Coronavirus – Now what? How do we prepare for a similar crisis in the future?

If you’re like me, aka. Millennial, this will likely be the very first recession / depression like situation you’re about to experience. In the face of so much uncertainty, there is one thing I can tell you with absolute certainty:

This is not going to be the last recession-like situation you will walk through in your lifetime.

The world’s economy fluctuates in a surprisingly predictable manner – as predictable as the last rollercoaster ride you’ve taken. Recall that ride, that steep dive downwards, your body slicing through the air and the screams that seem to engulf everything else around you. Once the worst is over, you begin yet another slow climb upwards – to the next steep dive. And when that happens, it almost always catches you off guard. But as you ride it for the second time and the third time and the subsequent rides you take (assuming you’ve got the express tickets so you won’t have to wait all day long), you become used to it. The dives still take you through a chilling moment, but it no longer becomes a surprise.

The economy works in a similar fashion. It’s a rollercoaster ride.

Credits: LumenLearning.com

Long story short: there will be multiple good times (peak) and bad times (recession / contraction).

The real question is: How do we prepare ourselves for the peaks and recession such that we don’t take a nose-dive downwards and hit face-first onto the ground the second it dips into a recession?

Well, ask yourself what’s that one thing you need to have throughout the rollercoaster ride, no matter how many bumps and dives there are up ahead?

Your safety strap.

The safety harness / strap / guard is the thing which keeps you where you need to be through the ups and downs.

So what’s the equivalent of this safety harness which we can turn to in life to keep us where we need to be – snug, safe and happy – throughout the different stages of the economic cycle?

It’s simple: a sound, robust financial plan.

Side note: The esteemed work of a financial planner has been tarnished by the run-of -the-mill salesperson who makes a living shoving overpriced insurance plans down your throat. Fortunately, it’s becoming easier to distinguish a good financial planner from an insurance salesperson. From designations such as the credible Associate Wealth Planner (AWP) and the Certified Financial Planner (CFP), consumers like yourself would have a little more confidence in sifting out the bad eggs from the bunch. Have a listen to my podcast episode #1 at http://www.anchor.fm/womenwealthjourney to learn more about the three questions you can ask to interview your financial planner so you’re prepared to weed through the bad eggs and find a good financial planner for yourself.

Establishing a solid financial plan now will put you in a better place for the next recessions and peaks upcoming (or other financial setback).

Here’s a quick run down of what makes a good financial plan:

1. Good savings habit
2. Strategic allocation of income into investments, liquid savings, insurance, and others.
3. Ensures that risks and uncertainties are insured adequately
4. Long-term and short-term financial goals and life plans are taken into account and revised annually at the minimum.
5. A solid continuity plan for the next generation.

There’s a lot to be shared from this simple list of bullet points, and if you’d like to appoint me as your financial planner, you can always do so by booking a video call appointment with me via http://www.calendly.com/cherietanjy/initial

In the coming months, I will be sharing those bullet points in the form of online courses and webinars. Feel free to express your interest in these online videos and courses by dropping me an email at hello@cherietan.com or send me a DM via Instagram @cherietanjy

What to Do with Your First Paycheck

You’ve landed your first job and your first ever paycheck has just come in. It’s an amazing feeling of accomplishment, self-sustenance and independence, all mixed into one. Before you start your shopping spree to celebrate, hold on to your money a little longer and start planning on how to spend it wisely – make that amazing feeling last!

Depending on your own financial goals and obligations, you should have a financial plan as soon as you receive your first paycheck. It’s all right to reward yourself for your hard work but being smart with your spending can give you a jump-start to long-lasting financial independence and wealth. Here’s what you should do to maximise your first paycheck. 

Creating a budget: Follow the 50/30/20 rule

Creating a budget is an excellent way to set a healthy financial habit moving forward with your professional career. Establishing a spending and savings budget allows you to see and account for where every dollar is going. The best way to start is to follow the 50/30/20 rule: 50% of your salary allocated to your bills and monthly expenses, 30% set aside for savings and emergencies, and 20% specifically for investments. As you progress in your career and you gain a better understanding of your lifestyle needs, adjusts those numbers to propel you towards your financial goals.

Book your financial planning and goal setting appointment with me by clicking here!

Spend 50% on monthly expenses: The lower, the better

If having a steady income is something new, you may need to adjust your attitude towards money. Suddenly being flushed with cash takes getting used to, especially when exerting self-control. Ensure that you do not spend more than 50% of your paycheck on your monthly expenses. First, pay off any outstanding bills and loans, then look at your other expenses. If your variable expenses such as food, transport and social activities are pushing you beyond this 50% budget, you need to reassess your financial decisions. Occasional splurges – such as birthday gifts, a hearty meal or weekend staycations – or the daily spending – such as coffee or Grab rides – all add up and could affect your financial health. Keep track of all your expenses and minimise where you can, ensuring that you do not spend more than 50% of your salary – or the lower, the better.

Allocate 30% for savings: Have a solid savings plan

After prioritising your monthly bills and expenses, it’s important to set aside a fixed amount for savings. Establish how much you can afford to save and lock in that number – at minimum 30%. If possible, set up an automatic transfer into a dedicated savings account. This savings account should be left untouched and set aside for your retirement and emergencies. Try to aim for a savings sum that can cover three to six months of living expenses for times of emergencies (imagine that you have no income in that time).

Setting financial goals will also encourage you to stick to a realistic budget and savings plan. 

You should set your short-term goals (less than six months), intermediate goals (up to three years), as well as long-term goals. Plan ahead for big-ticket items such as a long vacation, wedding or home renovation, saving from your very first paycheck is the way to go. With these goals in mind, you can increase your savings and readjust your expenses. Having a solid, tangible plan and an attainable goal will help you make wiser decisions and get the best out of your paycheck.

Book your financial planning and goal setting appointment with me by clicking here!

Invest 20%: Making your money work

You’ve worked hard for your money, so it’s time for your money to work for you. It’s never too early to start investing, and you do not need a large sum to start. Some banks allow you to invest in bonds or mutual funds from just $100. Know your options and find the best way to grow your money while you sleep. Although you won’t be able to count this as an alternative source of income, it’s an excellent way to build your wealth for the long-run.

Having a plan to manage your money right from your first paycheck will cultivate a healthy attitude towards money.

Achieving long-term financial independence and reaching your goals will not be a struggle if you start planning right from the get-go. Similarly, getting an in-depth understanding of how money works early on in the game can make you a wise saver and investor, so it would be worth sitting down with a financial advisor to learn more. Make appropriate adjustments according to your lifestyle and goals, and develop a financial plan that is most achievable, realistic and right for you. You’ll be off to a great start in your career.

Book your financial planning and goal setting appointment with me by clicking here!