Managing finances in trying times | The Daily Star
12:00 AM, July 14, 2020 / LAST MODIFIED: 03:59 PM, July 14, 2020

lifestyle talkies

Managing finances in trying times

Lifestyle Talkies is Star Lifestyle’s latest multi-media endeavour, where we invite our expert columnists, specialists, and writers to share their opinions, ideas, suggestions with our readers. The guest for our first episode is well-known Banking Tips columnist, Ms Nasreen Sattar, Independent Director and Chairman Audit Committee, Mutual Trust Bank Limited, Bangladesh. Nasreen Sattar has been with Star Lifestyle since its inception 20 years ago in 2001 and has since then been giving financial advice for our readers. Today, more than ever, when we face an unprecedented financial crunch caused by the on-going pandemic, we need her as our sounding board to help us sort out finances, which are otherwise in doldrums. Don’t forget to catch her in Lifestyle Talkies in The Daily Star’s YouTube Channel. — RBR

Smart ways to ship-shape our finances

Lifestyle Talkies is Star Lifestyle's latest multi-media endeavour, where we invite our expert columnists, specialists, and writers to share their opinions, ideas, suggestions with our readers. The guest for our first episode is well-known Banking Tips columnist, Ms Nasreen Sattar, Independent Director and Chairman Audit Committee, Mutual Trust Bank Limited, Bangladesh.

Posted by The Daily Star on Monday, 13 July 2020

 

1. How to create an actionable plan for our debts now when we are facing a financial crunch?

Having a monthly budget is essential in keeping track of our financial health. We need to have a clear account of expenses and income. Now that all of us are facing a financial crunch, mainly because of the pandemic, it is essential to scrutinise our bills to see where we might be spending money we do not need to spend. Also, ensure that bills are paid on time to avoid any kind of penalty.

If we have personal loan account and are unable to pay our instalments on time, due to losing our job, or failing business or having to pay more important financial requirements, we should get in touch with our bank manager and ask for our loan to be rescheduled. However, always keep in mind that sooner or later, we have to pay back. Under no circumstances should we allow ourselves to become loan-defaulters. This will affect our reputation as well as getting future loans.

Cut down on all non-essential expenses. We do not have to buy the best brand of coffee or tea or any other similar luxury items. There are very high-quality Bangladeshi made food items, which are cheaper and just as good. We have to get rid of the idea that anything imported is better!

We must remember to do proper maintenance on everything from our home to our health to avoid expensive problems down the road. Hygiene has to be followed very strictly like washing all food items bought from stores or even home delivered before bringing them into the kitchen. There should be a designated place to do this. Non-perishable purchases can be kept aside for at least 48 hours or more before using them.

I am particularly careful about medicines; I take off the outer box and allow the strips to lie on a piece of clean paper for 4 or 5 days. This is enough time for germs on the surface to die. Remember to wear gloves while dealing with food and even medicines, change gloves as and when required and discard them after one use. I am sure by now all of you know about washing hands with soap and water for at least 20 seconds.

The reason why I am highlighting on being careful is if we are not, we can catch this contagious disease and spread it to others in the family. Unfortunately, if the case becomes serious, there is no end to the cost we might incur and also lose our lives or infect senior members of our family.    

2. How do we check and sort our credit card bills and reports?

We should use our cards sparingly and only when there is an emergency. Card use has naturally reduced because of the COVID-19 situation and reduced economic activities. Banks and card companies are promoting heavily to encourage greater card use, but we must not fall for unnecessary deals or promotions!

We should not stick to minimum payments. We all know how high the rate of credit card interest is. It will sky rocket before we are even aware of it. It is important to try and pay the full amount before the due date. If this is not feasible, then at least 60 percent of the card debt should be paid off each month.

We should prioritise our debts: Pay off the debts with the highest interest rate or consolidate the debt so that we can pay them all off at one go.

Pay by Direct Debit: Setting up a Direct Debit for our Credit Card payments will ensure we never forget to pay. Let us set up a Direct Debit now, preferably to pay the full amount every month automatically. If this is not possible, we can pay as much as we can.

