Financial Planning amidst Covid 19 crisis
By Too Lee Soong
Covid-19 which started as a global health crisis, has also brought an economic downturn resulting in companies scaling down their operations and affected many individuals' disposal income due to salary pay-cuts or employment termination. As the impact of the Covid-19 continues to play out across the globe, it is a timely reminder for us to evaluate our financial positions and review our current situation.
A sound financial plan is important as it helps to reduce and possibly eliminate financial distress that may arise from various unexpected circumstances, like this pandemic we are going through. A simple budget can help to track all sources of income, the expenditures as well as track all the savings which can be portioned out as an emergency fund. Through a budget, one is able to know their financial flexibility for the month. A budget gives one a good starting point towards financial planning. Sticking to a well laid out budget requires discipline, and it reveals where your weaknesses are, especially in areas where you can be saving more money.
Three areas you will want to pay attention to:
Questions we should be asking ourselves:
Am I spending more than my income level?
What are my spending habits?
Am I managing my debt?
“The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”
Martin Luther King Jr.
The pandemic has shown us it may not be enough to have 6 months of emergency funds, as most financial planners have advocated. We may need to accumulate at least 12 months of emergency funds as one does not know when the pandemic will finally be brought under control. Since we do not know when, it will be better for us to be better prepared.
To cut back on expenditures, the goal is to Simplify more. Prioritise your expenditure to spend only on the needs as opposed to the wants. Focus your efforts on recurring and necessary bills and you may want to relook at your entertainment budget. Also focus on consolidating and reducing your outstanding debts.
Satisfy your needs first and weigh your wants against future needs, for instance saving for your child’s education instead of saving for a car! Life is about choices. Bad choices have negative consequences and good choices have positive effects.
It is important for married couples to communicate openly and deeper with your spouses on managing financial responsibilities. Discuss as a couple the role each of you will take up. You will need to be more supportive and be willing to share with the family on how you have planned to go through the challenging times together.
Winston Churchill said, “never let a good crisis go to waste.”
How we respond is entirely up to us. Let us make a good plan to develop strong financial habits, consider how to best maximise your financial resources and finally to build a strong financial base to support any and all future life transitions.
For couples who are planning to get married, you can click here to watch more videos on financial planning resources to build a stronger marriage:
[Money and Marriage Series] Financial Planning for Couples
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How to Covid-Proof your First Home