Lessons from the Pandemic – How do we take control of our financial health
We are in unchartered 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.
A recent survey of 1,000 working adults by OCBC indicated that two out of three do not have savings to last beyond six months. This is worrying, and we should all be asking ourselves: Do I have financial plans in place to buffer from the downstream economic impact?
You think you may have enough, but do you, really?
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. 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.
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 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.
Most of us have stayed home more than ever these past few months, and have found ourselves doing things we’ve never done before – aspire to cook like Gordon Ramsey, prepare coffee like a world-class barista or even become a fitspo through endless online workouts. Even at home, we are not safe from risk of injuries and accidents. I know of someone who had a fall in her kitchen and injured her knee so badly that she required immediate surgery. Thankfully, the unexpected medical bill was taken care of by insurance.
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 last year 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”.
We’re crossing the half-year mark, but it feels like we’ve been battling this pandemic for a lifetime. The recurring theme over the past couple of months has been to ‘emerge stronger’ – as individuals, families, communities and as a nation. We do this by making decisions and taking positive actions to grow amidst the turmoil and come out more resilient, just like we did with SARS.
With Singapore gradually exiting circuit breaker, it seems like there is light at the end of the tunnel but many of us continue to feel financially vulnerable knowing that the economy will take a while to recover. We have a long way to go, so take stock and review your financial health to see where the gaps are so that in time to come, we will find ourselves financially stronger and better prepared for the days ahead.
This article is meant purely for informational purposes and should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income insurance advisor.