We must remember always to check our Credit Card statements, very often we forget till such time a huge interest bill is levied due to our own negligence of not paying on the due date. We must maintain a diary to record credit card bills with due dates for different cards and arrange funds and ensure payment before the last date to avoid penalty. Nowadays, a digital diary is ideal for the purpose where our device would give us reminder.

3. Do we need to set up an emergency fund for now?

Definitely! An emergency fund is a top priority for all times, not just now. In my previous columns, I have always mentioned the importance of it.  We never know what the future holds for us.

Did we ever think that the whole world would be gripped with this pandemic? This was stuff for movies only! I am hoping everyone already has a separate account for emergency fund. Now with the COVID-19 situation, it is an absolute necessity. A simple testing for coronavirus infection can cost as much as Tk 5000 per person. If one person develops a symptom, the whole house needs to be tested. Then there is the cost of the cure. If caught in the early stages, treatment can be done at home with care and minimal cost. Sometimes, we tend to treat it as a common cold. Let's not ever take the chance, the sooner the treatment starts the better the chance of cure and survival.  God help us if the patient needs hospital treatment, because not only can the cost be astronomical, but also survival can become a question.  Health Insurance is not the norm in our country. Only a few fortunate people have insurance coverage, the rest of us need to pay from our own pockets. The emergency fund can be a big help at this time. 

4. If you are going through a salary cut or if your business is not doing well, what is the best way to manage funds for grocery and paying bills and salaries for service help?

There are two sides to budgeting: what we spend and what we earn. If our income has already taken a hit because of COVID-19, we simply cannot continue to budget our money the same way as before.

The first step in budgeting amid the pandemic is figuring out what our new baseline for income is if a job loss or layoff has affected our household. This would give us an idea of how deeply we would need to cut our budget.

For example, if one has experienced a 50 percent pay cut, then that pay cut corresponds to cutting 50 percent or more of your regular spending. This means that person is spending the amount he is earning (or less) each month and not creating debt. If one were living above his/her means pre-COVID-19, then the individual may need to make even deeper cuts to get their budget to work.

 I have always advocated that we should all live within our means. Now is the time when we realise what can happen if some unforeseen situation confronts us.

5. What are the benefits that we have earned from the locked down situation?

We have definitely saved on the following:

 Eating out

 Entertaining friends and family members

 Shopping for non-essentials and durables like clothes and jewellery

 Travelling for holidays (in my case a major expenditure)

 Going to salons

 Transportation/fuel cost of cars, etc.

 Reducing number of domestic help

 We have also learnt to spend time caring for family members living in the same house, having time to read good books, cooking and helping in the household chores. A big lesson has been to never take anything for granted. The age-old saying is still very valid — Man proposes, God disposes.

6. Remember how we used to spend our pocket money during high school and college days, do we need to check in with our spending in that manner?

Parents should continue to give pocket money to their children whether the children have the option to spend it or not, considering the current situation. This is a perfect time to instil the values of saving at a young age. The money can be put away in a piggy bank or a safe box to be used for something essential once life goes back to normal. This is also a good time to explain the pitfalls of unnecessary spending. Online shopping has become an addiction for many and so much money is spent buying useless stuff.

Virtual tutoring by young people to earn extra money —

Children of all ages are in need of tutoring, now more than ever, as our world goes on lockdown and schools remain closed indefinitely. In households where both parents work online, finding time to home-school can be a struggle and very difficult. This is an area where young people can come in to do virtual tutoring to earn some extra money. Obviously, to conduct virtual tutoring, you do need to have computers/laptops and the relevant application. Zoom has become a very popular mode of virtual interaction. It is easy to download and very user friendly.

 They can also earn extra money by enlisting as tele-interviewers for market research projects, for example, service quality evaluation of credit card companies etc. Of course, individuals have to do their prior homework by listing number of market research companies (by Google search) and apply with CV for enlistment as part-time tele-interviewers.

 

Photo: LS Archive/ Sazzad Ibne Sayed

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