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How to Recession-Proof Your Household

The COVID-19 pandemic triggered global lockdowns and literally stopped life in its tracks for almost everyone across the world. Even though governments worldwide have stepped in with unprecedented relief packages for their citizens, irreparable damage has already been done to businesses and jobs.

With the stock market climbing higher and higher each day, people are hopeful of a V-shape recovery, but I'm not optimistic. I'm concerned that the higher the stocks surge, the harder they'll fall.

Photo Credit: Timothy Ang

Looking at my own business, logic and common sense tell me it will be a long and painful road ahead. Until a vaccine is found, I don't see how normalcy can return quickly. Our industry is linked to many others, and it will be a domino effect, with one affecting another in a bad way.

The situation is being propped up artificially by government support right now, with 75% of wages being paid by the government, foreign worker's levy waived, rental waivers, mortgage deferments, property tax rebates, etc. However, such support cannot last indefinitely. Once the government wage support falls from 75% to 25%, which will be pretty soon, businesses without strong cash flow and deep pockets will have to axe more staff. With multiple industries affected this time, unemployment will skyrocket. Those without healthy emergency funds set aside will find it difficult to keep up with their mortgage payments when their mortgage deferments come to an end.

Those hoping to live off their investments will not be immune too. More and more expats and foreign students are returning to their home countries, leaving rental properties vacant. Dividends may be cut or suspended by companies like REITS. There may be defaults in corporate bond payments and redemptions for highly geared companies with low cash holdings. Those who borrowed to leverage on their investments may face margin calls.

I will not forget the sight of deserted properties and mortgagee sale signs at every turn during the Asian Financial Crisis ("AFC"). Will that happen again? I can't say for certain, but I sense a fundamental difference between this time and the last. Before the AFC, Singapore was one of the Four Asian Dragons (the other 3 being Hong Kong, South Korea and Taiwan), with supremely high growth rates and everything looking up and up. However, the last few years before the pandemic hit us, we had already been experiencing dismal growth or even contraction, with foreign investment flocking overseas to cheaper, more commercially attractive countries.

Things are no longer rosy like before for Singapore. In fact, it has been a slippery slope down. If we're faced with massive foreclosures this time, it may take many years for our country to recover, if at all. Suddenly, the thought of Singaporeans having to go overseas to work as blue collar workers doesn't seem so unfathomable after all.

If you agree that financial security may be threatened, steps will need to be taken to recession-proof your household. Making more money and using less money are the obvious ways to ensure your household sails smoothly through the rough waters ahead.

Below is a list of 10 steps I've made for myself:-

No. 1: Increase household revenue by having multiple streams of income.

Sublet your house or apartment to receive rental income. Take on a second job. Start an online business. Build up your profile as a social media influencer on YouTube, Instagram, etc. Give tuition. Babysit. Be a dog-walker. Switch bank accounts for higher deposit interest rates. The sky's your limit when it comes to building multiple streams of income.

If you choose to invest in stocks or unit trusts for dividends, or in bonds for coupon payments, always be reminded that you must be prepared to lose every penny of your investment and that more investors lose money than make money in the market.

No. 2: If you've lost your job, take any that comes along, and don't be picky.

The key thing to avoiding bankruptcy is to keep your repayments or at least your interest payments current. If we keep tapping on our savings, sooner or later they'd run out without us replenishing it with our income. The hard truth is there are more job losses than vacancies right now, so one should not be unduly selective.

During SARS when the economy ground to a halt, I remember clearly having an airline pilot come to us for work as a part-time cleaner. He was licensed to fly a jumbo jet, yet he did not think any job was beneath him. He opined that any job was better than no job, and that whatever came along, he would do his best at it. He remained with us for a while, till he finally secured a position with an airline again. To date, he remains one of the most remarkable people I've come across. I was greatly humbled by him.

No. 3: If the lock-in period of your mortgage is over or about to be over, reprice the loan within the same bank or refinance your property with a different bank.

For most, property would be the biggest ticket item in one's household and mortgage payments the most significant monthly outgoing. Keep track of when your mortgage lock-in period is about to be up, and take steps to reprice or refinance it as soon as possible. Do not wait till the last minute as banks need time to process the documentation and the new reduced rates do not come on board immediately.

