Back in early 2019, who would have thought of the concept of ‘work-from-home’ (wfh), let alone a worldwide lockdown in most countries. But humans are adaptable creatures. Adjusting and adapting from lockdown, to dining out in twos, to the daily wearing of masks, it’s about time we get used to the new norm.
It may be a blessing in disguise that this pandemic has helped many to save on air travel and leisure holidays, dining out, and daily commute. However, it puts a strain on most people’s finances with most businesses and operations slowing down locally and internationally.
This week, we have 2 experienced financial advisors to share with us how this ‘new life’ has shaped their finances.
Speaking with an accumulated wealth of knowledge, the 37-year-old wealth planner Zong Jie, mentioned that the proper way to save is to park a percentage of your income aside before spending. Humans are creatures of habit. It takes 21 days to form a habit and 66 days to maintain one. Good savings habit is crucial, especially during a crisis like this. If there is something this pandemic teaches us, it would be the importance of an emergency fund.
As per Zong Jie, get into the habit of paying yourselves first. Put your needs before your wants. And though this need in the form of emergency funds may not be visible at this current point, in the long run you will be rewarded with the benefits of early savings.
The ideal amount of the emergency fund to set aside would be 3-6 months of your income, not expenses. Expenses and income should never be equal. To start off, set aside a certain percentage of your income rather than a fixed amount. James recommends saving a good 3-5% for a start, and slowly build up the saving habit.
According to the research conducted by St James's Place, quoted “More than half of Singaporeans (56 per cent) have had to draw down or reduce contributions to retirement savings at some point over the past 12 months, with 20 per cent having to do this in a significant way.”
If it takes a pandemic to force one to relook into their spending habits, I’d say it’s worth the pandemic. Now don’t get me wrong, often at times we get too complacent when living in comfort. But with COVID-19 affecting most of the Singaporeans last year, many are dipping into their emergency savings to pay bills, cutting back on dining out, and spending less on miscellaneous items. Unemployment rates were also on the rise.
MAP has introduced a money tracking application called Money CEO, a financial tool to track individual’s expenses, savings, assets, investment, and to guide you on the right track, and better manage your cashflow.
A strong banking background and several investment portfolios on hand, James talk about how the investment landscape has shifted pre-and-post-covid. Interest rate have been coming to an all-time low. For instance, mortgage interest rate has gone down to a low 0.3-0.5%, as per 1.2-2% before COVID. When interest rates fall, and all else is constant, the share value will likely rise, and rate of returns increase. A low interest rate environment encourages investors to constantly look for better returns in the market. He shared that he has a handful of clients reaching out to him when shared to them about a new product launch that offers a capital guarantee for a single premium plan.
Despite the government’s preventive measure in managing the virus as well as the budget allocation to help Singaporeans tie through, many were hit by the economic waves when Singapore dip into circuit breaker and its post recovery stages.
It is a crucial time that financial planning and advice come into play, be it for the middle age or for the younger generation, one can never be too late or too early to start. This pandemic has shifted the expectations of savings, goals and income/career stability tremendously.
Disclaimer: The information is meant purely for informational purposes and should not be relied upon as financial advice.
