How to survive a recession
By Zach Lim
26th August 2009
The most intense phase of Singapore's recession may be over, but the economy is not going to bounce back to full health any time soon.
Instead, the recovery will be 'slow, gradual and fraught with uncertainties', unlike the quicker rebounds that followed previous downturns, said the Monetary Authority of Singapore (MAS) on Wednesday.
The central bank said in its latest Macroeconomic Review, a twice-yearly survey of the economy, that the worst economic contractions probably took place in the last quarter of last year and the first quarter of this year. The economy logged record quarter-on-quarter declines in both quarters, of 16.4 per cent and 19.7 per cent respectively.
But the MAS stopped short of saying that the worst is over or that the recession has bottomed out. Private-sector economists say that although the worst is likely behind us, the economy could continue to contract in the months ahead, although the declines will not be as severe.
The MAS warned on Wednesday that despite recent signs of a slight increase in economic activity around the world, the major economies are still 'mired in an extended period of sub-par growth' and Singapore's growth is likely to remain 'below potential' as long as that lasts.
So how will middle-class Singaporeans be able to tide over this crisis?
There are steps that one can take to be able to tide over this economic crisis. However, there is no “silver bullet” that can save one from any crisis, but there are basic things that one can do to survive through it, which can be classified broadly into 3 groups: Income, Expenses and Savings and Investing.
Income
In a recession, keeping one’s job should be the number one priority. This may mean putting in a few extra hours, working a little harder, or simply improving your skills in your field. Those people who keep their jobs or have a good, steady income are generally able to weather the storm. Now, the last thing one wants to be doing is to be looking for a job with the unemployment rate on the rise. Although Singapore’s unemployment rate is not rising as rapidly as some other countries,
there are still people that will be caught without a job.
It is important to always, as the Scouts say, to “Be prepared”. While one might be doing everything he can to keep his job, some layoffs are inevitable. No matter how secure you think your job might be, always be ready for the unthinkable. This means updating your resume regularly, knowing who you will go to for job opportunities and where you would apply for a job in case of crisis.
26th August 2009
The most intense phase of Singapore's recession may be over, but the economy is not going to bounce back to full health any time soon.
Instead, the recovery will be 'slow, gradual and fraught with uncertainties', unlike the quicker rebounds that followed previous downturns, said the Monetary Authority of Singapore (MAS) on Wednesday.
The central bank said in its latest Macroeconomic Review, a twice-yearly survey of the economy, that the worst economic contractions probably took place in the last quarter of last year and the first quarter of this year. The economy logged record quarter-on-quarter declines in both quarters, of 16.4 per cent and 19.7 per cent respectively.
But the MAS stopped short of saying that the worst is over or that the recession has bottomed out. Private-sector economists say that although the worst is likely behind us, the economy could continue to contract in the months ahead, although the declines will not be as severe.
The MAS warned on Wednesday that despite recent signs of a slight increase in economic activity around the world, the major economies are still 'mired in an extended period of sub-par growth' and Singapore's growth is likely to remain 'below potential' as long as that lasts.
So how will middle-class Singaporeans be able to tide over this crisis?
There are steps that one can take to be able to tide over this economic crisis. However, there is no “silver bullet” that can save one from any crisis, but there are basic things that one can do to survive through it, which can be classified broadly into 3 groups: Income, Expenses and Savings and Investing.
Income
In a recession, keeping one’s job should be the number one priority. This may mean putting in a few extra hours, working a little harder, or simply improving your skills in your field. Those people who keep their jobs or have a good, steady income are generally able to weather the storm. Now, the last thing one wants to be doing is to be looking for a job with the unemployment rate on the rise. Although Singapore’s unemployment rate is not rising as rapidly as some other countries,
there are still people that will be caught without a job. It is important to always, as the Scouts say, to “Be prepared”. While one might be doing everything he can to keep his job, some layoffs are inevitable. No matter how secure you think your job might be, always be ready for the unthinkable. This means updating your resume regularly, knowing who you will go to for job opportunities and where you would apply for a job in case of crisis.
The best method for securing an income would be to have two sources of income. While it may be hard on one, the beauty of having a second income is that it goes right to the bottom line. If one needs an average of $5000 to survive each month, even just an extra $1000 per month will extend your emergency fund by 20%. It will make a huge difference if you ever lose your job.
Expenses
One of the few benefits of the economic crisis is that the interest rate is now low. If you have an adjustable rate mortgage, it’s time to see if you can transform it into a fixed rate loan.
This should be obvious, but it is still important to recognise the many ways to reduce spending. Did you know that your internet services have different bandwidth options? You can switch to a lower bandwidth and save up to $20 a month, and not notice the difference in internet speed. There are literally thousands of ways to save money. While some of them may only save you a few dollars a month, combine a few of them and you will be able to save a decent amount of money every month. Pick those that work for you and start saving money now while you still have a job.
Savings and Investment
In these difficult times, it is more imperative to have a decent emergency fund. An average guide to how much you need is to take you average monthly expenses and multiply it by 6. This ensures that, should you lose your job, you will be able to fall back on you emergency fund for at least 6 months while you find a new job. If you have two cars that are paid off, you might want to sell one and save the money for your emergency fund. Whatever your situation is currently, building up an emergency fund is crucial should the worst occur.
Some examples of small-scale saving include not wasting food. Keep whatever leftovers you can and eat it later. This could save you about $5 per day just on food. If you are into bu
ying music online, buy the songs individually instead of the entire album should you want just one or two songs. Examples of larger-scale saving include taking public transport instead of your own car. Not only is this cheaper, it is benefits the environment as well. Another simple but potentially rewarding method of saving money is to simply switch of the lights whenever you leave the room. You can also trade the comfort of an air-conditioned room for a fan-cooled one when you go to sleep.
Each of these components will have to work hand in hand: saving but not toning down your expenses, for example, is not that effective as doing both. In the end, these are still just suggestions, and it requires one to act fast in order to tide through this financial meltdown.
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