KUALA LUMPUR, April 28 – It is imperative that Malaysians learn to plan and manage their finances prudently in view of the uncertainty over how long the Covid-19 crisis will persist.
Although the government is offering various incentives and financial aid to B40 and M40 groups, however, in the face of the highly unpredictable situation the world is in currently, financial planning is the wise thing to do.
By spending money smartly, one can avert facing financial constraints or, worse still, becoming broke. Unnecessary spending is an invitation to accumulating debts and undermining one’s nest egg.
Evaluate current position
Head of the Kuala Terengganu branch of the Credit Counselling and Debt Management Agency Junainah Ahmad Esa said now is the time to evaluate one’s financial position by calculating one’s total monthly income and expenditure.
She said the ongoing crisis can give rise to eventualities such as cuts in pay and allowances and in the worst-case scenario, loss of job due to the economic downturn.
“Those whose incomes have been affected by the crisis should manage their money carefully. They must update their net assets, and income and cash flow statements.
“They may need to consider liquidating a part of their assets but this should only be done after they have taken into consideration the government’s incentives and aid, and checked whether they have enough money to meet their current needs,” she explained.
On March 27, Prime Minister Tan Sri Muhyiddin Yassin announced a RM250 billion economic stimulus package (Prihatin) to ease the financial burden of the people affected by the Covid-19 crisis and the enforcement of the movement control order (MCO) since March 18.
Almost RM128 billion is being channelled to the people to protect their well-being, RM100 billion to support businesses including small- and medium-sized industries and RM2 billion to strengthen the nation’s economy.
Surplus
Pointing to the six-month automatic moratorium on loan repayments granted by Bank Negara Malaysia beginning April, Junainah said over the next six months, employees may have a higher take-home pay due to the deferment of their car, housing and other loans.
“Many employees are also making savings in terms of petrol, toll charges, food and entertainment during the MCO (which has now been extended to May 12). So, what they should do is channel the surplus money to an emergency fund.
“It’s important to have an emergency fund so that one is prepared for any eventuality. The fund must have enough money to sustain a family for three to five months,” she told Bernama.
Junainah, however, opined that those individuals whose incomes are not affected by the crisis should continue paying their loan instalments as usual. This, she said, is to prevent any extension to their loan repayment period or having to pay higher monthly instalment payments to make up for the six-month moratorium.
Ramadan during MCO
Commenting on the facility extended to Employees Provident Fund contributors aged below 55 to withdraw RM500 a month from Account 2 for a 12-month period, Junainah urged EPF members to give the matter careful thought as it concerns their retirement savings.
“To ease their financial burden, I would suggest that they make use of their other savings and other incentives given by the government and if necessary opt for the moratorium on loan repayments.
“But if they have to withdraw from the EPF, then only one person in the household (either husband or wife) should do so as EPF savings are meant to be used after retirement,” she added.
Junainah also said that this Ramadan, which for the first time is being observed amid an MCO, will give an opportunity to the Muslim community to spend prudently on food.
“This year there’s no Ramadan bazaar, no crowding around at food outlets to buy all kinds of delicacies for breaking of fast. Look at the positive side… it will educate Malaysians to spend carefully and not to buy too much food which will go to waste,” she added.
Government policies
Universiti Utara Malaysia Centre for Economic, Finance and Banking Studies senior lecturer Muhammad Ridhuan Bos Abdullah, meanwhile, said every household must ensure that any decision pertaining to finance made during the pandemic should serve the family’s interests effectively, even over the long term.
“For many people, the deferment of loan payments can help them to cope with the crisis, which was most unexpected. However, households should plan first and then choose whether to take up the offer or not, depending on their financial position,” he said.
Muhammad Ridhuan Bos also hoped that banks and credit institutions would offer their customers the best formula to ease their loan repayment burden, as well as boost the nation’s economy, during these trying times.
He said providing cash handouts to households under the economic stimulus package is an effective government policy as it boosts cash flow through spending and revs up the domestic economy.
Other nations that have announced economic stimulus packages are Singapore, China, Germany, France and the United Kingdom and they are also implementing monetary and fiscal policies to revive the economy and boost their respective nation’s Gross Domestic Product.
Muhammad Ridhuan Bos said the International Monetary Fund in its World Economic Outlook 2020 stated that every nation should make preparations to mitigate the effects of the economic crisis caused by the Covid-19 pandemic through the implementation of fiscal policies that include aid for households and businesses.
“Strong fiscal impact will enable the economy to recover faster,” he added.
— Bernama
