COVID-19 struck and changed almost everything people knew and believed in. The two most impacted areas are the savings and spending habits. How have these two aspects changed?
As the Singapore economy gains momentum on its recovery, consumers are finally getting a sigh of relief as they recover financially. The rule of thumb for most people is to ensure they have savings worth 6-12 months, but the pandemic made this almost impossible for millions of people in Singapore and across the globe because of the massive loss of jobs.
Now, there is some light at the end of the tunnel. The economy is reeling back to its feet and businesses are now roaring back to operations, hiring and wiping off the lengthy period of turmoil. This will also come with growth in savings as people replenish their exhausted savings. In this post, we take a closer look at how the COVID-19 pandemic has changed people's saving and spending habits.
The Article in Brief:
COVID-19 created the story of two types of people or economies: those that save and others who simply try to make ends meet.
Financial advice given to people about the importance of saving still remains very crucial. So, you better make sure you have an emergency fund.
You should always use the advice of financial advisors to get your finances on the right path.
Some people in Singapore were able to save while others packed up debts during the pandemic.
In the US, about 64% referred to themselves as savers, while 80% more indicated one of their goals in 2021 was saving.
The Financial Bang from COVID-19
Taking a closer look at post-COVID-19 pandemic period, there is no doubt that it looks more blissful. However, the short-term is still uncertain. A significant number of Singaporeans only have a very small amount of money left every month while others have nothing. Again, debts incurred during the pandemic are also heavy on their shoulders.
Before the pandemic, many people had ample cash in their emergency funds, but that is now gone or needs to be replenished. The pandemic period has emphatically reminded Singaporeans that everyone needs to have a budget. Once you identify where your money is heading, it becomes easy to separate wants from needs.
We must say that separating needs from wants is easier said than done. Financial experts, such as Michael Resnick, explain that although the fact about savings is clear to all, the opening economy is likely to give people a sense of relief, making some start overspending. Some look forward to overspending and covering for the lost part.
Although a sense of spring-back to the pre-COVID-19 life is a good idea, it is paramount to try and ensure you spend responsibly. The pandemic was just a warning and you might never know when the next one might strike. So, have your eyes cast far ahead to avoid getting stuck the way many people were stuck during the pandemic.
Spending is Making a Huge Come-Back
Now that we have COVID-19 vaccines, more people are getting confident to venture out, and spending will no doubt grow. Unlike in the dark days of 2020 when everyone felt like hope was slipping away, people are now ready to reset, including more spending. Most of those vaccinated expect their finances to spring back to normal or have already reached pre-COVID-19 levels.
Even as the economy rebounds, consumers should not rush to overspending. The core principle of financial planning is focusing on the long-term with the aim of spending less than you earn. Still on the same baseline, you should ensure that the emergency fund is maintained at capacity to cater to all the unexpected occurrences.
Here, we agree with the age-old rule of thumb that you should always aim to have at least 6-12 months of your expenses saved so that you can manage without a lot of strain in the event of a job loss. Well, did the pandemic help you relook at the importance of this tenet? Most people did, and if you are yet to, it will be a good idea to join the ship because this could be your go-to kitty if everything goes the wrong way.
Are You Barely Getting By: Here are Some Important Steps for You
If your financial position is risky, it is prudent to take greater caution. According to financial expert Detrick, the economy is rebounding pretty well, but this might not feel the same for all. Detrick adds that although many debts got forbearance at the height of the pandemic, the same is likely to get lifted with the rebounding economy. Therefore, debt obligations are likely to come knocking for those who had taken loans. So, how do you handle it?
The bulk of this comes down to good financial planning, but it is never easy for many Singaporeans. The idea is to ensure that the available money is planned for correctly so that you can cater to all the personal expenses and still service the debts. Here are some useful things that you should consider:
Identify the prospects of your income returning. If the prospects are not good, it might be a good idea to consider changing your career. Remember that even the switch still comes with its share of challenges.
If you are not capable of doing something about your financial returns or income, take a dig at your expenses. Check closely to identify some wiggle room. For example, can you be able to negotiate for payments or initiate some austerity measures?
If you got some forbearance on your rent, mortgage, or student loan, check the rules again to determine how they impact you when the relief cover is finally lifted.
There are many actions that you can take and it is crucial to be as creative as possible. Remember that even if you are forced to make some very hard choices, maybe moving from a three-bedroom house to a one-bedroom, it is a better way than not having none at all.
COVID-19 was a wake-up call on how people's lives can suddenly turn without warning. Well, this might not be an experience that you want to remember, but the lessons should help sharpen your financial skills.
Now that the economy is getting back, you should rethink the short-term and long-term goals. So, what you need to do is be honest with yourself and your personal desires. Again, there is always some help out there if you can seek it. Here are some of the things that you can do:
Share with friends to establish what works for them and check how it can apply in your situation. Be critical and use their ideas to sharpen your focus.
Look for a financial advisor. You might want to ask your friends for a referral or dig online. If you are not in a position to pay for such services, check for experts who offer pro bono (free) services.
Trying to do everything at a go might become too much. Therefore, focus on one thing at a time. This way, you will be able to see progress and overcome one hurdle after the other.
Make sure to stay in good health. All of these actions require you to work harder and think more, which is only possible if you are in good health. So, take a lot of water, get some exercise, and avoid harmful foods. This way, you will remain focused and be critical of every action.
The ultimate goal is to build an emergency fund. No matter the situation, try to ensure that the kit is always ready for you before you can never know when the next challenge will come.
Remember that if you do not have ample cash, you can always get started by taking a loan to set the ball rolling. For example, if you are just back to work and there are so many debts, a debt consolidation loan can help to clear them so that you are left only with one loan. You might also want to use a personal loan to clear them. You can also take a personal loan to start an additional business for your spouse to increase the streams of revenue. Make sure to use Lendela for loan applications as we help you to get low-interest loans and avoid loan sharks.