My favourite site for comparing mortgage rates is iCompareLoan. Input the necessary information, and the rates show up right away. I used the rates listed there to negotiate a better deal for repricing with my bank. It worked for one, but not another. No harm trying! It might help you save thousands like it did for me.

No. 4: Reduce your transport costs.

The Circuit Breaker made white elephants of our cars. With the ever-so-gradual reopening of the economy, there isn't much need for a car. There's simply no place to go. I haven't re-filled my petrol tank since March, 3 months ago!

Used car prices haven't come down much, since car showrooms are still closed from the Circuit Breaker. With the stock market surging, there might be people looking to celebrate their gains by purchasing a car. If you've a car or other vehicle you're not using much of, this might well be the last chance to offload it at a better price.

Where possible, walk, use a kick scooter or bike to move from one place to another. This way, you won't have to pay for transport nor have to be packed into a compartment where social distancing is minimal. You'll also earn your daily 10K steps much faster and lead a healthier life.

No. 5: If you've a domestic helper whom you can live without, send her home.

I'm sorry, Yati. We do love your sambal chilli and how you make our bed so nicely, but times are getting really bad and having you around means having to pay your salary, foreign domestic worker's ("FDW") levy, your meals, higher water bills etc.

I know of people living in huge bungalows who do not have helpers at home. Everyone in the family has to be more proactive in picking up after themselves. Make your own bed, wash up after eating and drinking, and scrub your own toilet bowl.

It's actually more economical to use a robo-cleaner and dishwashing machine than hiring a helper. You won't have problems of money and jewelry going missing, food that you saved for yourself disappearing, etc.

No. 6: If you've a costly bad habit like smoking or drinking, give it up.

Hey! There's no better time than now to do it.

No. 7: Save on electricity.

You're home more and you need to turn on the air-con more with the temperature pushing the high 30s nowadays. You can definitely get cost savings by switching to a more competitive electricity retailer.

I signed on with SembCorp a while back and have been happy with them. I thought they'd charge more than the smaller players in the market, but as it turned out, their rates were actually lower and I got the added reliability of a large corporation with good customer service support. I also like that the recurring bill payments can be charged to a credit card to earn points which can be exchanged for miles, etc. If you're thinking of switching to SembCorp, please use my referral code NAD3GJS9. I'll receive a S$20.00 rebate on my bill, which will spur me to write better articles! Thank you very much!

No. 8: Switch to a cheaper service provider for your mobile phone and home broadband.

Sweet competition has driven the price of data plans down sharply. I switched from SingTel to Circles Life last November, by taking advantage of their attractive Singles Day promo. In addition, I used ShopBack to sign up for Circles Life, benefiting from an extra cash back. Since then, I've been paying S$9.00 per month for 20GB of data, 100 mins of outgoing calls, unlimited incoming and up to 25 smses free. 79% less than what I used to pay SingTel.

As for your home broadband, use a site like Seedly to do a quick comparison of the different plans in the market and their costs. When it's time to switch to a cheaper plan, get on it.

No. 9: Cut expenses on non-essentials like expensive meals, birthday gifts, branded goods, vacations, tuition, enrichment classes, etc.

When something is unnecessary, pull your purse strings tighter and don't spend on it.

Online shopping can be rather addictive. The more we browse, the more we add to our cart. The minimum sum needed for free shipping tends to make us buy more than what we need. Those free shopping vouchers keep beckoning us to return to the shopping app. Voluntarily lower the credit limit on your credit card if you've difficulty controlling yourself. Always pay your credit card bills on time, and never ever get yourself embroiled in credit card debt. Those debts can pile up exponentially with insane interest rates charged by the banks.

Learn to live without tuition and enrichment classes. You're home more now. Help your kids with their schoolwork, instead of outsourcing to a tutor. Teach your kids to draw or swim yourself, instead of sending them to a costly art or swim class. Granted that teaching them piano, violin or ballet will be errr... challenging, but when push comes to shove, you gotta do what you gotta do!

No. 10: Sell Unnecessary Items at Home on Carousell.

It's time to spring clean, de-clutter and make a few bucks out of it at the same time. Download the Carousell app, snap pictures of what you'd like to sell, decide on a price and post. It's as simple as that. I've managed to sell close to S$1,000.00 worth of "useless junk" which I would otherwise have discarded. Unbelievable, but true!


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