit, with the 30-39 age group performing best

  • Nearly 80% of people still use bank deposits as their main form of savings

Facing challenges:

  • Hong Kong's housing price-to-income ratio is 14.4 times, the most unaffordable in the world for 15 consecutive years

  • The inflation rate reached 2%, and prices have risen by 21.5% over the past 10 years.

  • Pre-retirees need HK$5.45 million to feel secure

🧠 Three basic financial management concepts

Concept 1: Saving money is more important than increasing it <br>Many people think financial management is all about making more money, but controlling your spending is actually even more important! If you don't even know how you spend your money, no matter how much you earn, it's all wasted.

Concept 2: Time is investment's best friend .<br>Compound interest takes time to kick in. Assuming a monthly investment of HK$4,000 with an annual return of 6%, in 30 years that would amount to HK$4.25 million!

Concept three: Risk is proportional to return . High returns are inevitably accompanied by high risks. New investors should choose suitable investment tools based on their risk tolerance.

📋 Chapter 2: Practical Financial Planning - Developing Your Financial Blueprint

🎯 Step 1: Assess your financial situation

Before you start managing your finances, you should first understand your financial situation, including:

Income:

  • Main job income

  • Part-time or side job income

  • Return on investment income

  • Other passive income

Expenditure:

  • Fixed expenses: rent, insurance, loan payments

  • Variable expenses: food, transportation, entertainment

  • Annual expenses: travel, medical care, taxes

Assets and Liabilities:

  • Cash and bank deposits

  • Portfolio Value

  • Property value

  • Credit card debt and loans

📝 Step 2: Set SMART financial goals

Financial goals should be specific, measurable, achievable, relevant, and time-bound:

Short-term goals (within 1 year):

  • Building an emergency fund: 6 months of living expenses

  • Pay off high-interest credit card debt

  • Saving funds for specific purposes (such as travel, further education)

Medium-term goals (2-5 years):

  • Down payment for property purchase

  • Wedding Fund

  • Further study expenses

Long-term goals (5+ years):

  • retirement savings

  • Children's Education Fund

  • Housing loan

💰 Step 3: Use the 631 financial management rule to allocate income

The 631 rule is the most popular financial allocation method in Hong Kong:

60% - Living expenses <br>Including housing, food, transportation, daily necessities, entertainment and other necessary expenses

30% - Savings and Investment <br>Funds used to achieve financial goals, which can be invested in various financial tools

10% - Risk Management <br>Purchase insurance to deal with emergencies such as accidents and illnesses

📊 Financial allocation suggestions based on income level

Based on different income levels, the editor has calculated the specific distribution of the 631 rule for everyone:

Monthly income Living expenses (60%) Savings and investment (30%) Risk Management (10%)
$20,000 $12,000 $6,000 $2,000
$30,000 $18,000 $9,000 $3,000
$40,000 $24,000 $12,000 $4,000
$50,000 $30,000 $15,000 $5,000

📱 Recommended accounting tools

Keeping track of your finances is essential for good financial planning! Here are a few helpful Hong Kong accounting apps:

Local development:

  • Gini : supports linking bank accounts and automatically categorizing expenses

  • ONEFi : Linking MPF and Cryptocurrency Accounts

Banking App:

  • HSBC Personal Budget feature : Automatically record bank transactions

  • Hang Seng Savings Planner : Set a savings plan and budget limit

Virtual Banks:

  • Mox App : Instant Consumption Classification

  • WeLab Financial Overview : Analysis of Six Consumption Categories

🏦 Chapter 3: Bank Account Opening - Taking the First Step in Financial Management

📋 Preparation before opening an account

To open a bank account in Hong Kong, you need to prepare the following documents:

Necessary documents:

  • Hong Kong identity card or passport

  • Proof of address (within 3 months)

  • Bank account holder proof

Account opening process (7 steps):

  1. Choose the right bank and account type

  2. Prepare required documents

  3. Fill out the application form

  4. Authentication

  5. Set account password

  6. Deposit account opening funds

  7. Waiting for account activation notification

🏛️ Popular bank account opening comparison

The editor has sorted out the account opening requirements of major banks for everyone:

