Ever wonder what are the important financial questions you need to ask yourself for this year?
This year has been tough for everyone. From forced to stay at home to having to live through movement control restrictions, you have endured the harshest period of your life.
There are important financial questions that you have to ask yourself to get a grip of what happened to your financial situation this year.
Find out below what are the questions you should be thinking about!
Contents
Question #1: What is your current financial position?
What is your current financial position? Is your income enough to cover all your expenses and debt obligation?
Start by monitoring how has your savings account changed since the Covid-19 pandemic. Is it increasing or decreasing from month to month?
If it is increasing, then you are one of the lucky ones who are able to pay your bills during this time of hardship. If it is decreasing, then you are the majority of the Malaysians this year facing declining income and possible loss of your job.
It is not easy to take an honest look at your current financial position as it reminds you and almost everyone that its going to be a tough period to save and pay your bills and financial commitments.
However, start tracking your savings, expenses and financial commitments for the year and analyse what are the areas that you can improve on or cut back on your spending.
Question #2: Did you achieve your financial goals in 2020?
Let’s face it, you and everyone else started the year off optimistic on the prospects for 2020. Even though Wawasan 2020 didn’t came to be, most of you had high hopes for 2020 being the year that you can achieve many financial objectives.
Noone could have anticipated that Covid-19 could throw everyone’s lives into such a tailspin. But c’est la vie, life goes on.
Instead of asking yourselves what financial objectives you did not achieve because of Covid-19, ask yourselves what are the things you achieve in spite of it.
You might have started the year off by aiming for an increase of 10% of your salary or a promotion, but retaining your current salary at the same level and keeping your job is already a blessing.
You might have been aiming to change your 10-year old car, but having a car that can take you to your workplace ensured that you are still earning.
You might have wanted to purchase that apartment this year for your family, but being able to still pay rent ensured that you still have a roof above your head and the price of that apartment will probably decline this or the next year, making it cheaper to buy in the future.
Think of your financial goals this year as a journey and stepping stones to the bigger picture next year and the future. Everything in life is relative, not absolute.
Question #3: How prepared were you to withstand the tough conditions this year?
To borrow a boxing analogy from Rocky Balboa…
“It ain’t about how hard you hit. It’s about how hard you can get hit and keep moving forward”.
Take a moment to think about your finances during the hard times where you weren’t able to work or were having a hard time paying your bills.
Did you have enough financial savings to buffer you and family for at least 3 to 4 months if you lose your job? Were there any financial resources and support that you could fall back to if it happens?
Start by listing down all your savings and investments that you and your family have prepared and determine what kind of spending warrants using them.
For example, food, water and rent must always come first and it justifies using your financial buffers to guarantee the welfare of you and your family. For other items like that sweater that you like from Uniqlo, these are not the priorities and you should refrain from spending on them in a time of crisis.
Start adopting the mindset of insuring yourself against tough financial situations, like how you buy life insurance for yourself and your family. Make the point of allocating a fixed amount of money every month in anticipation of a crisis tomorrow.
Question #4: What are your financial obligations and commitments?
The loan moratorium period by Bank Negara has expired as of September 2020. While that period has helped to address the short term cashflow problems of many Malaysians, you need to be prudent in taking into account your financial obligations and commitments for next year.
Start by listing in terms of importance, the financial commitments you have. It should first start from housing, insurance, cars, and then other types of personal loans.
Housing comes first as everyone needs a roof over their head no matter the situation. Insurance is important to ensure that you are covered in case anything untoward happens to you or your family. Cars are still important as you need to travel to work, but there are other public transportation options that you can consider.
While it is important that you are able to pay for all your financial commitments, sometimes you need to prioritise your commitments in case you can’t afford to pay for all of them.
It is not good to default on any of your financial obligations, but when push comes to shove, you need to make that hard decision for the long term future of your family.
Question #5: Do you need to evaluate your current financial principles?
For many of you, there are some financial principles that you practice during the normal times. However, as situation changes, you either find yourself holding fast to them or forced to change them to survive.
Ask yourself, what are your top 3 financial principles? Then evaluate whether those principles have helped or made it harder for you in 2020.
For some, you view building wealth through investments in the stock market, and not just your job as important. However, many investments before Covid-19 have turned sour and have not recovered to their previous levels. Securing your job might be more important this year then to survive to fight for another day.
Some of you might think that it’s important spending less than you earn. This couldn’t be more true today as that habit has enabled you to build up financial savings that could buffer you when times are bad.
Life is always changing at every juncture, don’t be afraid to change some of your financial principles if it means that you can get ahead in life. If that financial principle has served you well even now, keep it. If it didn’t, try something new and explore.
Question #6: Are you at risk of losing your job or having a lower salary?
Before you start stressing about this question, this isn’t meant to put you in a tough place to figure this out but rather to get you thinking how you can prepare in case they happen.
Start by thinking about the industry you are in, and how important is it that you are physically present at your workplace to work. If your work involves mainly sitting down at your laptop or computer producing work, you don’t have to worry that much about it.
If you are working for services and manufacturing industry, there is a high chance that movement control restrictions will be imposed on and off moving forward depending on the severity of Covid-19.
As these industries require physical presence at the workplace to be efficient, you are at higher risk if the industries suffer more.
You can mitigate your risk of this by considering alternative forms of income to supplement your main income, such as engaging in online tuition for students. There is higher demand now for online tuition as most schools are still closed.
Question #7: What can you do better in 2021?
2021 will be better than 2020. The first thing you can do is to be more optimistic about your financial situation and goals in 2021. Sentiments are expected to improve and businesses will look to expand during the economic recovery next year.
You can further improve your current skillsets and education, to adapt to a world that is increasingly reliant on information technology and the internet. There are many free online education platforms such as Khan Academy and EDX that you can take advantage of.
Furthermore, getting through a tough situation in 2020 enables you to learn how to get a grip on your finances better. Identify the kind of spending and expenditures that you cut down this year, and learn from them that you might not actually need them in your lifestyle in the future.
Set your financial goals with potential worse case scenarios in mind. While your financial goals must be specific, break them down into sub goals that you can reliably measure. For example, for a financial goal of getting a raise of 10%, set sub goals of 5%, 7% and 10%. If the Covid-19 situation worsens, aim for 5% as it will be realistic.
Conclusion
Ask yourselves these questions for this year, and learn from them what was good and what was bad. These questions will enable you to understand your financial situation better, and improve your financial planning for next year and the years ahead.
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Are there any other financial questions that you are thinking now? Let us know in the comments below!
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