The increasing number of Covid-19 of cases in these past few weeks have given anxiety to public, especially those financially affected by the crisis. What can you do to navigate financial risk in new normal?

Covid-19 cases have been rising to a new high in Malaysia from 2000+ cases to 6000+ cases despite the implementation of several Movement Control Order (MCO) restriction periods. It does not seem that the pandemic is going to end anytime soon, so what is the best way to manage personal risks in this new normal?

Managing personal risks means being prepared for the worst possibilities that might happen. It also means that ensuring should something unexpected happen, it would only leave little to no impact on your family’s finances and well-being.

Here are six tips on how to manage your financial risks in this new normal.

#1. Have a Sufficient Emergency Fund

Amid the pandemic, the economy has been severely impacted so it is no surprise that the unemployment rate is rising. Many businesses are unable to pull through, leaving them with no choice but to force pay cuts, undertake retrenchments, or worst, shut down their businesses. On the flip side, there are businesses that are quick to adapt to this pandemic that they are moving towards digitalization, which also leads to retrenchments as manual jobs are replaced.

These turbulent times has taught us that anyone can be at stake. With that fact, it is one of the reasons why it is crucial for us to build up at least 6-12 months of the emergency fund.

An emergency fund will act as our cash reserves that help us weather tough times when our income stream is compromised or insufficient. This backup cash helps us avoid relying on a credit card to keep afloat.

#2. Upskill or Reskill to Stay Relevant

With the rising unemployment rate, the job market is becoming more uncertain and tough. The supply of labour becomes greater now that more and more people are actively seeking jobs. Thus, it is essential to always ensure your skills are not obsolete and are still relevant to the needs of today’s employers.

There are tons of free and paid courses to explore online. You can get on websites like Linkedin Learning, Skillshare, Udemy, and Coursera to name a few. Here, you get to upskill and reskill whenever and wherever you are.

Apart from that, the Employment Insurance Scheme (EIS) under the Social Organization Society (SOCSO) also provides vocational training to those who eligible participants, including those affected by retrenchment. The training cost will be covered by them and you may also be eligible to receive training allowance.

In addition to all these, it is also worth being flexible and open to any job even though it is not paying as much, as this will not only help you with the relevant skills but will also help to stretch your emergency fund before you land yourself a suitable job.

#3. Lower Your Risk of Getting Infected

The Covid-19 virus does not discriminate and will attack anyone. Regardless of which category we are in, it is important to follow the standard operating procedures set in place by our Ministry of Health to prevent from getting Covid-19 and to ensure that we won’t become the carrier for those who are more prone to be infected.

Lead a healthy lifestyle; be it in terms of adopting a balanced diet or engaging in physical activities to boost our immune system. It is easy to opt for a sedentary lifestyle these days, especially now that some of us can work in the comfort of our home without having to travel back and forth to the workplace.

In addition to that, it’s crucial to get vaccinated to prevent you from getting infected with COVID-19, and by doing so, we can also help reduce the spread of the virus. You can register on MySejahtera app if you’re yet to do so.

By getting vaccinated you can do your part to help reduce the spread of Covid-19 and help to propel the economy to recover faster as lesser spread will lead to less unemployment and economic activity can run normally again. With better herd immunity among the public, people will be less anxious to go out in public and started to spend more on local businesses.

#4. Be Prepared for Unfortunate Events

As much as we try our best, we are all prone to risks, not just limited to covid-19. Death is inevitable, while total permanent disabilities and illnesses are unfavoured events and risks that we are exposed to. We need to prepare for these events to avoid leaving our family’s finances at huge risk of breaking the bank or worst, spiraling into debts.

These are scary events to think of, but we have to face the fact that not preparing for them will be more detrimental. So how can we start?

Think about how you would want your money to be managed in these events. For instance, if death happens, how would you settle your debts and ensure the survival continuation of your dependents? This is especially imperative for parents with minors and those with special-needs dependents. As for disabilities and illnesses, is being self-insured your option, or it is cheaper to opt to be insured in the first place?

Some things need to be prepared to help your beneficiaries and dependents cope if you are struck with the misfortune of disability, incapacitation, or death. For example, preparing will or wasiat ahead, tidy up your financial and personal data so beneficiaries can easily find it for further use. Good debt management also essential to help navigate a smoother process during the event of an unfortunate situation.

#5. Take Up Financial Initiatives Provided by The Government

Since the first Movement Control Order (MCO), there have been much financial assistance offered by the government to safeguard our people’s welfare as well as to continue stimulating the economy.

While some financial initiatives announced aimed to help the vulnerable groups and those who live on daily wages, there also some initiatives that are optional to be taken up like EPF i-Sinar advance facility and loan moratorium.

So, who should take up this financial initiative? Those with no or little emergency fund, who have experienced pay cuts or retrenchment, have high-interest debts like credit cards and personal loans, who are at risk of getting retrenched or even those who have a monthly cash flow deficit should consider taking these up.

Take the period of assistance as an opportunity to reset and improve your financial situation so it will be more resilient to withstand any shocks. Having stated that, it is also important to understand the impacts of utilizing these facilities.

The Employment Insurance Scheme (EIS) by SOCSO also offers Job Search Allowance (JSA) for those who are eligible, and if you are, you can claim the allowance for up to six months. This allowance will be reduced over the period so you should not get used to relying on it, but it will certainly help your emergency fund to last longer.

#6. Review Your Investments

‘Should I redeem my investments?’ is one of the questions I often receive recently, as people are fearful about the market uncertainty. If this is what you are thinking of, have an investment review and ask yourself these questions:

  • What is my investment objective for that particular investment?

The objectives of investments will determine how long you should stay in the market. A longer-term goal further in the horizon should be able to withstand the turbulence. This is also where the emergency fund plays a role to increase the holding power of your investment to help you not be forced to cash out your investments prematurely.

  • Am I able to withstand the ‘roller coaster’ movement of the investment?

If your answer is no to this question, you may want to switch to a lower risk profile. Switching to a lower risk profile does not mean that you are getting out of the market. It just means that you are lowering your exposure to high-risk investments and increasing exposure to low-risk investments so you will not have to experience the volatility.

  • Is my emergency buffer fund enough?

It is essential to have an emergency buffer in place prior to making any investment. However, different people have different circumstances these days. If you are experiencing job loss, and currently living on your emergency fund, you may want to have the last back up plan ie. selling your investment, should you exhaust your fund before you get to secure a job. It is a better option as compared to relying on high-interest debt such as credit cards.

With the current work arrangements, you may also find that you have extra money to invest. If this is the case, putting aside savings regularly will help you get into the market at different times and you will benefit from the market dip when investments are at a sale.

Conclusion

Being prepared with risks will give us peace of mind that things will be well taken of. Having a resilient financial situation will certainly help us weather this crisis. If you are unsure about how to go about your finances and stuck, do seek unbiased professional help. It may be a daunting period but there are also lots of opportunities.

‘Tough times never last, tough people do.’ – Robert H. Schuller

What is your action to manage financial risk during new normal?

You May Also Like