HSBC

  • HSBC One : No minimum deposit requirement, no monthly fees

  • Premier : Minimum balance $1,000,000, monthly fee $380

Citibank

  • Citi Plus : No minimum deposit requirement, no monthly fees

  • Citigold : Minimum balance $1,500,000, monthly fee $300

Hang Seng Bank

  • Preferred Banking : No minimum deposit requirement, account opening bonus up to $800

virtual banks

  • Mox : Up to 6% interest, $5,180 sign-up bonus

  • ZA Bank : 0.31% interest on the first $300,000

💳 Account type selection

Savings account : suitable for daily savings, with interest returns
Current account : suitable for frequent transactions, usually interest-free
Comprehensive household registration : combining multiple services for convenient management
Fixed Deposit Account : Lock up funds in exchange for higher interest
Foreign currency account : holding foreign currency assets to diversify exchange rate risks

📈 Chapter 4: Comprehensive Collection of Investment Tools - Financial Weapons for Beginners

💰 Low-risk financial tools

1. Bank deposits 💳

  • Current deposit : High flexibility, withdrawal at any time, interest rate 0.001%-0.1%

  • Fixed deposit : Locked term, higher interest rate, currently up to 3%-4%

  • High-interest savings accounts : Virtual banks offer higher interest rates, such as Mox, which is up to 6%.

2. Government bonds

  • Hong Kong Government Bond Program : three-year term, redeemable at any time, annual interest rate of 2%-4%

  • Inflation-linked bonds (iBonds) : Fighting inflation and preserving principal

  • Silver Bond : Designated for seniors aged 65 and above

3. Corporate bonds

  • Investment grade bonds : higher credit ratings and relatively lower risk

  • High-yield bonds : Higher returns but increased risk

  • Convertible bonds : can be converted into stocks, and have the characteristics of both bonds and stocks


🚀 Medium-risk investment tools

1. Fund Investment📊

A fund is a collective investment scheme managed by professional fund managers and is suitable for investors who do not want to spend time researching individual stocks:

Fund Types:

  • Equity funds : primarily invest in stocks, with higher return potential

  • Bond Fund : Invest in bonds, relatively stable

  • Hybrid Funds : Combining stocks and bonds to balance risk and return

  • Regional funds : focusing on a specific region or country

  • Industry Funds : Focused investments in specific industries

Popular fund platforms in Hong Kong:

  • Hang Seng SimplyFund : Start with $1 and choose from 10 funds

  • HSBC FlexInvest : $100 minimum investment, 15 funds available

  • Citi Preferred Investment Portfolio : Starting from $100, system-recommended portfolio

2. ETF Exchange Traded Funds 📈

ETFs combine the diversification of mutual funds with the trading flexibility of stocks:

ETF advantages:

  • Lower fees than traditional funds

  • Flexible trading hours, buy and sell like stocks

  • High transparency and clear visibility of shareholdings

  • Diversify investments to reduce individual stock risks

Popular ETFs:

  • Tracker Fund of Hong Kong (2800) : Tracks the Hang Seng Index

  • SPDR Gold ETF (2840) : Invest in physical gold

  • Southern A50 (2822) : Investing in the A-share market

⚡ High-risk investment tools

1. Individual stocks 📊

Direct investment in listed company shares offers the highest potential returns but also the greatest risk:

Hong Kong Stock Features:

  • No price limits

  • T+2 settlement system

  • Can short sell

  • The minimum trading unit is 1 lot

Key points for stock selection for beginners:

  • Choose blue chip stocks to start

  • Understand the company fundamentals

  • Pay attention to diversification of investments

  • Set stop-loss level

2. Derivatives

  • Warrants : Leveraged investment, small money to win big money

  • CBBCs : There is a mandatory call mechanism

  • Options : Buy and sell rights with controllable risks

3. Alternative Investments

  • Real Estate Investment Trusts (REITs) : Investing in properties to earn rental income

  • Commodities : gold, oil, agricultural products

  • Cryptocurrency : Bitcoin, Ethereum and other digital assets

🛡️ Investment tool risk comparison

Based on the degree of risk, we divide investment tools into three levels:

Low risk low reward:

  • Bank deposits: 1-3% annual return

  • Government bonds: 2-4% annual return

  • Money market funds: 3-5% annual return

Medium risk, medium reward:

  • Corporate bonds: 3-6% annual return

  • Hybrid Fund: Annual return 4-8%

  • REITs: 5-10% annual returns

High risk high reward:

  • Stock funds: 6-12% annual return

  • Individual stocks: Annual returns -20% to 25%

  • Derivatives: Leverage effect, returns can be high but losses can also be huge

💡 Chapter 5: Practical Application of Financial Management Tools - How to Start Your Investment Journey

🎯 Pre-investment preparation

1. Risk Assessment <br>Understand your own risk tolerance, which is generally divided into:

  • Conservative : tolerate fluctuations of up to 10-20%

  • Stable type : withstand 20-40% fluctuation

  • Aggressive : Can withstand fluctuations of more than 40%

2. Investment Funds <br>Only invest your spare cash; don't invest your emergency funds. HSBC recommends setting aside at least $100 per month to start investing.

