So you’ve probably heard all about the PN government’s RM250 bil economic stimulus package, designed to
save Malaysia’s economy reduce the financial damage that COVID-19 and reduced oil prices will do to Malaysia’s economy.
(Well, it’s actually just RM25 bil in direct injection. You MakCik Kiahs aren’t getting that much. The loan deferments you still have to pay later and the EPF withdrawal is YOUR OWN MONEY, but I guess RM250 bil in total is *technically correct*, so let’s go with that.)
— 🇲🇾Astro AWANI🇲🇾 (@501Awani) March 27, 2020
Regardless of the creative accounting, fact is that a lot of money will be freed up now, which can go back into the economy. Some of you will be getting a combination of the one-off financial assistance,
Some of you will choose to withdraw your EPF money, up to a maximum withdrawal of RM500 per month. Some of you may get your credit card balances restructured into term loans (36 months at 13% per annum). Some of you may be eligible for insurance/takaful deferment (not automatic, T&C applies, must apply).
Significantly, many of you will be getting your loan payment(s) deferred. Assuming you have a mortgage and a car loan, that’s at least, what? RM1500 in freed up money every month?
The moratorium is applicable to all Malaysian Ringgit-denominated loans/ financings held by eligible customers that have not been in arrears for more than 90 days as at April 1.
For individual customers, eligible Islamic and conventional products under this moratorium include ASB financing, home financing, auto financing and personal financing (express cash, cash plus loan and Awam-i) and for SME customers, the moratorium applies to all existing term loans/ financings and industrial hire purchase.
(side note: should you defer loan payments or continue to pay? Read here. )
How much money you’ll have (or don’t have to pay now) will vary depending on your situation, but I guess its safe to say that the most vulnerable among us will have a bit of extra cash in their pockets, at least in the next six months.
The question now is… what do you do with the money? In this article, I’ll rank the best ways to use your economic stimulus money, from best to worst. If any of them don’t apply to you, then just skip it and do the next one.
#1 – Have at least RM1000 in emergency savings
Open a secondary bank account – preferably a savings account but even e-wallets work too – and park at least RM1000 in there as emergency funds. More is better, but RM1000 is minimum.
Some of you will find this easy. Some of you, hard. Here, I just want to say its okay to suffer temporarily just so that you can complete #1 as fast as possible.
And oh, whatever you do, DON’T TOUCH THIS MONEY UNTIL YOU FACE AN ACTUAL EMERGENCY.
#2 – Build up 3-6 months of living expenses
Okay, #1 is done. You can breathe a bit, but get back in the game. Forgive me for being blunt, but you may be laid off at any time, or fail to get the same income you were previously earning. The Malaysia Institute of Economic Research (MIER) estimates the upcoming recession might result in 2.4 million in job losses.
Let me repeat that. 2,400,000 job losses. 2,400,000.
I can’t emphasise enough on the urgency here. You’re racing against time. You’ve seen how fast things can happen. Speed matters, so as soon as you complete #1, focus immediately on building up 3-6 months of living expenses quickly.
Calculating the amount is simple: For example:
- RM1200 in mortgage (include this even if you’re not paying for it now!)
- RM600 in car loan (include this even if you’re not paying for it now!)
- RM500 in groceries
- RM100 in mobile
- etc other monthly expenses (See example categories in: How Expense Tracking Looks Like (As Someone Who Doesn’t Budget)
- Total monthly expenses: RMx
- 3 Months’ worth (minimum): RMxxxxx
- 6 Months’ worth (good): RMxxxxx
The amount is going to be big. You need to work your way there anyway.
Here are some simple ways to reach that amount faster:
- Find jobs with higher salary – Some businesses thrive in a recession. Find them, look for those opportunities. Read: 3 Ways to Get A High Salary in Malaysia
- Find ways to significantly reduce your top 3 expenses. For most people, this is Accommodation, Transportation and Food. Of course, I’ll assume you’re already cutting your spending on Wants (you should know your poison)
- Accommodation: get roommate(s), downsize your home, rent out an unused room, move in with family, etc
- Transportation: get cheaper car, move closer to work so you can walk to work (if you still have to go to office), etc
- Food: cook at home, experiment with cheap(er) ingredients (its quite fun), get one of these water filters instead of paying for monthly water subscription, etc
If you have a spouse, then do tag team – you focus on earning money, they focus on saving money. There are also so many other tips to explore. See: 25 Personal Finance Subreddits For You To Find ‘Your People’
#3 – Save more money so you can pay off your high-interest debts
Here’s the plan: save up the money and pay off all of your high-interest loans right after the 6-month moratorium period ends.
#4 – SPEND
And now, the last one. If you skipped past #1, #2 and #3 because you already did those, and now hoping for pointers on good places to invest and grow your economic stimulus money, sorry not sorry, not going to do that here. In other times I would, but not in this situation. This is not the time to hoard wealth.
Instead, do spend. You can start with the practical purchases:
- Buy products and services that can save time – washing machine (save time go laundromat), big freezer etc
- Buy products and services that can improve health – fitness equipment, good mattress for better sleep, etc
- Buy products and services that can improve relationships – regular gifts for your partner (if that’s their love language), etc
- Buy products and services that can help you earn money – education (books, courses), big freezer so you can store products to sell to your neighbours (like frozen kuih), etc
- Replace items that wore out/broke down with higher-quality stuff
- Buy Malaysian stocks and financial products/services (ok fine this is kinda investment. But this helps the economy too, so I’ll include it)
- Buy insurance and takaful (or increase contribution)
- If you’re self-employed, enroll yourself in How to Apply for SOCSO / PERKESO Self-Employment Social Security Scheme
- Start a business and hire Malaysian employees
Reminder: do not skip #1-3 before you do #4. Also: You’re NOT spending your emergency savings and 3-6 months’ of living expenses. You’re spending the extra money that you make/save on top of those monies.
If you have no other practical things to buy, or don’t care for them, then go ahead and spend on whatever, making sure that as much as possible, the money stays in the country. #KitaJagaKita all the way!
Stay in local hotels & AirBNBs. Time to cuti-cuti Malaysia, people. I know I’ll be making a beeline for Penang once this is all over.
Spend at local grocers, buy from local farmers, visit small kedai kopi & not the big multinational chains. Malaysia needs you!
— Aiman I. Abdullah (@AimanIAbdullah) March 27, 2020
I need to add some sort of disclaimer here. No, I’m not telling you to splurge. Continue to spend mindfully, prioritising needs over wants, experiences over things. Continue to find out the reasons why you can’t stop spending money. Don’t use this as an excuse to live large – improve your financial management skills, you’ll need it beyond this 6 months.
How will YOU manage your economic stimulus money?
Do you agree with the way I ranked money priorities? How would you change or improve the ranking? How do YOU plan to make use of your economic stimulus money?
As always, share with us your knowledge.