Are You Financially OK?

Malaysian Government implements Movement Control Order (MCO) for 28 days since 18-March-2020. Non-essential businesses are not allowed operation and all people are requested to stay at home in order to curb COVID-19.  

On the other hand, many are facing financial problem without any income for a month. To most of them, they even have difficulties on paying living expenses. Why is that so? Simply because they don't have emergency buffer.

First step of financial planning is to make sure we have accumulated at least 3 months worth of essential living expenses to meet any unexpected emergency need. This fund should not be touched at all unless it is REALLY EMERGENCY. For those who have no income due to MCO should be able to sustain for subsequent 3 months should such buffer is ready. However, it is rather sad to realize that this is not the case to most of them. 

Many of them might have reason that they have nothing left by the end of each month, how could they accumulate such fund. Well, it depends on how you plan your financial. Yes, all of us have fix essential living expenses so how. However, it is also a matter how you plan your finance. As a rule of thumb, when we receive our pay check every month, we must first to save at least 10% of it in to emergency buffer until a worth of 3-month essential expenses is accumulated. We only consider investment of 10% savings after emergency buffer is fulfilled. Even initially you might not able to start with 10% of your pay check, you should set it as a final target with initial starting of, say, 3% and gradually increase to 10%. By doing so, you are at least starting your financial plan even though it starts slow.

Should part your emergency buffer is used up for emergency reason, it is very important that you should reimburse it back as soon as your situation has become normal. Emergency buffer is serve as an umbrella during the rainy day. So, give no excuse to yourself. Start to accumulate you emergency buffer now.