What if I suddenly woke up and found my life to be entirely different from what I have now?
Let's give an interesting scenario.
One day, I wake up. I realize. That I've woken up in a 3 room HDB with my wife beside me. I pinch myself. It hurts. This feels real... my good life has all been a dream and I have just woken up. I'm 30 years old. I own the HDB with a HDB loan. There is enough funds in my CPF to pay for the HDB mortgage for only 1 month. I don't own a car. I don't have a degree. I have a diploma in banking and finance from a Polytechnic. I've just gotten retrenched with a SGD1k severance package. This is my only cash available. My wife is a housewife. She is also a poly graduate but she is currently not working. We have no assets to our name and only the knowledge of finance and a dream that life could be better.
The scenario above IS very real to many Singaporeans. Maybe it is better or worse then other real scenarios. I've even given myself a SGD1k severance package and good education. It's already a very good starting. Now let's continue with the post.
First, let me be grateful that this scenario starts me with a positive net worth. I have no high interest credit card debt knocking at my door. However, there some critical areas which needs to be addressed pronto.
First few concerns are food, insurance and the HDB loan.
(My main 3 important keys in life Food, Lodging, Medical)
Food is important... Duhz
HDB loan also needs to be paid so that I can continue to stay at my home.
Insurance? Why is this on the first few concerns list? Of course it's on the list. It would be game over if my wife or I got injured ended up in hospital. This would be one of the primary causes of ruin if not planned first.
So time for both of us to eat. We still need to eat as we won't be able to find a job immediately.
What would I be eating if I had not money? It's really unfortunate but until we both get some form of income, all costs needs to be kept low. I would buy 10kg sack of rice, some garlic, eggs, cabbage, chicken stock cubes. This will be breakfast, lunch and dinner. Cook chicken stock cubes with rice for chicken rice, hard boiled eggs (frying requires oil), boiled cabbage with garlic. This really isn't so bad. I actually can enjoy the meal. Carbs, protein and veges. We will be cooking this and bringing this to work for lunch as well. It's for a short time til things get better.
We will both need to work. The places which are willing to provide work on short notice would be the service line. McDonalds, KFC, Starbucks, waiters, sales attendants. We should be able to get about SGD1,200 per month for each of us in these roles. I would probably even volunteer for overtime and weekend shifts to earn extra. This sacrifice has to be made until I get a better job. But those I would need to go for lengthy interviews and usually do not have open vacancies all the time. So we'd both have to hang on this for the start.
Next, I'd sign up for an insurance policy for both of us. Term life + Accident coverage + Critical Illness + hospitalization and surgery. Sum assured would be about SGD50k-100k. This coverage would be the bare minimum coverage to prevent catastrophe as if any of us were to be hit by any of the events, the situation would be impossible/extremely difficult to recover from. This insurance expense would probably be less than SGD100 per person per mth.
So now, we are all set to improve our situation. Where else can we save?
In this situation, it really doesn't matter if we're cheap or frugal, this situation is CRITICAL!!!
Turn off all electricity if not in use. I should be doing this even if things are not critical. But it's even more important now. NO... Absolutely NO AIR CON. Use the fan. Take short/quick showers. Buy reasonably priced soap/shampoo. None of those branded stuff.
Misc stuff which can be removed.
Handphone - Choose the lowest plan. No data plan. Really, I probably don't really need it. Life was fine using the old Nokia 3210. I could even use a pre-paid card.
Television - Do I really need to watch TV? I'm assuming I already have a TV in the house. I should have bought one before I was retrenched. Maybe I won't be using it for entertainment as it takes up electricity.
Computer/Internet - Ok this is necessary for applying for better jobs. I'm assuming I already have one when I woke up from my dream. I should have bought one before I was laid off.
Eating out - Do I even have to talk about this? Rice, cabbage and eggs. You could take a container to "ask" stall owners for some food. You can tell your sad situation and request for help. I've known people who did this when they were in really dire situations. But that's probably stretching it.
Transport - Take public transport. I was thinking if I could cycle. But I probably don't have a bicycle and if I bought one it would cost about $80 per person. This would be about 1 month worth of transport cost per person. Not to mention that Singapore roads isn't really a place for cyclists and there is real danger on the road. We can't afford getting into an accident. It's better to take public transport as cycling really depends on where you work vs where you stay.
Going out with friends, etc - Nope. I feel there's no shame in telling them your situation. Times are hard. We'll rejoin you all when things get better. Give us a few months to regroup.
I think the most that we'd have to wait out would be about 3-6 mths. With the first temporary job and slimming down our expense, we would be able to sustain the 3 main concerns of food, keeping my house and insurance. We might even have some money to save. But at this time, investing is out of the picture. This is a scenario when an emergency fund is entirely necessary.
The next thing that's left to do, is to find a better job. The next step would be to find a good/fair job utilizing our diplomas. Which means finding knowledge based work rather than labour based work. I reckon if we're really diligent about this, we should be able to get a role in a bank/financial institution in about 3-6mths with a pay of about SGD2,400 per person.
When this happens, we're pretty much out of the woods. We'll continue padding our emergency funds and we can start eating properly again. Actually, once we got our knowledge based jobs, we would shift to eating better food. I would think that rice, cabbage and eggs are fair enough food, but really not enticing for the long term if I could avoid it. We'd still live frugally until we can get about SGD6k monthly between the both of us. After which, I would let off a bit more.
Then it's time to upgrade. Get more insurance coverage, start investing. Maybe get a degree? But it's debatable. I believe that a Poly graduate can succeed and retire young as well without the degree. The degree just gives an opportunity for a more advanced starting point. Considering getting a degree would take about 3 years. It might be better to continue working and investing instead of spending a few thousand on a degree when the usage of the degree could only be for 5 years as I could possibly be retired by then.