This year has been tough for everyone, given the current state of the world as it battles the coronavirus pandemic.
Along with adapting to the new normal, there are important questions to ask yourself to get a handle on what happened this year – especially when it comes to your financial situation.
Here are the seven most important questions to ask.
1. What is your current financial position?
Check on any changes to your savings account since the pandemic. Is your income enough to cover your expenses and debts? Is it increasing or decreasing?
If it is increasing, you are one of the lucky ones but if it is decreasing, you are one of most Malaysians who are facing declining incomes and possible job loss.
It is not easy to take an honest look at your financial position, but it is important to start tracking your savings, expenses and financial commitments and analysing where you can improve or cut back on spending.
2. Did you achieve your financial goals in 2020?
Everyone started off this year with optimism and no one could have anticipated that Covid-19 could throw everyone’s lives into a tailspin.
Instead of asking what financial objectives you did not achieve because of Covid-19, ask yourself what you achieved in spite of it.
You might have started the year with an aim for a 10% increase in salary or a promotion, but maintaining your salary and keeping your job is already considered a blessing.
You may have wanted to purchase an apartment this year, but being able to pay the rent kept a roof over your head was a positive. Plus, the price of that apartment will probably decline in the next year, making it cheaper to buy in the future.
Think of your financial goals this year as stepping stones to the bigger picture next year and the future. Everything in life is relative, not absolute.
3. How prepared were you for the tough conditions this year?
To borrow a boxing analogy from Rocky Balboa: “It ain’t about how hard you hit. It’s about how hard you can get hit and keep moving forward.”
Think about your finances during the hard times. Did you have enough savings to cover you and your family for at least three or four months if you lost your job? Were there financial resources and support you could fall back on?
List all your savings and investments and prioritise spending. Food, water and rent must always come first and using your financial buffer for them is justified.
Try to insure yourself against tough financial situations, just like buying life insurance for yourself and your family. Make a point of allocating a fixed amount of money every month in anticipation of a crisis tomorrow.
4. What are your financial obligations and commitments?
Bank Negara Malaysia’s moratorium on the repayment of loans helped to address short-term cash flow problems but you need to consider your financial obligations and commitments for next year.
Prioritise them, starting with housing, insurance, cars and then personal loans. Housing comes first as everyone needs a roof over their head and insurance is important to ensure that you are covered in case of accident or illness.
5. Do you need to evaluate your current financial principles?
Most of us have certain financial principles we practise during normal times. Identify your top three financial principles and evaluate whether they have helped or made it harder for you this year.
Don’t be afraid to change your financial principles if it means getting ahead.
6. Is your job at risk or do you face a pay cut?
Think about the industry you are in and how important it is that you are physically present. Those who are able to work from home may be safer than those working in the services and manufacturing industries.
As these industries require your physical presence in the workplace, they could be affected by movement control orders. You could mitigate the risk by supplementing your income.
7. What can you do better in 2021?
Next year will be better so be more optimistic about your financial situation and goals. Sentiment is expected to improve and businesses will look to expand during the economic recovery.
Improve your skillsets and education to adapt to a world that is increasingly reliant on information technology and the internet. There are many free online education platforms such as Khan Academy and EDX.
Getting through 2020 would have taught you to get a better grip on your finances. Look at what you cut down on this year — you might not actually need some of these things in the future.
Set your financial goals with a potential worst-case scenario in mind. Break specific goals down into sub-goals that can be reliably measured. For example, for the goal of a 10% pay rise, set sub-goals of 5%, 7% and 10%. If the situation worsens, aim for a more realistic 5%.
This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.