Crisis-proofing your family finances

Common sense tells us that we need to save on day-to-day expenses. It is the first and natural thing many of us will do.

No one has been spared from coronavirus disease 2019 (COVID-19). Lives and livelihoods have been greatly affected by this pandemic, a health crisis that has turned into a financial crisis.

On the brighter side, economic and financial experts seem optimistic about the country’s recovery in 2021. While they expect gross domestic product (GDP) to contract this year, they think the country’s macroeconomic fundamentals are more sound compared to how they were during the political crisis in the ‘80s and the Asian Financial Crisis in the ‘90s. This, of course, is hinged upon the passage and proper implementation of the fiscal stimulus bill in Congress and Senate.

For the average Juan, however, concerns are much more practical. I’ve had family, friends, and clients raise questions such as “How can we survive and emerge from this crisis better?”, “How can we pay for bills that had piled after the grace period?”, “How can we afford laptops for our children to meet requirements for online classes?” and “Can we still afford to dream?”. These are hard realities that require down-to-earth, concrete answers. No assurance on better macroeconomic fundamentals, nor passage of laws can appease many Filipinos’ concerns about their present circumstances.  

Common sense tells us that we need to save on day-to-day expenses. It is the first and natural thing many of us will do. So, I will dispense talking about that and instead, offer additional ideas that hopefully may help you one way or the other.

1. Re-create and Innovate. I have witnessed companies pivoting their business models overnight.  Jollibee now sells frozen Chickenjoy in supermarkets, P&G and Nutriasia have put up stalls in village markets, and Unilever has set up its online store. Recently, I was part of Endeavor Philippines’ advisory panel that mentored two major local entrepreneurs who are laying the spadework to take their businesses from brick-and-mortar to online stores. In the US, Walmart now offers curbside pick-up and delivery of groceries.  

While these large businesses are doing this, we have also witnessed the rise of numerous hyperlocal microentrepreneurs enabled by digital banking and social media. I recently wrote about my 18-year-old son and how we guided him in putting up his own cookie business in the midst of this pandemic. I received a lot of positive feedback from parents who have their own teenpreneurs and other home bakers. We can say that the Filipino’s entrepreneurial and resilient spirit is alive and well. Let us be open to and take advantage of the opportunities presented by this pandemic.  

2. Review and realign priorities. It’s high time to re-assess what is really important and determine the worthy use of our limited resources. This pandemic forced many of us to live simply ― spending time with family, taking up a hobby, reading books, exercising, eating well, and praying. Activities that do not cost much have immeasurable returns ― love, fun, knowledge, health, and faith. In fact, if there is one valuable resource that we now have more of is time. Let’s use this well and not waste it. It is the best time to rethink our priorities.

a. Re-purpose funds for education. What you had set aside in the past for shopping and vacation expenses, you can use to purchase the needed laptops for your children’s online classes.  There are easy-on-the-pocket zero percent installment deals up to 24 months. A Special Installment Plan (SIP) for tuition and school expenses is also available up to 12 months.    

b. Invest in your health. We may have invented a number of excuses in the past not to exercise. I must admit guilt to doing this. I used to be 50 pounds heavier, size 14-16 until I lost both my parents to cancer. With two young kids and a predisposition to the big C, I decided to enroll in the Cohen lifestyle program in 2010, paying for it with my BPI Credit Card on installment. It had to take sickness in the family to knock some sense into me. With COVID-19, there is no doubt that health is wealth. So, the question is what will we do about this? Not having enough time should no longer be an excuse. Perhaps, you need a little more inspiration. There are great deals in stores and online for athletic wear, rubber shoes, exercise equipment and even airpods for sports. It does not take much to recreate a gym in your own home and you can even make it a family activity.  

c. Replace short-term pleasures with long-term aspirations. Those who continue to receive their salaries or with businesses that remain in operation have nevertheless expressed some concerns as to whether they should continue with their investment plans. It’s important to list your goals and assess what is most important at this time.  

If it is providing for the children’s education and having enough working capital, then consider increasing your deposits and investment funds. You may seek the advice of your bank as there are many kinds of deposits and investments with different features and yields to suit your needs.  

