Covid-19 has hit the global economy on an unprecedented scale. Everyone from multi-billion dollar corporations to your neighbourhood nasi lemak aunty has seen their finances take a hit. Some of us have seen our incomes reduced or have even lost our jobs.
According to a survey conducted by the Department of Statistics Malaysia, most Malaysians do not have adequate savings (more than four months) for pandemic. No one expected this, so it’s not surprising that most of us are unprepared.
We’re creatures of habit and the MCO has forced us to change our lifestyles in the most drastic manner. We can no longer step out of our homes for a cup of coffee, and we’re learning how to be better cooks at home because that’s where we are, 24 hours a day. We’ve even learned how to carry out minor home repair and maintenance works on our own.
Our financial planning must take on a more sustainable approach. Exercising discipline has become second nature to us during this time, and we can actually take this a step further to help us plan our finances.
Get financially prepared for The New Normal.
Malaysia has one of the highest household debt levels in the region, with the bulk of our salaries going into repaying loans and credit card debts. Credit cards incur a higher interest/actual management fee than car or home financing and will be detrimental to your budgeting. Now that you’re spending less, it’s the best time to settle that credit card debt.
Seeing that magical “zero” outstanding balance on your cards is going to give your motivation - and your budget - a major boost. Over time, you’ll get out of debt and even start to save!
Consolidate your credit card debt with a Balance Transfer. Your bank can offer to transfer your balance from your existing card with another bank onto a card with a lower interest/actual management fee, or none at all. A Balance Transfer can save you a substantial amount of money and with a lower monthly payment, you will pay off your debt much sooner. You’ll also be able to buy some time before you have to make the first payment.
It might make sense to take on a Personal Financing facility to settle your credit card debt. You’ll be able to settle your outstanding amount in full, but still have to repay the loan/financing. If you need extra cash, take a loan/financing slightly larger than your outstanding balance, but commit to the payment plan.
If your source of income is disrupted you aren’t able to make your minimum monthly payments, you can contact your bank and opt to convert your credit cards’ outstanding balances to a term loan/financing at an effective rate of not more than 13% per annum. Consider this if the interest/actual management fee is lower than what you are currently paying.
RHB is dedicated to help ease your worries with our financial assistance.
Seeing a shrinking balance (and more cash flow) is a great motivator, especially if you have trouble sticking to a plan. Apply the ‘snowball method’ to pay off your credit card debt by clearing the one with the smallest balance first. You can also rank your cards, prioritising the highest interest/actual management fee. Pay the minimum amount for ALL your cards but allocate as much as you can afford for the card with the highest rate. Once that card is cleared, apply the same method to the other cards.
Adopt simple money-saving lifestyle changes such as cooking at home and carrying out basic DIY home repairs. Stick with what you can afford without accumulating new debt.
If you have travel plans, postpone them until you have cleared your debt, or opt for a cheaper trip that you can pay for with cash.
If you really don’t have the means to pay off your cards, talk to your bank about restructuring and rescheduling your debt.
Continue with your lifestyle changes and continue to service your cards until the whole balance has been paid off.
If you’ve managed to save some money during the MCO, place it into emergency savings or invest in an insurance/takaful policy that will boost your retirement fund. Speak to your bank for options.
If you need more help in managing your finances and are still earning a steady income, enrol into the AKPK Debt Management Programme. AKPK will help you come up with a suitable restructuring programme that will get you back on track.
There are options such as personal financing and cash advances to help you get back on your feet. You can discuss refinancing your home or taking on an overdraft. However, only consider these options if they can provide you with the opportunity and time to improve your financial situation and will not inconvenience you in the future.
This is the time to minimise and prioritise. Adopt prudent spending habits, and you can also sell items you have not used in the last six months.
Do you know that a credit report can act as a shining light into your financial background, helping to reveal personal payment history, lending and credit worthiness. Regularly reviewing a credit report, you will be able to identify the area of your credit health that need fixing and maintain a healthy financial state.