[Fin Talk] Cash Quotient During Community Quarantine
Updated: Apr 28, 2021
By Arlyn Tan
It has been one year since we had our very first lockdown. We thought that we will be out of our houses now with moderate mobility. However, we find ourselves in the community quarantine again. What does this mean to your personal finance?
Everyone needs to pause and understand the implications of cash levels. This experience is like checking the family car’s gas level if it is good enough for the family to reach its destination. Low levels of cash signal the need to start sourcing for cash.
Checking the family’s financial plan is like evaluating the engine of a car. A robust engine can traverse dirt road because of its power. Your financial plan with the right foundation and elements will help you withstand the turbulence caused by the pandemic. Apart from the current cash from the monthly income stream, the other sources of cash can help the family survive the community quarantine.
Here are 5 tips to have healthy cash levels.
1) List all your possible sources of cash, from the simple bank interest income of less than 0.25% to the investment income which can range from 20% to 30% when you braved the tanking market in 2020.
2) Manage your lifestyle, and you define your expenses. Simplify your wants to bring the expense level to minimum. And you will find yourself having more cash.
3) Breadwinners’ greatest fear is when the streams of cash coming to the household slowly dries up because of underemployment and possible unemployment. Fear not because there are institutions and products which are designed to provide cash during low-productivity seasons.
Knowing how and where to borrow funds can ease the tight cash levels. Approach your HR to know the cash advance policies. Research on your eligibility to borrow from financial institutions.
4) Set up emergency funds strategically. You can either use your cash 100% or you can leverage on the design of a financial product called insurance. By paying a premium to an insurance company, you are guaranteed to have cash levels like 250K up to millions in unexpected moments like sickness, disability, and property losses.
The Emergency Fund is the available cash in any form that can help support the family’s main expenses. These include food, rent, electricity, monthly dues and medicines which will keep the family afloat for at least for 6 months.
The pandemic added one more heavy unforeseen expense item that can cause a family to seek financial assistance from family members or online platform. I could just imagine on how the bills pile up for the families who became symptomatic as a group. The spectrum of expenses ranges from medical care, medicines, equipment to temporary loss of productivity of family caregivers. This situation is a crisis which calls for a huge amount of emergency fund.
5) Seek opportunities to grow your money, either through entrepreneurial or investments in companies that you believe will grow within the next 10 years.
Investing regularly in stocks, mutual funds or unit investment linked products enables you to beat inflation and have extra source of cash when done right and given enough time.
Because cash transformed from physical to digital form, new trends in economic activity have emerged. Even the non-digital natives are able to buy from e-commerce platforms or viber groups. This created a surge of homebased entrepreneurs and online shoppers. Increasing your income stream can bring your car’s gas tank to high levels which eliminates fear. It will allow you to pay off debts if ever you availed them.
The pandemic teaches us to develop Cash Quotient by accepting the challenge to manage our cash and eliminate the consequences of poor planning. We will always experience small and big wins in this balancing act of maintaining healthy cash levels. Investing in a robust financial engine will give you the power to experience freedom while staying locked in the very confines of our home.
Arlyn Tan is a Strategic Wealth Consultant. She helps individuals and organizations on how to maximize the value of their money through risk, health & wealth management. Her mission lies in making sure that clients achieve 3 things. First, they reach their milestones on time with sufficient resources. Second, they protect them from the impact of economic losses secondary to unexpected events. The third and most important is that they enjoy meaningful and balanced lives.
LinkedIn/Twitter: Arlyn Tan