Karen Tang, CFP®: Certified Financial Planner in Singapore

6 Actionable Ideas about Personal Finance that Resurfaced during the 2020 Coronavirus Pandemic

6 Actionable Ideas about Personal Finance that Resurfaced during the 2020 Coronavirus Pandemic Singapore

It has been almost a year since the World Health Organisation (WHO) declared the coronavirus outbreak a pandemic. The pandemic disrupted the way we live, work, and play. And it also gave us new realizations about the state of our financial health.

As cliche as it sounds, life is unpredictable. Because the unforeseen can happen any time, it is better to be prepared than to run helter-skelter at the last minute. This pandemic has shown us the importance of
financial security – especially when we meet with an unprecedented circumstance. 

Here are 6 actionable ideas about personal finance that were reinforced during the 2020 Coronavirus pandemic:

1. Budgeting: Build and maintain a solid emergency cash reserve

An emergency fund is your safety net when you lose your job or get a pay cut. Property is not a liquid asset as it cannot be sold easily and promptly for cash. It is more prudent to invest your savings across various asset classes – such as bonds, stocks, unit trusts, and capital guaranteed savings plans.

I recommend to my clients to set aside a cash buffer based on their monthly income, not just their monthly expenses. It is essential that everyone builds their own emergency cash reserve.  And for that, you need to set aside at least 10 percent of your income.

This pandemic has revealed that a buffer of 6 months of expenses in emergency funds is insufficient for many folks. To ride through a prolonged recession, it is safer to raise this buffer to
6 months’ worth of income. To save more, you either spend less or earn more.

2. Hospital Bills: Check whether your health insurance is relevant and adequate

Get the best, most suitable private integrated Shield Plan for your needs. Even if your employer provides medical insurance, it is always better to have your own health insurance. This is because the medical insurance offered by your employer is usually not portable i.e. it will terminate when you leave the company.

3.Risk Management: Get suitable and sufficient life insurance coverage

Life insurance is designed to protect ourselves and our dependents should the unforeseeable happen. It provides much-needed compensation to cushion our finances. Different types of insurance fulfill different needs. Without proper insurance coverage, the financial burden could potentially drain our precious savings or retirement nest egg. Or worse, push our family into debt. If you have been procrastinating to close the gap in your insurance cover, do it now!

4.Investment Planning: Avoid equities if your cash needs are near in time

Investing in equities is a smart way to grow your wealth and plan for long-term goals like retirement. However, if your goal is only a few years away, it is advisable to move your investments to safer instruments like fixed deposits that guarantee your capital. In a bull run, equities deliver solid returns. But in uncertain times like these, when the markets have yet to recover from the devastation of COVID-19, you need to protect your investments. Otherwise, your years of disciplined effort in saving and investing may not yield the desired results.

5.Estate Planning: Prepare your will and complete your nominations (CPF, insurance)

You may be thinking “Why do I need to write my will now? I am still young and healthy!”. The truth is it is never too early to do so. There are many examples in the news whereby a properly written will could have averted family meltdowns and violence.

If you pass on without a valid will, your entire estate (i.e. every asset with your name) will be distributed according to the Intestate Succession Act. If you are not satisfied with this default distribution, then you ought to get a will drawn up according to your wishes. By writing a will, you are saving your beneficiaries much time, money, and effort from having to deal with heaps of administrative paperwork. Not only that, when there is a will, there is no guessing who gets what. It prevents fights, squabbles, and any uncertainty.

If you have not completed your CPF and insurance nominations, get it done. These are pretty straightforward and can be implemented quickly. You can locate the respective nomination forms at the CPF and insurers’ websites.

6.Debt Management: Ensure your loans do not exceed 30% of your income

To find out if you are financially solvent, here are the steps: first, total up your monthly debt repayments (these include mortgage, personal loans, renovation loans, car loans, outstanding credit card bills, student loans), and then divide the figure by your net monthly income. This is known as your ‘debt service ratio’. If it is less than 30%, you are in good financial health. If it exceeds 30%, you may fall into a vicious cycle of working “just for your creditors”.  You will have little or no buffer to protect yourself, especially when your job and income are at risk.

If your financial health has not improved, ask yourself why. What are the gaps that you have the power to fill? Better still, work with your trusted Certified Financial Planner to get you to the next level.

Closing Thoughts 

“The only real mistake is the one from which we learn nothing”.
                                                                                                                              – Henry Ford

I hope that we can all take this COVID-19 pandemic as a wake-up call and remember to cherish the important things in life. We will have to learn to live with the virus for a while. Instead of focusing on the uncertainties, let’s prepare for them by protecting ourselves and our loved ones, financially and physically (by staying healthy and happy!).

Every recession demonstrates that it is always better to be safe than sorry. So if you haven’t been putting together that nest egg, you probably should get started.

Let’s start the New Year on the right footing and end up stronger!

37 Responses

  1. Thanks for sharing superb informations. Your web-site is very cool. I’m impressed by the details that you?ve on this blog. It reveals how nicely you understand this subject. Bookmarked this web page, will come back for extra articles. You, my friend, ROCK! I found simply the info I already searched all over the place and just couldn’t come across. What an ideal web site.

  2. I’m so happy to read this. This is the type of manual that needs to be given and not the random misinformation that’s at the other blogs. Appreciate your sharing this best doc.

  3. Great blog here! Also your website loads up very fast! What web host are you using? Can I get your affiliate link to your host? I wish my website loaded up as quickly as yours lol

  4. I don?t even know how I ended up here, but I thought this post was great. I do not know who you are but definitely you’re going to a famous blogger if you aren’t already 😉 Cheers!

  5. Just wish to say your article is as astounding. The clearness in your post is simply excellent and i can assume you are an expert on this subject. Well with your permission let me to grab your feed to keep up to date with forthcoming post. Thanks a million and please continue the gratifying work.

  6. Very nice post. I simply stumbled upon your blog and wished to say that I’ve truly enjoyed surfing around your weblog posts. In any case I will be subscribing for your feed and I’m hoping you write once more soon!

  7. Excellent post. I used to be checking constantly this blog and I am inspired! Extremely useful info particularly the last phase 🙂 I handle such information a lot. I was seeking this particular information for a very long time. Thanks and best of luck.

  8. Hey! I simply want to give a huge thumbs up for the nice data you will have here on this post. I will likely be coming back to your blog for more soon.

  9. Pretty nice post. I just stumbled upon your blog and wished to say that I have really enjoyed surfing around your blog posts. In any case I?ll be subscribing to your feed and I am hoping you write once more very soon!

  10. I’m amazed, I must say. Seldom do I come across a blog that’s both equally educative and engaging, and let me tell you, you’ve hit the nail on the head. The issue is an issue that not enough men and women are speaking intelligently about. I am very happy that I stumbled across this in my hunt for something relating to this.

Leave a Reply

Your email address will not be published. Required fields are marked *