Quarter 1 of 2020 is now over.
It is probably an understatement to say that 2020 has been a bad start for everyone around the world. Probably more so for investors who have been investing over the past 5 to 10 years preparing for retirement.
Since the start of the year, market has plunged, wiping out 10 – 30% of retirement portfolios around the world.
While many other financial bloggers and us here have shared our take on investing during this period, we wanted to pen down our thoughts on another equally important matter – job preservation.
To us, the most important thing right now is job preservation, and this topic is probably quite understated in Singapore. This is especially important because companies are now cutting cost and freezing hiring during this period of uncertainties.
Decide If You Are The Cost Or Profit Center
Specifically, job preservation means that you have to decide if you are the cost or profit center of the company.
If you are the profit center of the company, you are less likely to take a pay cut or be laid off. Example of profit center is the sales department.
However, if you are the cost center, you are more likely to be affected if there are any cost savings measures in the company. Example of cost centers include customer service, maintenance, accounting, IT, HR and more.
Another thing everyone should do is to make sure that you are irreplaceable, or that it cost more to fire you than to hire your replacement in the long term.
What this means is that you have to demonstrate value to your boss, and be more proactive during this period to see if there is anything you can do more to help your company survive during this period.
Job preservation and mass unemployment is a very real problem, and because it is a lagging indicator, we will only hear about these numbers 2 or 3 months later when the government announce the quarterly unemployment rate.
However, we can use US unemployment data to give us a glimpse of what is to be expected.
Earlier last month, US announced that the number of people claiming for unemployment insurance claim reaches 3.3 million, 400% more than the highest ever recorded in the history of US. There are also no signs that this is slowing down.
Here in Singapore, companies are also earmarked to be closing down, and laying off their staffs to save on costs. The government has also stepped in and government agencies are actively creating temp jobs to ensure that Singaporeans continue to have employment income.
Preserving Cash inflow and Controlling Cash Outflow
Other than job preservation, which takes care of your monthly inflow, one should also look at his or her monthly outflows.
During this difficult period, cash is definitely king – and what we are actively doing is to make sure that we keep our expenses low. Because we are working from home now, we are cooking in more, which translate to slightly more savings.
All of our entertainment, travel and shopping budget are now shifted to zero as we try as much as possible to stay in and tide through this critical period.
Just as companies are taking this time to optimize for their finances, individuals should also take time to optimize their finances too.
For Mrs Budget and myself, we are also expecting dividend cuts from the counters we are holding on. SPH REIT had already announced a 78% reduction in their dividend, and we know that this will probably not be the only REIT to do so.
In similar vein, we also expected banks to cut the interest rates of high yield account, which all the 3 local banks have announced the past 2 days.
With the reduction of interest rates and dividend, that will reduce our monthly inflow, which means our outflow will have to be reduced too.
PM Lee and Minister Lawrence Wong has also shared in two different occasions that this will be a long drawn out battle, and will last at least another 6 months.
Times are bad folks. Please save up for rainy days.
Here at Mr and Mrs Budget, we will continue to update you on:
- What we are doing financially to cope with the slowdown in economy
- Updates on our portfolio and what we are buying and selling
- Important things to take note of during this COVID 19 situation
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