Post pandemic budgeting – How do we take control of our financial health

We are in uncharted waters globally. Not long ago, we saw that a cup of bubble tea was in greater demand than a barrel of oil. Indeed, COVID-19 has upended life as we know it, grinding it almost to a halt, hurtling us into an economic recession that’s not of our making. For many, this has deepened worries about money with news about businesses shuttering, wage freeze and pay cuts, and even job losses dominating today’s headlines.

It begs the question: Are we equipped with financial strategies for these unpredictable times? It's a tough question. While we might feel confident in our preparations, there are always measures to further enhance our financial resilience against future challenges. Let's delve deeper.

 Step-by-Step Guide to Financial Planning Post-Pandemic

If you're looking for a starting point or need guidance to modify your existing plans, this guide serves as a robust budgeting roadmap for the post-pandemic scenario:

1. Expense Tracking and Budgeting

For starters, understanding your financial movements is foundational to managing your funds effectively. Having clarity on your income and expenditure empowers you to make decisions confidently and paves the way for financial resilience. Amidst the post-pandemic uncertainties, maintaining an organised record of your expenses and planned allocations shields you from unexpected financial challenges.

Kickstart your post-pandemic budgeting by:

• Expense logging: For a month, jot down every expenditure, no matter how insignificant it may seem.
• Categorisation: Group expenses into fixed (like rent or mortgage) and variable (like entertainment or dining out).
• Prioritisation: Identify and differentiate between wants and needs. This helps in trimming down non-essential expenses.
• Consider relief options: Financial assistance related to COVID-19 is available in various forms such as the COVID-19 Recovery Grant. You may also browse through the SupportGoWhere portal or use the Support Recommender tool to find schemes that you may be eligible for.
• Digital aids: Utilise apps or digital platforms to track and analyse your spending patterns over time.

2. Debt Assessment and Management

If you find yourself in debt, remember that it isn't inherently negative. However, when not managed wisely, it can lead to substantial financial burden. Here's how you can better assess and manage debts effectively:

• Debt cataloguing: Start by making a comprehensive list of all your outstanding debts, from credit card balances to loans.
• Interest rate review: With post-pandemic budgeting in mind, take note of the interest rates on each debt. Higher rates often mean more money drained over time.
• Strategy development: Prioritise paying off high-interest loans first. This method, often referred to as the avalanche method, ensures you pay less over time.
• Stay informed: Be aware of any relief or deferment options that financial institutions in Singapore might offer due to pandemic-related challenges.

3. Investment Considerations Post-Pandemic

As we transition into the post-pandemic era, the focus isn't on returning to old investment strategies, but on understanding and adapting to these new market dynamics. Let's explore the pivotal considerations for post-pandemic investing in your financial planning efforts:

• Risk tolerance: Some of the things to think about when investing include defining your risk tolerance. Post-pandemic, some may feel more conservative, while others might spot opportunities in volatility.
• Diversification: Ensure your portfolio is varied, spanning across industries and asset classes to mitigate risks.
• Regular portfolio rebalancing: With market dynamics constantly evolving, it's essential to periodically review and rebalance your portfolio to ensure it aligns with your investment objectives.
• Stay updated: Regularly attend webinars, or engage with financial advisors in Singapore to get local insights on investment trends.

4. Ensuring Adequate Insurance Coverage

When was the last time you assessed your financial health? If you’ve not done so recently, now is a good time to do it as part of your post-pandemic budgeting.

You may be tempted to deprioritise insurance, regarding it as an expense with no immediate benefit, and put more focus on easing immediate financial pressures, but consider this: insurance is the essential first step towards risk management and financial planning. Here’s how to begin:

• Policy review: Examine your current policies to see if the coverage aligns with your current and future needs.
• Diversify your coverage: It is also essential to have a mix of different insurance policies – from health and life insurance to coverage against critical illnesses and disabilities. This diversified approach ensures a comprehensive safety net.
• Pandemic-specific coverage: Some insurance providers in Singapore introduced policies with benefits related to COVID-19. Consider integrating Income’s range of plans to get started.
• Emergency health concerns: Given the health implications of the pandemic, ensure you have comprehensive health insurance that covers major medical expenses.

The Critical Role of Insurance in Financial Stability

Think of your financial plan like a car. Many people look at a car’s rate of acceleration as a measure of its power. But how many of us think about its rate of deceleration, which can lessen the impact if it is able to slow down at a faster rate than it speeds up. Having sufficient insurance cover is like having good brakes that help cushion a hard blow.

It’s like a protective bubble to safeguard our savings and investments to ensure our long-term goals are not derailed by unexpected and unfortunate short-term events. In short, it is an integral part to achieving financial stability.

When bad luck comes knocking, emotional and mental stress can get compounded by financial stress. If steady cash flow is important to you, imagine how a sudden, large healthcare bill or even temporary loss of income will add strain to your finances during times of economic uncertainty where every cent counts.

I’ve been in financial services for over two decades and far too often I see people ‘borrow from the future’ – dig into what they’ve set aside for something down the road like education, a new house or even retirement, to meet present financial expenses which we did not plan for.

The impact is not just now, but on your future too

On the topic of retirement, as we assess our financial commitments under pressure, it’s easy to let our retirement plans take a backseat – forgo the long-term goal to focus on meeting immediate needs. With retirement adequacy an on-going concern in Singapore, this is not ideal as we would only fall further behind in saving enough for our golden years.

A survey Income commissioned in 2019 showed us that Singaporeans know they have better opportunities to plan for their retirement than the generations before. Therefore, we should try to avoid foregoing retirement planning altogether, even when finances are tight, and find a plan that helps us keep our future dreams alive. Use a mix of savings, investment and protection tools such as personal savings or investments, as well as CPF, health and life insurance to work towards your retirement goals.

Remember also that any investment, including our retirement plans, should have a longer “time in market” rather than “timing the market”.

Kickstart your Post-Pandemic Financial Planning

The aftermath of the pandemic has reshaped our world in countless ways, including how we approach our finances. Get started by reviewing your financial health to see where the gaps are so that in time to come, you will find ourselves financially stronger and better prepared post-pandemic and for the days ahead. For additional insights, explore common misconceptions about financial planning.