Enhanced Money Quarantine (EMQ)
by: Lyndon Magsino, CPA
The Global Filipinos are now “at home” because of the government-mandated quarantine or because of the self-imposed quarantine due to COVID-19. Likewise, businesses and companies have also imposed the Work-From-Home approach, which is causing a huge cash flow mismatch – i.e. no cash inflow from operations while cash outflow for fixed expenses are continuous.
Banks are also persistent in giving out loans and credit cards but the question is, would you take a loan or get a credit card while you are under the Enhanced Community Quarantine? What are the ways to sustain your living expenses, considering that we do not know when this ECQ will end?
You, together with your money should be placed under quarantine! So, let me give you a practical approach on how you can survive with the remaining cash that you have and sustain your living expenses.
That approach is called — Enhanced Money Quarantine! Here are some approaches to help you do the Enhanced Money Quarantine:
1. Budget your spending for needs
You have to list down all the things YOU NEED in the next 3 months and estimate the cost per item (e.g. food, water, milk for baby, etc.). Then match the total cost with the money you have in your wallet/bank and assess if your fund is enough or not. If your fund is not enough, revisit the list and remove “less critical needs” and ensure that your budget is proportionately allocated. Your goal is to make sure you have enough funds for top priorities — NEED.
2. Set aside some cash for Emergency Fund
If your fund has an excess amount after you budgeted the living expenses, then set aside the 50% – 70% of the excess for the EMERGENCY FUND. Withdraw that amount and hide the money in your cabinet or anywhere that is safe inside your house. It is important to keep cash available with you for emergency scenario and also in case ATMs are out of cash. Besides, you may not have the luxury of opportunity to go to the bank when the need arises.
3. Talk to your bank and negotiate
The best way to deal with your loans and credit cards is maintaining a good relationship with your bank through open and honest communications with your Relationship Manager, either via email or call. Considering the uncertainty of your employment, which is the source of your cash flow, it would be best to talk to your bank and request for a consideration.
This conversation is critical to maintain your cash float and manage your cash flow. It will not harm you if you request the Bank to waive some fees, defer the repayments or even reduce the interest rate. Whatever is the result of your request, you will still have to pay your credit card bills and monthly loan installments, otherwise, defaults can cost you even higher because of penalties or worse, it can result in a bigger headache — legal issue.
Bottomline, banks do not want you to default and they have a “heart” too! But initiate the conversation for their consideration before it is too late.
4. Save Money
I know that online shopping, with discounts and great promotion, can be incredibly attractive but focus on saving money. In this pandemic time, this is not the best time to spend, rather, this is the time to save. Why? Because we never know how long it will take. You are not sure about your employment how long it will last. In fact, even your company is not sure how long the business can survive with partial or no operation. So, you must conserve all your resources, save money because we never know what could happen in the coming days.
5. Acquire new skills and make money
While you have more free time, make yourself productive. Use your free time to acquire new skills, take online courses that can create an additional income for you. Learning how to create a passive income from Stock Market can be a good idea and for sure, you will enjoy it. To start with, visit the PBS eMasterclass at www.PhBusinessSchoool.com/eMasterclass
Also, if you are into online business, writing contents for companies, doing freelance jobs like accounting or marketing, it would be ideal for you to spend your time and make money!
Bottomline, you need to think and find ways how you can make yourself productive, use your free time to acquire new skills and make money.
Disclaimer: The writer is a CPA and a Subject Matter Expert in Finance and Banking but he does not assume any responsibility on the consequences of this article and hereby disclaim any liability to any party for any loss, damage or disruption caused by his personal opinion and insights.
About the Author
Lyndon Magsino is a CPA with extensive experience in auditing, risk management, corporate governance of financial services industry. He completed a Leadership Program at Harvard and a scholar for the Global Executive MBA at Hult International Business School in Massachusetts USA. In addition, Lyndon previously worked in the Risk Advisory Services of a Big-4 consulting firm and headed the Banking and Financial Services portfolios in the UAE. As part of his role, he headed various projects on Internal Audit, Risk Management, Corporate Governance, Compliance and AML for global and regional banks, Central Banks and other financial services companies. He is highly qualified as a Certified Public Accountant (USA and Philippines), Certified in Risk Management Assurance (USA), Certified Financial Services Auditor, specialized in Banking (USA) and Certified Internal Auditor (USA).
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