The Covid-19 pandemic has disrupted the lives and financial plans of many Malaysians. But as we learn to live with this illness as part of our everyday lives, it could also be a good time to rebuild your financial health. So, if you’ve had a tough time financially during this pandemic, here are 4 tips to help you get back on your feet.
- Consolidating Debt
During times of crisis, you may have to take loans to help you survive. Reducing debt should be a high priority goal as the owed amounts can very quickly gain interest or become unmanageable.
Start by listing down the debts and loans you have. Then, categorise them according to loan size and interest rates before deciding if you will clear your outstanding amounts with the debt snowball or debt avalanche method.
Once you’ve cleared off your debts, you’ll feel a sense of relief and renewed confidence. The increased cash flow could also motivate you to achieve your other financial goals.
- Reworking a “New Normal” Budget And Cashflow
The pandemic is still changing rapidly and constantly, with more people staying in and working from home to reduce their exposure to the virus. As a result, there have been huge lifestyle changes.
Be mindful of new habits that may develop such as online shopping, reduced transport expenses or even increased spending on groceries.
With the situation continuing for the foreseeable future, it is important to take stock of how your cash flow has changed and adjust accordingly. Try using our budget calculator or reading our guide on Planning & Budgeting to help you with your spending plan.
- Rebuilding Emergency Savings
Some of you may have dipped into your savings during this time due to sudden expenses, job losses or pay cuts. So, it’s important to rebuild your savings as that amount of money will be your financial cushion should other unexpected difficulties happen in the future.
- Rethink your financial goals
Within this period, your financial needs and investment risk appetites may have also changed. You may want to increase your coverage on your insurance or re-look your strategies of building wealth.
In some cases, timelines for longer-term plans such as retirement planning may have to be changed because you might need more cash in your hands now. So, you might have to think about whether you’d prefer to delay your retirement age by 5 years because you want to increase your emergency savings today. Or, you may want to cut all travelling plans in the short-term and channel these savings into investments.
Review your goals not only in the short-term but with the big picture view in mind.
How to start recovering your financial health?
Now that you know the ways you can recover your financial health, here are some steps for you to get started:
- Identify areas causing you financial stress, like debts that you owe or bills that you haven’t paid.
- Rank what needs to be paid most urgently.
- Finally, break it down into payments that you can afford. Don’t be afraid to try and speak to your lenders or creditors to discuss a payment plan that you can afford. If you’re having difficulties managing your debt, read our blogs on how you can discuss payment options with your lenders/creditors and what you can do to get your debt back on track.
Ultimately, keeping your finances healthy is more of a habit than a sudden movement. Small efforts can turn into big results, and these habits can be important in improving your general financial health, even when you’re not facing financial challenges.