Many people have feedbacked about the global COVID-19 pandemic that has caused their cash flow problems due to no income and other factors such as sudden change of living style that affects their daily activities.
However, we have no choice but to follow the Movement Control Order (MCO) to break the chain or flatten the curve of COVID-19 spread. Therefore, it is vital for each one of us to stay at home during this period and be patient so that everything will be fine as seen from country like China. China underwent this period for about two months (since 23.1.2020 to 25.3.2020) to stop further spread. So, we need to believe that we can too.
The following are the important financial planning tips using the RECALCULATE formula:-
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You need to take immediate action now to recalculate all your assets and liabilities, daily expenses, monthly expenses, monthly income, and etc. This is important in order to make sure that your family has enough monies to go through this period and survive for at least six to twelve months.
E. Emergency Fund
The standard number of savings to have is six (6) months’ of your gross salary. This is important in order for you and your family to go through this period to cover the family living expenses such as food, children/babies’ expenditure, petrol, utility bills, insurance and etc. According to BNM survey, Malaysians can hardly come up with RM1000.00 for emergency purpose.
C. Cash flow planning and Budget report
You and your wife must sit together to discuss and do a cash flow planning for a year ahead to get the forecast of a positive cash flow instead of negative cash flow. Likewise, the budget report will help you and your family to plan on essential expenses and spend for the next twelve months.
A. At home
Work from home to earn your income and also extra income. However, do make sure that you have reliable fast speed Wi-Fi for your online work purpose. Those without income may opt to join online platforms to sell your own products to get side income. For instance, you and your wife can cook delicious meals or bake a cake, and use this talent to sell your food online by using grab food or foodpanda as delivery options to your clients.
L. Long term liabilities
As per government’s move on debt moratorium, you can delay your bank loans for six month with the term and conditions that no overdue of 90 days previously. With this excess cash saved without paying loan for the next six months, you can now convert this extra money as your emergency fund.
C. Current liability
Check again your current liability such as credit card or personal loan. Please do act according to the government’s move as I said for credit card case. Kindly contact your bank for further enquiry.
U. Using online bank accounts and email
This is the most important step to do. As we need to stay at home and monitor our money in the bank account and make payments for utility bills, insurance premium, to receive online side income and etc. Everything is by a click, and it can save you time and hassle. Email is also helping us to communicate effectively with others.
L. Long term investment
Some of you may have surplus of cash due to early savings habit from the start. Therefore, this cash may be useful for investing in good investment products like equity counters, unit trust funds, bonds, or other investment alternatives. However, pls do check your risk profile before embarking on any investments.
A. Active communication with a Licensed Financial Planner
If you still have no clues about financial planning matters, do contact your financial planner for further assistance and advice.
T. Term life insurance
Please check on your sum insured that it is at least six to ten times of your gross annual income (rule of thumb method). The main reason is to protect your family against the loss of main income earner from unfortunate events happening such as death, total disablement, diagnosed of critical illness and etc. My advice is top up to increase the sum insured. The suitable product now is term insurance that gives high protection with lower insurance premium since during MCO period you and your family need to spend money on other things.
E. Estate planning
Pls do not feel superstitious about Wills.
If you love your spouse and children or parents, writing a Will is actually making things easy for them as the beneficiaries they will have access to your wealth and property upon your demise. According to the Malaysia Distribution Act 1958, a person who passes away without a Will, needs to go through an extra step such as appoint a valuer, get two sureties to apply letter of administrative to unlock your estate (wealth).
In contrary, a person who passes away with a Will, need to apply for a Grant Probable to unlock the assets in order to distribute it accordingly to your beneficiaries as per your wish. It is also important to also make sure that your nominated names are listed for your insurance policies, KWSP and etc.
**The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of the editorial board.
CFP CERT TM
Chairman of FPAM JOHOR CHAPTER and also licensed financial planner of Phillip Wealth Planners Sdn Bhd. He can be contacted at firstname.lastname@example.org.