Preparing for troubled times as S'pore's economy enters tough period

The Singapore economy is “in for a tough period that will last for a while”, Deputy Prime Minister Tharman Shanmugaratnam said last month. Minister for Trade and Industry (Trade) Lim Hng Kiang said this month that the Singapore economy may face negative growth in some quarters. And advance estimates from the Ministry of Trade and Industry showed Friday that Singapore’s economy suffered its worst slump in four years in the third quarter.

With the economy sputtering along, and unemployment and job cuts rising, there is financial uncertainty ahead. By preparing well, though, you can be prepared for whatever may happen.

PLANNING AHEAD

While it’s unclear how severe the “tough period” will be, a key step in preparing for it is to develop a budget and then stick to it so you can manage where your money is going. As part of your planning, you could also cut out unnecessary spending, make changes to your lifestyle or reprioritise your financial goals. If a downturn does happen or if you face a job change, making further changes and setting up a frugal budget for a simpler lifestyle could allow you to concentrate spending on what is important so you can reduce your costs.

More than just drawing up a budget, though, it’s important to follow through and use it. The Simple Dollar founder Trent Hamm suggests taking tangible steps to make that plan real, since a budget is “useless” without action and taking real action in a positive direction is “perhaps the biggest stress reliever that there is”.

Using the budget may also mean you’ll need to reduce your spending while maintaining your lifestyle, self-contradictory as that may sound. Changes can include not buying things unless you actually need them, resisting sales pitches and cutting discretionary spending.

Canadian financial writer Gail Vaz-Oxlade also advises not taking out loans. “If you can’t live on what you’re making now,” she wrote, “how will you cope when things get tight?” If you have borrowed already, it’s time to start paying back credit card or personal loans so that you can reduce your interest payments. Then, put the credit cards away for a while and replace them with debit cards so you can stay on track.

MANAGING YOUR MONEY

Investment values and returns can drop during an economic downturn, so it is important take stock of your actual financial position. Along with calculating how much you have in your bank accounts and other investments, also look at how much debt you have for your mortgage, credit cards or other obligations.

Make sure your debt is manageable so you will not face even greater difficulties if a recession happens. If your debts are larger than you thought, you could consider selling items you no longer use through Carousell or Gumtree and using the money to reduce your loans. Prices will be better now than during a downturn when others have the same idea.

To make sure your investment portfolio is ready for whatever happens, it’s time to take a detailed look at your unit trusts, shares, bonds or other investments. If you have investments in higher-risk funds or companies or countries, it may be time to consider a shift to lower-risk options.

To make sure you’re prepared in case your salary is cut or you lose your job, you should also ensure that you have an emergency fund equal to about 3-6 months’ salary. While it can take time to accumulate this much if you don’t have it already, starting to save is essential.

You can also look for free things to do that you really enjoy, which allows you to put money you would have spent into savings and to become happier at the same time. Consider attending the free concerts at the Esplanade, strolling through the Botanic Gardens and taking in a free movie, signing up for free yoga or fitness classes through Sunrise-in-the-City, listening to talks at the national libraries or doing something else you enjoy.

PREPARING YOURSELF

One of the biggest uncertainties during a downturn is employment and income, so you should take steps to future-proof yourself. Rather than waiting to take courses later, take classes now so you can develop in-demand expertise. JobsCentral advises choosing two skills that you can advance on each year, taking classes and monitoring your progress.

Along with building your capabilities, build your network by attending industry events, having lunch with industry contacts regularly and attending networking events through apps such as Meetup.

You could also look at creating other sources of income while still keeping your full-time job. You might consider using your skills to become a freelancer, for example, or becoming an Uber driver on the weekend or a concierge shopper with Honestbee. Creating a blog can be another source of income, with one example being The Chill Mom blogger Michelle Hon generating about S$3000-S$5000 per month.

It’s important to maintain your health as well, since a poor diet or lack of exercise can put you off your physical and mental best.

TAKING ACTION

Even though it’s uncertain when or whether an economic downturn will actually happen, taking action to prepare will be beneficial. You may even find that it enhances your financial position as well as personal well-being for the longer term as well.