Staying Ahead Financially in Tough Times

Many are still struggling to make ends meet despite recent decreases in the price of petrol. As a matter of fact, Malaysia may be heading towards a full time recession if current global financial situation does not make a change for the better now.

Norzuhaira Ruhanie, a writer for The Edge Daily offers a few tips on staying financially strong in a slowing economy.

1. Review Your Financial Goals
The first thing to do is review your financial goals and decide if you can stick with them or revise certain targets to suit your current needs. “You need to know where you are and where you want to get to. Taking the time to set challenging but realistic goals is vital,” says Rajen Devadason, a Securities Commission-licensed financial planner with MAAKL Mutual Bhd.

He also adds that long-term goals may remain unchanged but personal cash levels should be increased. When looking out for investment opportunities, says Rajen, take advantage of any sharp dips in the equity, bond and property markets to buy great assets that generate cash flow by way of dividends, distributions, coupons and rent. However, it is imperative that the buying is done largely out of current cash flow surpluses and not by depleting capital too quickly, he adds

2. Spend Less, Save More & Look at avenues to increase your take-home income
If cash is king, then you need to bring yourself into a stronger position. Reduce spending, work much harder to generate larger incomes and therefore get significantly larger cash surpluses, build large savings buffers and invest slowly and carefully over the long haul, says Rajen

“Ways to reduce spending could include eliminating consumer debt by paying off all credit card balances and deferring any unnecessary lumpy purchases that are not wealth-generating… like a new car if the old one is still functional,” he says.

The goal, says Rajen, should be to “try and get to the point of being able to save and invest 40% to 50% of your net income, apart from EPF, which is forced savings and which should continue at the maximum allowable rate.“The only way to create investment capital is to spend less than you earn and to carefully allocate your savings toward the emergency buffer, normal savings and well-chosen investments.”

Most Malaysians, says Ng, have been controlling their spending due to hikes in the price of many consumer goods. Look at avenues to increase your take-home income, he adds. “See if you can earn extra income doing what you already doing, but in your own time. If you are a tax consultant, for example, you could ask your boss for a commission if you secure clients outside your working hours.”

3. Have your emergency buffer
Have been putting off building an emergency buffer? While it is always important to have one, uncertain times means it is all the more crucial. The fund, says Rajen, should be between three and six months’ expenses for an employee and six to 12 months for a self-employed individual. “If you don’t have the buffer in place, your savings allocation should go into an emergency fund until it reaches the target size, based on your circumstances.”

To ensure maximum safety, the money should “be kept super safe in bank savings accounts, fixed deposit accounts and money market funds that do not have any bond component,” he adds.

Source: The Edge Daily