Created: 21 October 2020
The global economy not withstanding Malaysian economy, is facing enormous pressure from the brunt of COVID-19 pandemic.
An economy is in recession when there is a significant decline in economic activity, and when nation’s economy experiences negative gross domestic product (GDP).
In 2Q20, Malaysian economy saw a double-digit GDP contraction of 17.1%, which is the deepest decline since the 1998 Asian financial crisis. The GDP contraction was primarily due to the decline in domestic economic activities due to the implementation of the movement control order (MCO) to stem the spread of COVID-19, on top of already weak external conditions in the form of pandemic recovery uncertainty.
Now, the country is seeing worse spike in COVID-19 cases compared to in 2Q20, but the government has outright confessed that the country cannot possibly go through another lockdown (MCO) without severely hurting its economy further. high debt level and rising fiscal deficit
What happens in a recession?
During a recession, the country’s overall economic output declines as in the case of Bank Negara Malaysia's (BNM) GDP contraction forecast of between 3.5% and 5.5% for the year; the economy struggles, people lose work leading to a rise in unemployment, retails make fewer sales and we are also seeing permanent or temporary closure of several industries.
How will recession affect the average Malaysians and what can we do to ride it out?
Here’s 5 budgeting tips for those who want to keep their finances together:
1. Certain Non-essential Self Indulgences Can Wait!
Bar hopping, expensive concerts, pool parties—these activities are still prohibited under the latest relaxed ruling. Besides the risk of close contact, think of how much burden it’s releasing off your wallet! Examine your expenses over the past months, will you? We’ve spent less on contact lenses, salon treatments, and mall marathons, considering our house pets couldn’t care less if we mope around the house like the ‘Walking Dead’. A whole tank of petrol might have carried us through the entire MCO period, since 10KM was the furthest anyone could drive out to for essentials. Pub? What’s that?
If there’s one good thing to come out of this trying period—it’s that we’ve spent far less on the things we usually spend heaps on, especially non-essential luxuries. Many large companies have started hiring freezes to sustain during rough times; perhaps it’s time you froze certain expenditures to build your emergency savings?
2. Check Your Subscriptions, Cancel Non-Applicable Ones.
Always take stock of your credit card statements. Sometimes we don’t realise some long-forgotten subscriptions that we are still paying for. In addition, whatever non-essential subscriptions you can scrape out of your life (e.g., Netflix, iFlix, Spotify) − go ahead and hit ‘cancel’! You can always re-subscribe when the financial outlook is brighter. Do it for your ‘duit’.
3. Be a Digital Freeloader, Wherever You Can!
Follow value-for-your-money aggregator sites like Malaysia Freebies for the latest updates on Coupons, Promo Codes and Deals. Ecommerce has been totally unaffected by COVID-19 and seen tremendous (if not server-downing) growth since the start of 2020. Most of us have been shopping online and using online payment solutions while we were stuck at home − so why not take advantage of any promo codes and cashbacks while we’re at it?
4. Chart a System for Purchases
Ever bought an item on your wish list and then wish you didn’t? The novelty wore off only to be replaced with regret! How about creating a purchase journey flow chart to prevent guilt trips? You may customise it, as long as you have a system that works to keep your purchases strictly in check, for instance:
5. You Can’t Improve What You Can’t Measure… So, Track Your Expenses!
The same rule applies to every other important goal in life: weight loss, learning new skills, body building. Here’s how you can apply smart expense tracking in your life:
By tracking your expenses, you’ll be more conscious of your spending patterns, be able to plug any leaks, and curb excessive purchases in a certain area. According to Nicole, “While the awareness you gain from tracking your spending could be accompanied by guilt or discomfort, ultimately you’re making the choice to not allow money to control you.”
The COVID-19 outbreak may have severely disrupted the global economy as well as livelihoods, how on the bright side, it is creating a generation of resilient people, who are able to adapt and respond positively to the changes and challenges brought about by the pandemic.
On an endnote, while point number one on frugality is key, don’t go spartan by depriving yourself of indulgences and then committing crimes of compulsive buying once some extra money frees up. STEADY wins the race! Set aside some “fun money” to spend on wish list treats using the 50-30-20 monthly budget apportioning plan.
Also, the best budgeting mindset is one that’s first of all open to experimenting with different ways of saving money.
Related article Do Your Savings Pass the Pandemic Stress Test? Find Out Now!