My Halal Financial Plan
As an apprentice who, Alhamdulillah, is in the position of not having any dependents, my expenses are limited to how extravagantly I wish to live my life. On top of that, being a Muslim who doesn't drink, party or smoke, and who leads a disciplined life, that can be extremely beneficial financially.
I'm someone who likes to think long-term, so I began financially planning even before I got my first pay check. I've tried my utmost to maximise on investing and saving, but in the last two years of seeing adult money as an apprentice I've also learnt a lot and developed my strategy since.
Some mistakes
Most people only know stocks and shares. I was most people. On top of this, I made a few rookie mistakes: not being consistent, not waiting out long enough, and choosing the wrong strategy in the first place.
As with all financial strategies, you have to tailor it to your risk appetite, which is aligned with your goals. My initial mistake was having a short-term goal but going for a medium-to-high risk investment. Thanks to Nvidia I broke even (I joined late), but otherwise this could have resulted in a bigger loss.
Now that I've built the capital over two years, I can strategically place it into a mix of short, medium and long-term investments, each with their own risk levels. In this post I'll document the strategy I've gone with after doing my research.
Before any of this, though, I'd like to talk through the best investment of them all, if you have the mindset and willpower: investing in yourself. As cliché as it sounds, this gives you the skills to make even more money and therefore invest even more. Two examples that really paid off for me: YouTube Premium and Audible. There's so much value on the internet and in books, just use YouTube wisely or it can become a trap.
Let's begin.
Key concepts
Here are some types of savings account you may not be familiar with:
- Notice period accounts: Let you deposit regularly and withdraw after giving notice (which varies between accounts). You can't withdraw before the notice.
- Bond (Sukuk) accounts: Let you deposit once, at the start of the term. You receive both your initial investment and any profit at the end. You can't withdraw before the term ends.
You're probably aware of these already:
- Stocks and shares: Easier liquidity, since they can be traded almost instantly on weekdays.
- Cryptocurrencies: Available 24/7, offering high liquidity but with extremely high risk due to volatility.
1. Emergency / rainy day fund
Goal & allocation: Easily accessible funds covering 3-6 months of expenses.
- Strategy: I've chosen a notice period account with the shortest notice. At the time of writing, Gateway Bank offers a 30-day notice account. If there were an easy-access account (zero-day notice) with the same or a better AER (annual equivalent rate), I'd have chosen that.
- Steps: Sign up to Raisin for easy access and comparison across multiple banks (and a £50 bonus using a referral link). Explore Sharia-compliant offers on Raisin.
Why Raisin? Raisin is an aggregator. It simplifies the process by giving access to multiple banks through one account, with a single identity verification. This saves time and often gives access to banks that require higher minimum deposits, like Qatar Islamic Bank. It's especially useful when applying for new bond accounts that can expire every 3-12+ months.
2. Low-risk investment
Goal: A safe, low-risk option I can access in 3-6 months if necessary.
- Strategy: I've selected a notice account with a 6-month notice period but a higher AER than my rainy day fund. The benefit of a notice account is that I can keep depositing, so my money compounds quicker.
- Another option would be a fixed-rate bond (Sukuk) account with a 3-12 month term, but only if the AER was higher. In that case I'd hold only the monthly additional contributions as cash and deposit them into the next bond term. The maths would have to work in my favour over a notice account with monthly contributions. ChatGPT is your best friend here.
- Whichever option I choose, I'd regularly check for better deals so I can make the right call and transfer funds appropriately.
- Allocation: 40% of my savings to this investment. 10% of my monthly disposable income deposited regularly into the notice account or stored as cash, ready to reinvest into the next Sukuk when the current term ends.
3. Medium to high-risk investment
Goal: A long-term investment (5-10 years) with the potential for significant growth through compounding.
Strategy & allocation:
- Invest 30% of my savings and 40% of my monthly disposable income into higher-risk stocks and shares. To make stock selection easy, I use Amal Invest, as it integrates seamlessly with my Trading 212 ISA, meaning tax-free returns, zero additional fees (minus FX), and I can turn on auto-invest monthly.
- Invest 5% of my savings in gold (physical assets, not CFDs), with an additional 2% of my monthly disposable income.
- Invest 20% into a property IF-ISA through platforms like Nester, and 43% of my monthly disposable income into higher-risk for other properties. I've recently come across Amal Invest's low-risk (stock selection), which is included with their high-risk plan; it seems to have higher performance than property, so I've moved away from property for now.
4. High-risk investment
Goal: A high-risk investment with the understanding that it could be lost at any time due to volatility. The plan is to hold this for 1-2 years, but that can change.
- Strategy: Allocate 5% of my total savings to cryptocurrencies, with an additional 5% of my monthly disposable income to double down.
- Allocation: Without going into specifics, more than half is split across BTC, ETH and SOL. The rest is split into even higher-risk cryptos like ALPH, TAO and RNDR.
Conclusion
This strategy is designed to balance accessibility, risk and long-term growth based on my short-to-long-term goals. By diversifying across different types of investment and carefully considering the risk of each, I aim to maximise my potential growth. My goals may not align with yours, so I don't recommend using this as a guide. My intention is to make you aware of your options and bring some transparency to my finances.
Filed under: Finance