3. Investment period

  • Short-term (1-3 years) : Focus on stable investment

  • Medium term (3-10 years) : Can tolerate higher risks appropriately

  • Long-term (more than 10 years) : Invest in assets with high growth potential

📊 Open an investment account

Securities account opening process:

  1. Select a securities firm or bank

  2. Prepare identity documents

  3. Fill out the account opening application form

  4. Conduct a risk assessment questionnaire

  5. Signing of relevant agreements

  6. Deposit account opening funds

  7. Download the trading platform app

Comparison of popular securities platforms:

platform Hong Kong Stock Commission US stock commissions Minimum fee feature
Futu NiuNiu 0.08% $0.99 HK$3 0 commission trading promotion
Webull 0.08% $0.99 HK$3 Simple and easy-to-use interface
Yaocai 0.20%-0.30% US$8.8 HK$50 Traditional brokerage firms

💰 Build a portfolio

Recommended configuration for beginners:

20-30 years old:

  • 70% equity assets (stock funds, ETFs)

  • 20% bond assets

  • 10% cash

30-40 years old:

  • 60% equity assets

  • 30% bond assets

  • 10% Alternative Investments

40-50 years old:

  • 50% stock assets

  • 40% bond assets

  • 10% cash

Ages 50 and above:

  • 40% stock assets

  • 50% bond assets

  • 10% cash

📈 Investment strategy recommendations

1. Dollar Cost Averaging
Invest regularly and consistently, regardless of market fluctuations, to average out your investment costs over the long term.

2. Diversify your investments . Don’t put all your eggs in one basket. Diversify your investments across different regions, industries, and asset classes.

3. Hold for the long term <br>Time is investment’s best friend, and the compound interest effect takes time to take effect.

4. Regular Review <br>Review portfolio performance quarterly and adjust allocations as needed

Ten-step financial management checklist for beginners.csv
Generated files

.

🛡️ Chapter 6: Risk Management - Insurance is an important part of financial management

💼 Why do you need insurance for financial management?

Insurance transfers risk to insurance companies, preventing unexpected events from affecting financial plans. Hong Kong insurance has the following advantages:

Protection function:

  • Death benefit protects your family

  • Medical insurance to cope with disease expenses

  • Accident insurance prevents accident risks

  • Critical illness insurance to deal with major diseases

Financial management function:

  • Savings insurance provides both protection and savings

  • Investment-linked insurance participation investment returns

  • Annuity insurance provides retirement income

  • Education fund to prepare for children's further education

🏥 Must-buy insurance types

1. Medical insurance <br>To cover medical expenses, especially those in private hospitals. Recommended options:

  • basic medical insurance

  • High-end medical insurance

  • Dental Insurance

2. Life Insurance <br>To protect your family's life, the recommended coverage is 10-15 times your annual income:

  • Term life insurance: low premiums, pure protection

  • Whole life insurance: lifelong protection with cash value

3. Accident Insurance <br>Low premiums, protection against accidental injuries and disability

4. Critical Illness Insurance <br>Covers expenses for major illnesses such as cancer, heart disease, and stroke

💰 Insurance budget allocation

According to the 631 rule, insurance expenses should account for about 10% of income. For example, if you earn $30,000 a month:

  • Insurance budget: $3,000

  • Medical insurance: $1,200

  • Life insurance: $1,200

  • Accident insurance: $300

  • Critical illness insurance: $300

🔍 Tips for choosing insurance

1. Protect first, save later <br>Pure protection insurance is cheaper than savings insurance and is suitable for beginners with a limited budget.

2. Compare different products <br>Compare premiums, compensation conditions, and claims services under the same coverage.

