“I don’t have money for emergencies!”

If an unexpected crisis were to occur and you are completely unprepared, what can you do? Without a rainy day fund, what is the best course of action to take? How long does it take to save up for emergencies? How much should you save to be safe?

Some course of actions to take when you are caught in an unfavourable financial situation:
A) Be calm and assess how much money you need and what they are for.
B) Arrange them according to needs (living expenses) and wants.
C) Try to find a fuss-free way to earn some money in the meantime. Use your skills to freelance or ask around for any consulting job. Work part time if you need to.
D) If you need to borrow money, NEVER use your credit card. Credit card loans are the worst; interest is at 24% per annum.

Try to borrow from family and friends first. It’s humbling, but most will be sympathetic towards your plight. It’s tough to lend money to people you know so when you approach them, have a clear timeline and action plan on how you will return them their money.

The next option is to borrow a personal loan or a cash line. These are “cheaper” options when you need money urgently.

It depends on how disciplined you are in saving up for your emergency fund. Make it a priority. Give up little treats to ensure that you don’t have to worry about unforeseen circumstances.

Conventional wisdom states that you need 3-6 months of living expenses for an emergency fund. I think that you need at least 6 months, especially if you are losing your income.

“I can’t save enough.”

If you are living  paycheck to paycheck, earning just enough to pay the bills, feed the family and enroll your children in enrichment programmes, what are some strategies she can adopt? How does she start saving? How much should she aim to save?

I always believe that you should save 20% of your income. Automate your savings and have it credited to a saving account that you cannot debit.

I know that the struggle is real when one is living paycheck to paycheck but reassess your living expenses. Are you taking too much cab rides? Can you give up your daily indulgences? Instead of watching movies at the cinema, can you have a movie night at home instead?

I find that once you are forced to save, you will make a way to make do with the remaining funds you have. Try to make little adjustments in your life and be focused on the ultimate goal of protecting yourself in unfortunate circumstances.

“I’m living beyond my means.”

You’ve got an emerging cycle of debt threatening to take over your life and credit card bills stacking up. Maybe you need to keep paying for children’s tuition fees and pay for the domestic helper. What can you do to break out of this? Are there effective solutions, and if so what are they?

There is a 2-pronged approach we can adopt. Again, look at all the expenses you are incurring. Are all these necessary? Is the tuition essential? Are there any cheaper classes? Or can you approach your child’s teacher to give him/her extra attention?

As for the domestic helper, is it possible to get a part time helper? There are a lot of on-demand, 2 days per week helper that you can enlist. Or can you get the children to help out with the chores and reward them accordingly?

There is a need to recognise that a lot of things are wants and needs. Overspending on your wants, or what you think you need, is not viable in the long run if you can’t afford it.

“I’m not growing my money.”

What do you do with your savings in the bank if you aren’t sure how to manage your finances? With no money knowledge, what are some steps you can take to start growing their money? Who should you trust, and who should you steer clear of?

The first step is to determine your risk profile. At The New Savvy, we know how tough it is, and we have many articles that can help you with your investment decision. We have a whole section on “101 Guide to Investments for Women”.

How do you decide what to invest in – stocks, bonds, mutual funds, ETFs – how much and for how long? Once you know your risk profile, allocating the right mix of investment securities to your investment portfolio becomes easy.

Also, start by asking yourself the following questions:
Your age, lifestyle, budget – savings goals and income requirements – should all be considered.

Other considerations are:

Time horizon – Estimate the amount of time you have to meet your financial goals. Do you plan to retire when you are 60, or 70? Will you live to 90, or 100?

Risk appetite – Your risk tolerance looks at how much of a decline in your investments you would be comfortable with – 5%? 20%? You may be young and have a good salary and thus meet the risk profile of an investor who can invest in high growth stocks. If you are under high stress, though, due to the added risk, then it is not a good investment for you on an emotional level.  Moreover, investors who are under stress are more likely to make bad investment decisions.

Financial situation – Review your expenses and income, and assets and liabilities. Your personal balance sheet will help determine how much you can allocate to investments each month.

 

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C.E.O @ The New Savvy
Anna Haotanto is passionate about finance, education, women empowerment and children’s issues. Anna has been featured in CNBC, Forbes, The Straits Times, Business Insider, INC and The Peak Singapore. She was nominated and selected for FORTUNE Most Powerful Women conference in 2016 (Asia) and 2015 (San Francisco, Next Gen). Anna has 10 years of experience in the financial sector and is currently a Director in Tera Capital. Her previous work experience includes positions at Citigroup, United Overseas Bank, a regional role in Business Monitor and a boutique private equity firm based in Shanghai. She graduated from Singapore Management University (Finance and Quantitative Finance).