Last week, there was a harsh report from DBS that Singapore may lose 90,000 jobs due to the worst economic recession in recent decades, pushing the jobless rate to 5 per cent by mid-2010. It was further postulated that the economy may contract 4.8 percent in 2009.
Singaporeans have not felt the brunt of the economic hardships just yet. Yes, manufacturing and exports are in the doldrums but many companies are holding back on their layoff plans. Firstly, it is not popular, given that DBS was roundly criticized for using ”retrenching as a first resort” to save costs.
Then, budgetary measures like Job Credits have softened (or delayed) the blow and everybody is keeping their fingers crossed on a swift recovery in consumption. However, if global demand doesn’t pick up, the axe will certainly fall at some point. Meanwhile, the construction sector is still alive and kicking, a lot of construction companies have order books stretching till late 2010. After that, it is anybody’s guess what happens to this sole pillar of our economy.
In view of a protracted downturn in the job market, talking about financial freedom and retirement seems premature. The path to riches is fraught with pitholes, many investors have fallen by the wayside and need to slog even harder to make their portfolio whole again. Nevertheless, we should pick ourselves up, learn our lessons, and not lose sight of our financial goals.
Let’s go back to the basics of wealth building. There are essentially two ways to increase our cash. One way is to earn more money through investments, entrepreneurship or taking on another sideline job – seemingly futile exercises in this economic climate. Alternatively, we can cut costs by being frugal. In fact, saving money has now become a top financial priority among my friends, and me included.
A massive wave of frugality is expected worldwide. There is nothing wrong with saving money, it is only when everybody do it at the same time, that a self defeating effect of shrinking demand is felt keenly on the general economy. I am conscious of this downward spiral and have only cut back significantly on investments, rather than my spending on essential items.
Over the last two months, I planned a budget to improve my discipline in conserving cash and tracking my money. Being an easily contented person, I am happy with what I have without purchasing fancy and luxurious “stuff” to keep up with the Joneses. Thus, there was little adjustments to make as I have always lived well within my means.
Of course, there are always fat to be trimmed off. I have targeted some “big ticket items” which allow me to save hundreds of dollars a year, like gym membership, credit cards, car, cell phone and internet service. These may be chopped or renegotiated in the coming months.
To be sure, frugality is good, it is not to be confused with being stingy. I have no qualms about channelling my money into providing the best for my child’s education, going on a vacation, paying down the mortgage and setting up an emergency fund.
I can make do in areas which are deemed less important. For example, I eat hawker fare or have my meals at home instead of restaurants. I buy coffees from coffee shops or boil my own 3-in-1 coffee instead of patronizing Starbucks. I turn the lights and computer off when I’m not using them. I wear clothes which cost 3-for-$10 or buy my professional work attire during year-end sales. I avoid hot baths and recycle the water from washing vegetables and rice to water the plants.
These savings may be peanuts but if your savings have allowed you to accumulate a large down-payment to buy a house, you will be a very happy person today as you avoid massive top-ups, high premiums and additional interest when your asset goes underwater.
By the way, don’t underestimate the savings from a cup of cappucino. Your daily visit to Starbucks could cost you upwards of $5 and in a year, that is a whooping $1825. Now, you are wondering where all the money goes to. If you add compound interest on this for 20 years, that is worth a mighty fortune.
Frugality also means we take little for granted. We value what we have and become self reliant by using creativity and learning new skills to avoid middlemen. Being frugal also ties in with sustainability, a new buzzword as we experience declining fossil fuels and adverse climate changes on a ravaged Mother Earth.
When I rewash a towel or plastic bag, it can be used again for different purposes instead of being disposed like tissue papers or paper bags which add on to the tons of litter generated per day. These activities do not waste a lot of my time and though they do not result in huge savings, I am happy to do my part to create an environmentally friendly planet.
While we go about building up our wealth, the fact that all our assets are illusory has always been at the back of my mind. This financial crisis has driven home this point further. We become self-serving by measuring all our actions in terms of dollar and cents, only to have our fortune destroyed by the irresponsiblity of others at the end of the day. What an irony!
Indeed, as our society becomes more affluent, we become more wasteful and uncaring of our surroundings. We often ask, “why repair and not just buy something new?” In certain circumstances, like a spoiled TV, it does cost cheaper to buy a new one rather than repairing the old set. However, that does not mean that throwing away things become the default for all our belongings.
Saving money can take many forms (moderate to extreme), because our financial positions, values and requirements differ. For those who are rich and have much disposable income for spending, saving $100 or $200 per month is insignificant, but it could mean the world to an unemployed person or a family struggling to put food on the table.
Does saving money rank highly in your financial priorities too? It certainly does, for me. What other steps you have adopted to increase your savings, living green and leading a more fulfilling life in this recession?