3. Understand the terms and conditions <br>Pay attention to exclusions, waiting periods, compensation limitations, etc.

4. Regular review <br>Adjust your insurance coverage as your life stages change.

🚨 Chapter 7: Financial Traps for Beginners - Avoiding Common Mistakes

❌ 15 Biggest Financial Mistakes Beginners Make

Based on the common questions of Hong Kong investors, the editor has sorted out the most common mistakes made by novices:

Goal setting errors:

  1. No clear investment goals - Blindly follow the trend of investment

  2. Expect to get rich overnight - Pursuing unrealistically high returns

  3. The goal is too vague - Lack of specific measurable indicators

Investment decision errors:
4. Superstitious insider information - Reliance on hearsay or small talk
5. Over-concentrated investment - Put all your funds into a single asset
6. Chasing high and selling low - Emotional Trading
7. Frequent trading - Overtrading increases costs

Risk Management Errors:
8. Ignoring transaction costs - Underestimation of fees and tax implications
9. Misassessing risk - Overestimating or underestimating one's risk tolerance
10. No stop loss level - Failure to stop losses in time

Money management errors:
11. Investing in an emergency fund - Invest your emergency money
12. Excessive borrowing and investment - Excessive leverage through credit or margin trading
13. Not adequately prepared - Not doing enough research before investing

Mentality issues:
14. panic selling - Panic exit when the market falls
15. Greedy Position - Excessive optimism during a rising market

✅ Avoid wrong methods

Develop the right mindset:

  • Investing is a long-term behavior, not gambling

  • Accept that market fluctuations are normal

  • Establish trading discipline and strictly enforce it

Do your homework:

  • Understand the characteristics and risks of investment products

  • Learn basic analysis methods

  • Pay attention to economic indicators and market trends

Risk Control:

  • Set a clear stop-loss level

  • Diversify your investments to reduce risk

  • Only invest idle funds

Continuous Learning:

  • Take a financial management course

  • Read related books

  • Consult a professional

🔍 Identifying Investment Scams

Common investment scams in Hong Kong include:

Online investment scams:

  • Fake investment platforms (such as the JPEX incident)

  • Investment plan with guaranteed high returns

  • Fake financial institution scam

Identification method:

  • Check if the platform is regulated

  • Questioning promises of excessive returns

  • Verify company information with the Securities and Futures Commission

  • Avoid disclosing personal information to unknown parties

🛠️ Chapter 8: Practical Financial Management Tools - Technology Helps You Manage Your Finances

📱 Financial calculation tools

1. HSBC Future Planner
HSBC Hong Kong's personal financial planning tool predicts future wealth through 1,000 simulations:

Key features:

  • Predicting wealth changes before age 90

  • Assess the chances of achieving each goal

  • Simulate the impact of different investment and insurance products

  • Planning for retirement and education expenses

2. Investment Committee Financial Management Tools <br>The Investment Committee provides a variety of free financial management tools:

  • Savings Goal Calculator

  • Loan and Debt Calculator

  • Retirement Planning Calculator

  • Inflation Calculator

3. StashAway Investment Calculator <br>Predict long-term investment returns and understand the effect of compound interest:

  • Enter initial investment amount

  • Set monthly payments

  • Select the expected rate of return

  • Calculating compound interest growth

💻 Online financial management platform

Smart Investment Platform:

  • StashAway : AI automatically allocates investment portfolios, with annual returns of 2.4%-15.7%

  • Kristal.AI : Providing diversified investment strategies

  • 8 Securities : Social Investment Platform

Fund investment platform:

  • Hang Seng SimplyFund : Starts from $1, no subscription fee

  • HSBC FlexInvest : Minimum investment of $100, free for holdings below $10,000

  • ZA Bank Fund Services : Zero Subscription Fee Money Market Fund

📊 Market Information Tools

Financial Websites:

  • Yahoo Finance : Free stock price information

  • AAStocks : Real-time quotes for Hong Kong stocks

  • Investor and Financial Education Council : Financial Education Resources

Mobile APP:

  • Futu NiuNiu : Stock Trading and Information

  • Webull : US and Hong Kong stock investment platform

  • MoneyHero : Compare financial products

🎓 Chapter 9: Financial Learning Resources - Continuing Education to Enhance Financial IQ

📚 Must-read financial books

Entry Level:

  • Rich Dad Poor Dad - Robert Kiyosaki

  • Rich Dad - Bodo Schaefer

  • The First Investment Guide for Financial Beginners

Advanced Class:

  • The Intelligent Investor - Benjamin Graham

  • A Random Walk Down Wall Street - Melkye

  • The Most Important Thing About Investing - Howard Marks

🎥 Premium Financial Management Channel

YouTube Channel:

  • Chai Shu Brothers : Vivid and interesting financial knowledge

  • Yale Chen : Practical Sharing on Investment and Financial Management

  • Dan Lok : Entrepreneurship and Wealth Thinking

Local financial programmes:

