As COVID-19 sweeps across the world, affecting the lives of billions, infecting millions of people and crippling businesses, many find themselves unsure of how to proceed with their financial lives in these uncertain times.
While waiting for regulations to be placed or lifted, one thing you can do as responsible global citizens is to continue following the guidelines of local authorities and maintain safe distancing in order to return to normal lifesoon.
Anxiety about the future is unavoidable as the economic fallout from COVID-19 may potentially reverse the global economy into a recession. For some, the current circumstance has made you think about whether you are truly equipped for uncertainty, or even certainties in our future such as retirement. To protect yourself and your loved ones from similar situations in the future, you can take active steps to mitigate certain fears and bolster your finances to ensure you are better prepared for the worst.
1. Build an emergency fund for a rainy day?
Few industries remain unaffected by the coronavirus pandemic. Businesses in Singapore will experience a loss of business from shutting during the circuit breaker. There are warnings of increasing job losses and slower wage growth as economic recession looms.
One place to start having a financial conversation is asking whether your family can sustain your existing standard of living in the coming year if COVID-19 persists in weakening the global economy.
To make your emergency funds last longer – to maintain your standard of living should an unexpected financial emergency arises – you might like to consider making adjustments to your expenditure and look at where you can start saving. Ideally you should have liquid savings worth of at least six to 12 months of expenses. To make your emergency funds last longer, you can also look at shedding unnecessary expenses while diversifying your income streams.
2. Manage your monthly cash flow prudently
As no one knows when the current pandemic will end, being able to stretch your emergency funds as long as possible is important. For majority of people, your main cash inflow is through your job. This means ensuring you stay in employment or even accepting a temporary pay cut to ensure you don't lose your entire pay cheque. This is also when multiple income streams will help make up for potential shortfalls in other areas.
Another related conversation is to downsize your lifestyle. This will allow you to channel more cash into your emergency fund, while also stretching your existing emergency funds to last longer.
Drawing up a simple monthly income and expenditure statement will help you assess your current financial health, areas of strengths and weaknesses and where you and your family stands in the coming months. Armed with this information, you can more easily regulate the amount of money that comes into and leaves your account.
If you are in the fortunate situation of having surpluses and have the risk appetite for it, investing during a depressed economic landscape can provide significant upside in the long-term. This can strengthen your income stream from dividends or bond coupon payments.
3. Know your insurance coverage
The current COVID-19 pandemic shows just how unpredictable and fragile life can be.
The Singapore government has mandated for lifelong universal healthcare coverage for every Singapore and Permanent Resident through MediShield Life. Many others also have a complementary private Integrated Shield Plan (IP), that allows you to receive treatment in higher class wards in public hospitals or cover you for private hospitals. Some private IPs require you to seek treatment from a list of approved doctor for more comprehensive coverage.
AIA HealthShield Gold Max, our private IP, offers holistic healthcare solutions that take you from diagnosis to recovery and gives you options to seek treatment you require at either private or public hospitals and stay in various ward classes with a claim limit of up to $2 million per policy year, as well as extensive coverage for pre- and post-hospitalisation coverage.
Through our exclusive partnership with WhiteCoat – providing professional, on-demand video consultations with Singapore-registered doctors – AIA has pioneered telemedicine in the industry. This helps to reduce the need to leave the comfort of your home or queue at a doctor's clinic when you are unwell.
Do you also have sufficient critical illness and personal accident coverage for your family to take care of you and continue to live their lives with minimal disruption if something unexpected were to happen to you?
AIA Guaranteed Protect Plus (IV) is designed as an affordable one-stop solutions offering protection that can be tailored to boost coverage during the years you most require it. AIA Beyond Critical Care offers premium refund on top of protection against major stage critical illnesses (CIs) and relapse as well as mental illnesses.
4. Don't neglect your health and wellness
Those who are healthier, and without pre-existing conditions, are generally able to fight the coronavirus better. This extends to majority of other health conditions, and not just coronaviruses. A silver lining would be if people come out of this pandemic prioritising their health.
Talk to your loved ones about each other's current health conditions. At the very least, it will encourage them to be more conscientious about personal hygiene and safe distancing measures, if they are not already doing so.
You should also discuss how to keep fit as a family. Being accountable to one another also gives you the push to stay committed even on days you feel lazy.
You shouldn't wait to start after the pandemic either. With social environments like gyms and public pools now restricted, you can pursue more creative methods to keep healthy and fit as a family.
With technology, you can even bring a professional trainer to your home in the form of mobile apps and virtual fitness classes, with workouts from yoga to High Intensity Interval Trainings (HIIT). You can also mix it up by planning to run a quiet route if possible near your home.
The other pillar of a healthy lifestyle is eating right. Filling half your plate with fruit and vegetables, a quarter with whole grains and a quarter with meat or other proteins is generally an advisable way to portion your meals. You might also consider using healthier oils when preparing meals and choosing water over surgery or calorie-laden drinks.
With opportunities to work from home, you can jump on the app bandwagon to try out interesting and healthy recipes as a family. While buying groceries online can be challenging during certain instances, doing so will help you avoid impulse purchases of unhealthy snacks and observe prudent safe distancing measures.
AIA Vitality partners you to stay active with online health assessments and a wide array of challenges suited to your fitness level. At the same time, you can also receive rewards such as discounts on health screening packages, vaccinations, dental assessments, sportswear, fitness devices, gym membership, and more.
5. Is your retirement plan robust to overcome uncertainty?
You can see how Covid-19's drastic impact on the stock market can derail retirement plans if they are heavily reliant on stocks and REITs.
While everyone's risk appetite differs, generally, those who are younger can afford to have greater exposure to riskier investments such as stocks as they have a longer time horizon to ride out Covid-19 and future downturns. This is why it is important for investors to recalibrate their asset allocation into safer investments, such as fixed income or annuities as they age. At the same time, investors also need to understand their personal risk appetite and ability to take on risks.
It is important to strike a balance between your CPF accounts, which ultimately provide a lifelong monthly income under CPF LIFE, and investing into riskier assets, for your retirement needs.
In times of a global market crash, your CPF Special Account continues to pay you 4.0% per annum on your balances while stocks may plummet. In times of economic upswings, the stock market can be much more profitable.
Preparing for a shock, even before it strikes
Having these conversations as soon as possible will help you in #EmbracingNewNorms.
At the same time, while no one can predict when the next downturn will happen or what may cause it, implementing sound financial plans around these important discussions will better equip you to ride out the next downturn.
You will also be in great financial shape to benefit from upturns by making informed financial decisions, as you enjoy peace of mind, in the form of sound financial safety nets. To find out more about how you can secure your future, speak to an AIA Financial Services Consultant or Insurance Representative today.