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Financial Management During Economy Downturn

Posted on the November 16th, 2008 under Investment, Savings, Retirement by (Beaulife) Altis Lo

There have been alarming concern about the global economy downturn recently, in addition, the political unstability in Malaysia has also arisen uncertainty in our employment market, money market, share market, inflation, consumer index, consumer spending power/attitude etc. How shall we react on this crisis, or proact on the potential or opportunities?

We have come up some ideas below and hope these ideas could give all of us the directions. But we must take postive actions on these suggestions and ideas, instead of knowing or sitting on these ideas. There are only 4 ideas for easy understanding and actions.

1. Fully settle loan balances, and earn guaranteed return

If there are spare cash in saving account, current account, or fixed deposit, utilize them to fully settle all outstanding balance in loans, such as housing loan, credit card overdues etc. These loans are charging us higher interest rates than returns in savings accounts and fixed deposits. Still remember the Rule of 72 for Money Management and Financial Planning in my previous post?

2. Withdraw from retirement provident fund to lower the balance in house loan

During economy downturn, house loan interest goes up, but dividend in our retirement provident fund will shrink in the year to come. It will be more adviseable to withdraw from retirement provident fund to reduce our balance in house loan. Remember the Rule of 72 for Money Management and Financial Planning in my previous post? Apply it to your house loan and your retirement provident fund. You will make an easy decision.

3. Apply for re-financing house loan, or revise the interest rate

This is always the best practice to review the best house loan interest rate amongst the banks and make a quick decision to re-finance it. If the existing financing bank can offer better rate, apply for it immediately. This shall save few thousand dollars from the evaluation feee, transfer fee, legal fee etc if you decide to stick with the same financing bank.

4. Invest more in mutual fund or unit trust fund

The best time to either start to invest (as initial investor), or re-invest (as existing investor). Take up the chances to purchase the mutual fund or unit trust fund at lower price now. The idea is the same when we spend money on sale, offer and best buy in hypermarket and shopping carnival. When there is on sale, offer and best buy, we spend money to buy. When the share market and index is low, do we take action to purchase more shares, mutual fund or unit trust fund? This is applying our dollar cost averaging concept that is to bring down our average cost per unit of mutual fund or unit trust fund. When the market is up again, the redemption price will be very much higher than our average cost per unit, hence our return on investment will be very fruitful. Withdraw the highest possible amount from your fixed deposits, saving accounts and retirement provident funds and invest as soon as possible.

There will be more sharing on these ideas in my future posts.

Or you may send enquiry email to me to find out more.

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3. Introduction to Mutual Fund or Unit Trust Fund
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