Entering 2020, I was like “Yass finally, this is my year! I’m gonna get my financial life in order.” And three months in, it’s apparent that the universe is having something else in store, not just for me but, for all of us. So here I am strategizing my money plan for this stay-at-home period and the upcoming post COVID-19, whenever it will be. It’s an uncertain future, yes.
The Ultimate Goal
Before I list out my money plan, here’s my current situation – When I started out my financial journey, I barely had any savings. I only started saving for emergency fund in January 2020 mostly by doing a no buy year and sacrificing my wants which is totally worth it as I managed to hit 50% of my savings goal (at that point of time, now I have increased the goal). Allow me to pat myself on the back for that because that’s the most money I managed to save my entire life. Then come this virus…
For now I still have my job but with a 20% salary cut which still covers my necessities, and I get to help others as well. I haven’t touched my little savings yet and I intend to only use them for emergencies or the worst case scenario income wise, i.e. losing my job (hopefully not!).
So that’s my goals at this unprecedented time – survival, helping others, peace of mind. My ultimate strategy? To build my emergency fund as soon as possible as much as I can. How much?
The ‘right’ amount depends on your personal comfort level
There’s no one-size-fits-all answer to how much you should have in savings. The amount you need in a rainy day fund varies person-to-person and depends on things like your age, job, when you plan to retire and your tolerance for risk.; Do you need more than 3 to 6 months’ worth of expenses saved during the COVID-19 pandemic. Here’s what experts say – CNBC
Personally, I aim to have at least RM15k in my bank account (yup don’t have that now) which will comfortably cover my expenses for 5 months, but I can certainly stretch that for 7-8 months if need be.
Some of my sources – read/listen more:
- COVID-19: What Does A Recession Mean for You and Me? – imoney
- Urus Bersama Suraya dan AKPK – Ringgit Oh Ringgit
- My COVID-19 Financial Plan – Aja Dang
- Raising Cash in the Next Six Months – Faizul Ridzuan
My Financial Strategies
1. Revisiting my spending
My spending habit has pretty much changed this year since I’m on a no buy mission but as I don’t go hardcore, I still have some discretionary spending, i.e. hobbies, entertainment, recreation and dining out. Not anymore though as we’re all staying put at home. I don’t even spend for gas and tolls which is nice! So for now, I’m okay with my budget.
Once it is safe to be out and about, I honestly want to enjoy life out there. So most likely, I’ll continue with those discretionary spending (on a budget) but I’ll certainly revisit it again to make some adjustments to ensure I fill up my emergency fund, first and foremost.
- Retooling Your Budget for COVID-19? 5 Smart Steps to Take Now – Forbes
- 4 Rules of Personal Finance That Aren’t Affected by the Coronavirus – The Motley Fool
2. Freezing gym membership
In the first place, this is not a necessity by any means. But I’m willing to pay an extra hundred plus every month because in my usual working days, my gym routine is the only time that my body really moves. Money well spent I’d say (ah not really, there were days that I just couldn’t drag myself there).
In light of this pandemic that may be going on for some time, my decision to freeze my gym membership is more for health and safety reasons – what an irony if a gym cluster is to start in the country. For now, membership is automatically suspended but once this partial lockdown is lifted, I have to pay for freeze fees. Not cool but understandable. And with that, I can put the monthly payment minus the freeze fees into my emergency fund.
3. Reducing EPF contribution
The option to reduce the statutory contribution rate for employees from 11% to 7% from April 2020 until December 2020 was announced by the Government under 2020 Economic Stimulus Package before the partial lockdown.
Initially, I opted to maintain the 11% rate. But now as the risk of unemployment hits me, I changed my mind. I choose to lower my EPF contribution just to get and save some extra cash. The Government intends to get this 4% circulating in the domestic economy but I’m sorry for now I have to put those extra ringgit into my emergency fund.
I’m also aware of the long term implications to my retirement fund but I just want to get through the present with safety net that I can fall into in case anything comes up in the near future.
- Reduction of Statutory Contribution Rate for Employees – EPF
- Why I am Opting Out of the 7% EPF Contribution – imoney
- Here’s Why I am Lowering My EPF Contribution for 9 Months – imoney
4. Taking up the car loan moratorium
Moratorium is such a fancy word, isn’t it? Basically for us, it means we don’t have to make our usual monthly loan payment for 6 months as announced. But here’s the thing that I took time to understand – does it mean the bank freeze the loan amount, then resume as usual at the end of the 6 months’ period as if nothing happen (only the financing period be extended for another 6 months) OR at the end of the 6 months period, our loan amount got increased due to the accumulating interests over the 6 months that we do not pay?
It is confusing! For example, I have a car loan with Bank Islam and according to Bank Islam’s FAQ, “the profit will continue to accrue on the outstanding principal amount. Such profit however will not be compounded in line with Shariah principles.” What does that mean, my goodness so fancy the wordings.
So I found a simple explanation of it:
For example, say you’re paying RM1,000 a month now until December 2021. From April 1, you’ll pay nothing until the end of September. Come October, you’ll continue paying the same amount, which is RM1,000, till the end of your loan term, which has now simply been extended by six months to June 2022, with no extra charges.; Six-month car loan payment holiday – how it works – paultan.org
As I have a 20% salary cut, it sounds practical for me to take up the automatic moratorium and not pay for my car temporarily so I can put the monthly loan into savings. Once the 6 months period ends (and hopefully I don’t use the money set aside till then AND my emergency fund is filled up), I will most probably just make a lump sum payment for the suspended 6 months payment holiday.
