From a financial perspective, what would be some key lessons that the pandemic has shown us?

FMT speaks to a financial expert for some insights.

“It is important to always maintain a reserve fund of at least one year of your monthly expenses or six months to one year of your income. This is key because, during the pandemic, there were people who lost their jobs or had their income reduced,” said Lim Ming Liang, a Capital Markets Services Representative’s License holder.

The licence is issued by the Securities Commission Malaysia to allow an individual to carry out regulated activities on behalf of a principal. Lim also holds a Bachelor of Accountancy degree from the Universiti Malaya.

“You must have enough reserve so that you can still service all your commitments and sustain your lifestyle until you find another job or a secondary source of income,” he advised.

He also pointed out that it wasn’t easy to secure another job in the early days of the pandemic as there were many uncertainties.

“Secondly, when it comes to your investment, always have some additional cash in hand instead of fully investing all of your funds. This will allow you to seize any suitable investment opportunity that arises.

“For example, during the pandemic, there were some good opportunities in the stock market,” he shared.

Lim also highlighted the importance of having a will.

“After all, everyone is susceptible to the Covid-19 virus,” he said, adding that he personally knew of a case where an older individual caught the virus and passed away without leaving a will. This eventually caused a dispute among the family members.

How to be financially prepared in 2022

Based on these lessons, Lim recommends four financial resolutions as a brand-new year begins:

1. Build your reserve

“If you do not have a reserve yet, you can start by allocating a certain portion of your monthly income towards your reserve.”

For those struggling to save, he suggested asking these two questions: are your expenses too high or your income too low?

Once you have a clearer idea, you’ll know whether to cut costs to bring your expenses to acceptable levels, or supplement your income with a part-time job.

2. Invest regularly

“After you have built a sufficient amount of reserve, cultivate a discipline to set aside a portion monthly towards a suitable investment based on your risk appetite.”

For brand-new investors, it is advisable to seek the guidance of a financial planner to get a better understanding about investment.

3. Get insured

According to Lim, since insurance policies only cover those who are already healthy, it is best to scout for an insurance policy while you are still young.

“You should at least have a medical card. Imagine that you have spent years building up your reserve, and one day, you are involved in a car accident. Without a medical card, you might end up having to use the reserve that you have painstakingly built for so long to pay for your medical expenses.

“Insurance is always a priority,” he advised, and suggested allocating 10% of your total monthly income towards insurance.

4. Write a will

“A will is very important as it can help with a smooth wealth distribution process. After all, you need to prepare for the unexpected,” he shared.

Practise financial discipline

With the economy reopened, it may be tempting to spend your money after living for months in lockdown. Apart from the four goals, what are some good financial habits a person can adopt?

“Avoid unnecessary spending, or even unnecessary meet-ups. It is also important to save first before you start spending. Don’t save what you have left at the end of the month.”

To help with this, he suggested saving a predetermined amount in a separate bank account to avoid overspending.

Before you start splashing out on buying luxurious items, it is better to build up your reserve first. “Learn how to differentiate between your ‘needs’ and ‘wants’. If you have just started working, why opt for a very expensive car?”

“Also, when it comes to pricey coffee, there is nothing wrong in enjoying them once in a while, but just not too often. Always live within your means,” he added.

So there you have it – sound advice you should take heed of to keep yourself on sound financial footing in 2022.