If you are among the 60 to 70 percent of Filipinos who continue to dream of investing in their future home or owning a car, you will actually find more options that provide better value. Nowadays, you will find many great deals offered by developers and car dealers, from discounts and freebies to lower downpayment to longer payment terms.  

It is funny how we have postponed these dreams to afford things that give us temporary fulfillments. Imagine, the rent that you keep paying for your apartment that you will never own when you can use this money to pay for a home loan that will eventually be yours.  

Imagine, too, the risk you are taking now with public transport when you can drive your own vehicle for your own safety. It is interesting to know that car sales actually had gone up in Wuhan, China, when the lockdown was lifted as people wanted to avoid commuting.  

Knowing that it is important for you to conserve cash these days, BPI Family Auto and Housing Loans recently launched a more affordable loan variant called Step Up Payplan. It offers clients 10 to 30 percent lower monthly amortizations in the initial years of the loan compared to regular Auto and Housing Loans. To help you gauge whether you can afford the monthly amortization on a car or home at this time, check out the loan calculators at www.bpiloans.com. At the end of the day, the security of your income will spell the confidence you have in the kind of investment you will make to achieve your dreams.

3.  Restructure your payment and loan obligations to match your monthly cash inflows. With the end of the grace period on payments for bills and loan amortizations, the total amount of all your obligations can be quite overwhelming. If you think your cash flow will not be sufficient to pay for these over a short period of time, there are a couple of things you can do.

a. Consolidate and convert your utility and credit card bills to installment payments. Take advantage of the installment payment facilities offered by credit cards and personal loans. These give you time to pay for and budget expenses over a longer period time. To know how much your monthly payments will come out to be, BPI personal loans has a loan calculator which you can try out at www.bpipersonalloans.com/loancalculator.

b.  Proactively seek the help of your bank and ask for a bit more reprieve. Do not wait for the time when you can no longer pay for your obligations and you will get inundated by calls and payment reminders. Remember, it is both in your and the bank’s best interest to enable you to continue paying for your obligations.  

The bank will be able to advise you of the payment options that will match your expected cash inflows. This may come in the form of additional pay-break period, temporary lower monthly amortization for a year and/or extension of loan terms. You will need to be very transparent on the state of your finances so a workable payment arrangement can be designed for your expected cash flows.    

4. Diversify and stabilize sources of income. Early in our marriage, my husband and I decided that we should not work in the same industry or same company for the primary purpose of diversifying our sources of income. We started out our careers in the same industry ― fast moving consumer goods.  

We were actually in competitor companies, and as he was assigned as a brand manager for the paper (diapers and catamenials) category, I could not be assigned to the same category. When we settled down, I pursued a different career path ― banking. This proved to be the right decision as we were able to weather the ups and downs of our respective industries.  

The other benefit of doing so is the diversification of our competencies and knowledge. We are able to exchange views, learnings, and ideas that broaden our perspective. We are also able to be each other’s cheerleader, without competing on career progression or advancement. Since our compensation structures are different, we are also able to optimize HR benefits to the family’s advantage. While changing careers at this time is not advisable, keep this in mind moving forward.  

5. Provision for rainy days. Emergencies are not a question of if but rather a question of when. We need to always be prepared for rainy days. This is why building up your savings is the basic principle of money management.

Over time, you must have savings equal to at least six months’ worth of your family’s household expenses. Imagine how ants do this instinctively, gathering food provisions enough to tide them over the winter. What is hindering us from doing so? Knowing this will allow us to plan better and act accordingly. What had worked for me and my husband is agreeing on the target percentage of our monthly salary that we will save and invest. We also decided that our salary bonuses would not be spent, but instead placed in a deposit or investment fund. Mutual agreement between spouses is critical to making this work.

I hope these ideas give you hope that there are practical solutions and concrete actions that you can do to make the state of your family’s finances resilient to crisis. This pandemic has taught us a number of valuable lessons. Our ability to weather the difficult circumstances depends largely on our attitude, our ability to adjust and make hard decisions, our discipline to plan ahead then do what’s necessary, and our faith in God who created sunny days.  

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