I initially wrote this piece for our National Young Lawyers Committee column "Putik Lada" in The Star, but the editor subsequently requested for something else on a specific topic, so I reproduce the article here. As parents with young children, I think this should be useful in helping us to get by in these tough times.
Many of us young working adults may have been too young to remember or feel the effects of the late 1990s economic recession, but the reality has struck this time as most of us are facing what could be a monetary nightmare.
The United States-based National Bureau of Economic Research (NBER) defines economic recession as: "a significant decline in [the] economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales."
Evidently those hardest hit are those working in the manufacturing and industrial sectors, with threats of retrenchment and lay-offs all around them.
Lawyers too have felt the pinch of the recession, especially firms which specialise in the property market, i.e. conveyancing. Due to the economic downturn, many people are unwilling to buy property or even to sell as the market value of their property may have dropped drastically. This in turn affects the banking sector as well as fewer people are taking up loans to finance the purchase of property.
In this doom and gloom, what then can we do? Life must go on as usual. Below are a few tips which hopefully can help to ease our financial burden in getting by during these tough times.
1. Use Cash
Credit cards, if used unwisely, can lead to uncontrollable spending and unnecessary debt. At most, keep a maximum of two credit cards for emergency purposes and auto-debit payments such as utility bills, insurance payments etc. Cash should be used for all other retail purchases. This will help users to make credit card payments in full. Banks make a fortune out of credit card debt and especially since the 20 days interest-free period has been done away with, this has become a burden to credit card users.
2. Refinance Your Property
There are many banks nowadays offering attractive packages to home-owners who wish to refinance their property. With the drop in the base lending rate (BLR) to 5.95% as compared to the previous 6.75%, home-owners should make full use of this opportunity to refinance. With the zero moving cost packages offered by the banks, home-owners need not spend a single sen on legal fees and disbursements, and at the same they are getting a better interest rate and paying less for their monthly installments.
3. Try To Live On One Income
Most households nowadays have two incomes, with both spouses working to support the family. It may be a good idea that each family try to live on a single spouse’s income, thereby putting the second income into savings. Although this may be more difficult to achieve in low to middle income earners, at least a portion of one spouse’s income should be saved. It may not look like much, but a couple of hundred of ringgit per month can go a long way.
4. Do Not Reject Hand-Me-Downs For Your Children
I recently watched a programme on television whereby a family of sixteen children often came home to find a bag of clothing on their front porch, clean and usable clothes given to them by well-meaning neighbours and friends. This family commented that they never rejected the clothes, and rather this helped them to save a lot of money on their children’s clothes. Although our situation may not be that extreme, taking hand-me-downs from friends and relatives can help us to save as well, especially so when children grow extremely quickly, thereby making buying new clothes quite futile.
5. Conserve Energy
High utility bills can put a strain on our wallets. Switch off the lights and fans when noone is in the room. Turn off the television if noone is watching. Use energy-saving bulbs. Wash a full load of laundry instead of just a few stray pieces. Use the air-conditioning only when absolutely necessary. These are just some of the ways we can help to save electricity.
6. Car-Pool
No doubt, the price of petrol has come down compared to a few months ago. However, this does not mean that it is cheap. If we car-pool, we can save on petrol as well as on parking fees, not to mention that it does wonders for the environment.
7. Buy Malaysian Products
Many Malaysian products are compatible to those which are imported. By buying Malaysian-made goods, not only are we helping to boost our local economy, we also help our government to save on the cost of importing foreign goods. On a similar note, many hypermarkets and departmental stores also carry their in-house brand which is much cheaper compared to “branded” goods. As wise consumers, we should stock up on these goods as every sen saved helps to go a long way. As the Malay proverb goes, “Sedikit-sedikit, lama-lama menjadi bukit”.
8. Keep A Check And Balance Sheet of Your Spending
It is always a good idea to make a record of our daily spending. By doing so, we can sometimes be amazed at what we spend our hard-earned money on. In this way, we can help ourselves to eliminate spending on frivolous items which we do not really need.
All of the above are just some basic tips to help us spend our money wisely and to have something extra for a rainy day. Having said that, however, an occasional splurge to pamper ourselves never hurt, as long as it does not take its toll on our pockets and we do not need to make painful sacrifices for it. The bottom line is, we need to be prepared and in doing so, proper planning is essential. As long as we fail to plan, we will indeed plan to fail.
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