The global total number for job losses are hitting an all-time high, the COVID-19 virus is causing mayhem to the global economy, disrupting the supply chain and grounding flights. The slowdown in economies seems inevitable. The outlook is dark and worrisome. We all know that worry does not bring about the solution but we need to be prepared financially for what lies ahead.
We may have already suffered from a 20-30% pay cut or lose our job. The gig economy is losing some grounds as demand for services is affected. Self-employed requires financial assistance from the government.
The best insurance for recession is to craft out a good and comprehensive financial plan, stock up an emergency fund, increase our financial literacy knowledge and technical skills for new jobs.
Understand your personal financial situation
We can capitalize on this downturn to evaluate our personal financial situation, understand where is the potential pitfall, in order to be better prepared for other future uncertainties. The COVID-19 is a black swan event and it won’t be the last one, the key is to grow to become anti-fragile. We all need to have a steadfast emergency fund. In the past, we can live with 3-6 months of household expenses but we will suggest catering for 9-12 months.
We will suggest reducing debt and leverage, especially eliminate credit card debts. It is important to do a financial health check on an existing insurance policy, ask whether they are sufficient for present coverage, any policies which can be “refinanced” and optimized.
Tightening your belt
We can use technology to monitor and control our expenditure and spending habits. Some apps can list down where one is spending their money on, understand cash flow, and how much is spent on necessities versus wants. It will be important to create a personal financial statement which helps to list down income and expense, assets and liabilities, monitor them on a monthly or quarterly basis.
The key is to reduce unnecessary services and expenses. We need to re-evaluate our lifestyle and cut down on lavish ones. In order to free up for cash flow, it may be imperative to delay home mortgage payment and taking insurance premium holiday if necessary (do not stop an insurance policy).
As the interest rate is dropping, after the lock-in period, we can consider to refinance with the banks and save on interest.
Job preservation and skills upgrade
We may become too comfortable in our roles and become stagnant. We need to constantly upgrade our skills set to make ourselves constantly relevant. This will help reduce the risk of becoming redundant when the corporates need to reduce fats. The question will be,” Are you the fats or the muscle?”
We need to constantly upgrade ourselves in terms of technical skills and knowledge, keep abreast of times. This will help us to find a new role faster than others. This is the time for reskilling, training, and upgrade. The Singapore government is putting in a lot of subsidies for training. We should make good use of it.
Wealth Preservation and Wealth Accumulation
In these turbulent times, there will be volatility. Volatility can be our best friend. We can utilize cash which we don’t need for the near future and invest in multi-assets or diversified investment. All investments need to be aligned with a personal view on risk and time horizon.
Spread out the risk through diversification, do not put all eggs in a single basket. We can invest through the Dollars Cost Averaging method. Many investors lose money in a downturn because they invest in a particular industry or individual company.
Look for Money Making Opportunity
When there is a pay cut or retrenchment, we need to regroup and reassess our skills. It could mean looking for new employment out of our comfort zones such as a different industry or different type of roles. We need to tap on our informal network as they help to open to new opportunities for contract or temporary work.
Now is the time to start a side hustle, we need a secondary source of income to supplement our main one. In the event the axe fell, we can immediately pivot our effort into the side hustle, making it the main one. We could be crafting our own software, own app, creating digital assets, drive Grab to deliver stuff or pick up passengers, food delivery, home bakery, DIY craft, online illustrator, tuition, and Youtube channels. We can pursue our passion as a side hustle and hone it to perfection by putting additional manhours outside work.
Maybe we have been thinking to take the path of entrepreneurship, now is the best time as we have nothing to lose but more to gain. The Singapore government is encouraging us to start our own business and hire Singaporeans. If not now, when?
Apply for Government subsidies and grants
Check whether we are qualified for government grants and subsidies in order to tide through these challenging times.
Temporary Relief Fund is a one-off S$500 cash assistance.
The COVID-19 Support Grant provides a monthly cash grant up to S$800 for 3 months.
The Courage Fund provides a one-time lump sum of up to S$1,000.
Back to School
We can consider returning to school. The purpose is to pursue an education that will help us in future to secure new employment. We can be doing part-time studies, keeping the day job and waiting for this to pass.