- FAQs on Deferment Package and Conversion Package – BNM
- Malaysian Banks and Local Institutions Offer Financial Assistance for Customers Affected by Covid-19 – RinggitPlus
- Malaysia Bank Moratorium: Why You Should Opt for the 6-Month Deferment for ALL Loans – RinggitPlus
5. Upskilling and improving employability
Remember when the Prime Minister said that we will be living according to the new normal? Well, time for upskilling.
Upskilling entails learning new skills, but it also involves a cultural shift and change management. To be competitive in the digital age, individuals and corporations require a learning-for-life mindset, collaboration—with humans and machines– and a willingness to embrace new ways of doing things. It also requires a global perspective, agile adaptation, cultural diversity and awareness, a global perspective, basic competency in technology and data analytics, people skills (EQ), and abandoning a zero-sum approach to advancement.; Upskilling: Why It Might be the Most Important Word in the Legal Lexicon – Forbes
It may be hard to believe that I actually love my job and my workplace but as an employee, I have to get myself prepared for a scary prospect that I might lose my job. One of the inevitable impacts of this global pandemic is recession. Many will lose their businesses and jobs, like it or not.
So I’m trying to utilize the time I have at home to learn as much as I can especially career wise. I’m getting myself prepared for two situations; (i) if I stay in the same company, I don’t want to simply punch in punch out every day. I want to be able to contribute meaningfully to the company, and (ii) if I got retrenched / jump ship, I can ‘sell’ myself out there.
Yup I’m updating my resume and CV as well.
- With GDP plummeting, are we facing recession? Putrajaya can weather storm, pundits suggest – Malay Mail
6. Considering side hustles
This has been in my to do list for so long! It’s very hard to take the first step. I want money but I don’t want to put the effort, aiyo how lah.
However, things have changed. I have to adapt and evolve. This whole thing just validified the need to get a side income. Having only a 9-5 job at this uncertain time is like hanging by a thread over a cliff while holding a basket full of all your eggs.
Time to wear my business cap. Wait, where do I put it?
- Now Could Be a Great Time to Get Side Hustle. Here’s How to Start – Nasdaq
- COVID-19 Recession: Should You Invest Now? – imoney
7. Postponing big life decisions
Buying a house is expensive, wedding is expensive, having and raising kids? Phew sleep deprivation. It wasn’t my plan to do any of these this year anyway, but now with everything going on, don’t think these will happen next year or the year after either. But they say prices of properties could go down between 10% to 20%? Hmmm.
- Effects of Covid-19 on local property market – New Straits Times
- Expert: Malaysia may not hit worse-case property market scenario post Covid-19 – Malay Mail
- A Forum on Market and Financial Impact to Malaysian Wedding Industry – Wedding Professionals Association of Malaysia (PS. I didn’t participate in the Zoom forum but we can observe the impact I guess from many couples having to postpone their weddings, hopefully there’ll be an insight write up on this issue)
8. Strengthening financial mindset
For this one, I’ve written one post here which only has one point – we’re currently staying at home to break the coronavirus chain but after this is all over, it is time for us to break the vicious chain and cycle of living paycheck to paycheck. I’m seriously done with that. It’s not fun to be stuck at home worrying about money, so this is the time to get out of any bad spending habit and instil and strenghten positive money mindset.
- How to Develop a Positive Money Mindset – The Life Spotters
- How to Change Your Money Mindset So You Can Have More Money – Dolar+Sense
9. Switch to emergency budget
Related to #1 above, I’ve cut a lot of expenses being at home this whole month that for now I don’t find the need to switch to emergency budget. Of course I can, and perhaps I should, but I don’t want because I’m already depriving myself a lot of things. Life is long but it is also short, so I want to enjoy the little things in my daily life whenever I can.
Hence, I’ll only activate the emergency budget when it becomes necessary, i.e. God forbid, I lose my job. My emergency budget would mean suspending my Netflix subscriptions, terminating gym membership, switching down my mobile plan, lowering my daily expenses including food budget and cutting out all unnecessary spending, e.g. dining out, activities and hobbies. Hopefully I don’t have to come to this, I’m already on a no buy year for goodness’ sake.
- Emergency Budget: How to Budget During A Pandemic – IHeartBudget
- Emergency Budget: What It Is, Why You Need It and How to Create One – Rocket HQ
10. Withdraw from EPF i-Lestari
I do not intend to do this at all, unless and except if I become desperately in need (touch wood!). One because I don’t find it necessary at this moment and two, I’ve already utilised the EPF contribution reduction as at #3 above and I don’t want to touch my retirement fund more than that.
It’s just comforting to know that the option is there and one can apply anytime from April 2020 until March 2021.
- FAQ i-Lestari – EPF
- How to Withdraw RM500 from Your EPF Account 2 under i-Lestari – imoney
- How and Should I Apply EPF i-Lestari Withdrawal – Finance Malaysia Blogspot
Hoping for the Best
I’ve seen everywhere the discussions by financial people, experts and investors who suggest that this is a good time to buy properties and get into investment. I’m considering that of course but I’m not quite there yet, I’m still learning so I’m doing this the way I know.
My strategies are simple, I don’t have any sophisticated plan as you can see I’m just a millenial next door who lack depth and understanding of the financial stuff. I just want to be prepared for the worst case scenario and come out from this pandemic and recession intact.
Surviving and thriving is the greatest combo but one step at a time okay. Let’s survive this first.