Personal Finance

ValueChampion Asks Budget Babe: What Personal Finance Lessons Can We Learn From 2020?

In this exclusive interview, ValueChampion and Dawn Cher, Founder of popular personal finance blog SG Budget Babe, reflect back on 2020 and discuss how COVID-19 impacted the world of personal finance.

SG Budget Babe is one of the most well-regarded personal finance blogs in Singapore, with millions of readers and thousands of subscribers. Founder Dawn's carefully researched and thought-out posts appeal to everyone from newbies to personal finance to seasoned investors. With COVID-19 wreaking havoc on many people’s finances, we discussed lessons, challenges and surprising rewards that can help all of us better prepare for future financial emergencies.

1. What was your first reaction to the news that everything was going to get shut down? Did you and your family take any steps to prepare?

I was expecting it, because Singapore also had a "lockdown" of sorts when we went through the SARS crisis, although I was still young back then. As a parent this time, we made a trip to the grocery store and bought dry goods such as rice, canned food and some snacks, just to make sure we would have enough to feed our family for at least a month if anything happened.

2. What was the most challenging aspect of the circuit breaker? What about any rewarding aspects?

I’m an extrovert-introvert, so I didn't find it too challenging on a personal level, especially when friends and family were just a Whatsapp message or Zoom video call away. In fact, I loved not having to waste time on commuting to work!

The most challenging aspect was the income hit for my husband, as his job involves many face-to-face meetings and physical viewings. Thankfully, we had enough emergency cash and I was also still earning from work and teaching tuition (albeit online now), so we never had to resort to any borrowing to get by. He just didn’t have any savings during that period.

As a parent, the most rewarding part was being able to be at home with my child and watch him grow. On a regular workday, I seldom get to spend much time with him because he’s usually asleep when I leave for work in the morning, and about to sleep when I get back at night.

3. What was one of the most important things you learned about managing your finances in 2020?

Rather than learning something new, 2020 reaffirmed that our decision to be a little more conservative when it came to how much to put aside for emergency cash. General guidelines typically recommend 3–6 months as sufficient, but I’ve always felt we needed 12–18 months given the instability of my husband’s job and the sheer number of dependents we had to be financially responsible for.

It also reaffirmed my belief that one has to build multiple sources of income streams, because the employees who were solely reliant on their paycheck were the worst hit during this crisis.

4. In one of your recent articles, you mentioned steps people can take to be better off financially next time a crisis hits. What is the main thing people overlook when making a plan to be financially prepared for emergencies?

People usually underestimate how much they need when an emergency arises. This has to be tackled from two angles–ensuring sufficient protection through insurance, and having enough emergency savings.

"Enough" means different things to everyone, so this is where personal awareness really has to come into play. Don’t just rely on general guidance online, you need to tailor it to your own personal circumstances!

5. You mentioned in some of your investment articles that periods of uncertainty (like 2020) create a good opportunity to take calculated risks and how doing your research on quality companies is always better than trying to time the market. Are there any new or surprising investing lessons you discovered this year?

Yes, I got exposed to more alternative forms of investing instruments, such as options and property. In the past, I used to think options were a dangerous tool, having heard so much flak about them, but it seemed like options have done incredibly well for many people this year!

Like everyone else, I’ve also been surprised by several stocks and how they’ve performed this year, such as Tesla, Hertz, Kodak, just to name a few. Valuations are rising and we have to adapt our models and investment frameworks accordingly.

The nice surprise was also in cryptocurrency. I’ve been bullish on Bitcoin and cryptocurrency since 2017, to the ire of some other financial writers back then. Those of us who were invested since the previous wave were already talking about the problems with fiat for the longest time, but not a lot of folks (especially older investors and institutions) took us seriously, so it is really nice to see the skeptics start to soften their stance and finally start to acknowledge that Bitcoin is and can be a good viable investment asset to one’s portfolio.

6. Are there any financial habits that you developed due to COVID-19 that you will carry with you into 2021 and onwards?

An open-mindedness to explore new investment instruments, and I’ll be using 2021 to deepen my knowledge and understanding in these new tools before I start writing about them.

7. When circuit breaker measures were enacted, many families experienced furloughs or decreased paychecks. What's one piece of advice you want to give regarding maintaining expectations during periods of uncertainty to families who are struggling financially?

The fastest way is to either reduce one’s expenses or increase one’s income. Depending on each person’s scenario, there could already be a limit to cutting their expenses, so I personally would advise them to look into how they can build their income instead. This can be through a simple side hustle, such as selling handmade items online, or even starting a curation business and selling through Instagram. If you like cooking or baking, you can even start a small home business selling your creations. If you’re a parent, you can explore how you can add value to fellow parents. For instance, if you’re already spending so much time on your child’s education, could you find a way to share that with other parents and monetize it?

8. In times of trouble, there are always instances where vulnerable people get taken advantage of financially. The pandemic was no different. What are some things that you believe are never worth the money or risk and others that are worth the extra cost?

Anything that seems too good to be true, usually is. Anything that helps you to improve yourself (in terms of skills, knowledge, career progression or income boost) is always worth the extra cost, and this doesn’t always have to be in terms of money. When you don’t have the means to pay for a shortcut, such a cost can be in terms of your time, effort and energy instead.

Article has been slightly edited for clarity

Anastassia Evlanova

Anastassia is a Senior Research Analyst at ValueChampion Singapore, evaluating insurance products for consumers based on quantitative and qualitative financial analysis. She holds degrees in Economics and International Business Management and her prior working experience includes work in the capital markets sector. Her analyses surrounding insurance, healthcare, international affairs and personal finance has been featured on AsiaOne, Business Insider, DW, Vice, Her World, Asia Insurance Review, the Australian Institute of International Affairs and more.