  • TVB Finance : Hong Kong Stock Analysis

  • Now Finance Channel : Real-time market information

  • RTHK Investment Guide : Financial Education Programme

🏫 Recommended financial management courses

Government Agencies:

  • IFEC : Free financial management seminars and online courses

  • Consumer Council : Consumer Financial Education

  • Community Center : Basic Financial Management Class

Professional institutions:

  • CFA Institute : Chartered Financial Analyst Program

  • Hong Kong Securities and Investment Institute : Securities Practitioner Qualification

  • Hong Kong Institute of Certified Public Accountants : Financial Planner Course

🌐 Online learning platform

Free resources:

  • Khan Academy : Basic Economics and Finance

  • Coursera : Financial management courses from internationally renowned universities

  • edX : MIT and Harvard financial management courses

Paid Platforms:

  • Udemy : Practical Investing Skills Course

  • MasterClass : Taught by investment masters

  • LinkedIn Learning : Financial Management Skills for the Workplace

📋 Chapter 10: Action Plan - Start your financial management journey

🎯 Ten steps for beginners to manage their finances

The editor has developed a step-by-step financial management action plan for everyone:

Step 1-2: Assess the current situation + establish a fund (1-6 months)

  1. Keep detailed records of income and expenditure

  2. Build a 3-6 month emergency fund

Step 3-4: Debt settlement + account opening preparation (2-4 weeks)
3. Prioritize paying off high-interest credit card debt
4. Compare bank account opening offers and open an account

Steps 5-6: Learning + Goal Setting (1 month)
5. Learn basic financial management and investment knowledge
6. Set specific and measurable financial goals

Steps 7-8: Tool selection + start investing (2-3 months)
7. Understand the characteristics of various investment tools
8. Start investing regularly

Steps 9-10: Insurance Planning + Continuous Optimization (Ongoing)
9. Purchase appropriate insurance coverage
10. Review and adjust your financial strategy regularly

💰 First-time investment advice

Fund allocation suggestions:

  • 30% Keep it in a high-interest savings account as an emergency fund

  • 40% Invest in stable funds or ETFs

  • 20% Invest in growth stock funds

  • 10% Try investing in individual stocks (for learning purposes)

Selection criteria:

  • Choose low-cost products

  • Diversify your investments to reduce risk

  • Regular payments reduce market timing risk

  • Long-term holding to leverage compound interest

📊 Financial goal tracking

Create a financial goal tracking sheet and review progress regularly

Hong Kong Newbie Financial Goal Planning Table.csv
Generated files

:

Monthly Review:

  • Record changes in income and expenditure

  • Check investment performance

  • Adjust next month's budget

Quarterly review:

  • Evaluate progress towards goals

  • Review portfolio allocation

  • Consider whether you need to adjust your strategy

Annual review:

  • Reassess financial goals

  • Review risk tolerance

  • Adjust long-term financial planning

🎊 The secret to financial success

Maintaining discipline:

  • Strictly implement budget allocation

  • Do not interrupt your regular investment

  • Avoid emotional trading decisions

Continuous Learning:

  • Read financial information regularly

  • Take an investment course

  • Learn from successful people

Patiently wait:

  • Financial management is a long-term behavior

  • Compounding takes time

  • Avoid getting rich quick

Flexible adjustment:

  • Adjust strategies according to market conditions

  • Adapting to changes in life stages

  • Continuously optimize financial management solutions

🎉 Summary: Your Path to Financial Success

Dear readers, after reading this super detailed guide to the basics of financial management, I believe you all have a comprehensive understanding of financial management! 💪 I want to emphasize again that financial management is not just for the wealthy; it is a fundamental skill that everyone who hopes to improve their quality of life and achieve their life goals should master.

Remember, the key to financial success is:

  • Start early ⏰: Time is the best friend of compound interest effect

  • Continuous Learning 📚: Financial intelligence needs to be continuously improved

  • Discipline Enforcement 💪: Make a plan and stick to it

  • Risk Management 🛡️: Proper insurance protects your wealth

  • Wait patiently 🕰️: Financial management is a long-term marathon, not a sprint

No matter your current income or age, it's never too late to start managing your finances! Start today and take the first step towards a better future for you and your family! 🌟

If this article is helpful to you, please remember to share it with your friends so that we can learn about financial management together and move towards financial freedom together! 💰✨

I wish you all financial success and abundant wealth! 🎊🎉

Back to blog

See more...

View all
1 3
View all