How to maintain your income in times of crisis

As a magician, Vikneswaran Allagu specialises in making objects disappear, to the delight of his audience. But when his income completely vanished when Malaysia entered a lockdown in March to battle COVID-19, the situation was hardly entertaining.

“At first, it was nice to spend more time with my family,” said the father of one, who owns an events management company. “But as time passed, having no income was difficult with expenses and other commitments.”

The 32-year-old has since learnt a new trick – turning a truckload of durians into much-needed cash.

Since May, Vikneswaran has been selling durians around Kuala Lumpur and Negeri Sembilan, which has “helped a lot” income-wise, although this is still a fraction of what he used to earn pre-COVID.

Sometimes, he even dresses up in his magician’s outfit to perform for his durian customers. “Since I’m a magician, I don’t want to let the magic go,” he said. “This is my marketing strategy to engage more potential customers after the pandemic.”

Vikneswaran is not alone. Many Malaysians have seen their incomes disappear or shrink in this pandemic-stricken year that has taken a toll on global economies.

Yet, amid the gloom, there are still ways to earn money – from starting businesses to supplement or replace your main income, to making good investments in housing and equities while interest rates are low and markets are fragile.

Unleashing the entrepreneurial spirit

The global pandemic has surprisingly created entrepreneurs out of people who never thought of starting a business.

According to human resources firm Randstad Malaysia’s Workmonitor 2020 survey¹ in June, 56 per cent of Malaysians aged 25 to 34 are likely to quit their jobs and become a boss.

It is a practical push. Starting a business means you could still earn an income or build a side hustle as a buffer in times of uncertainty. Take Petaling Jaya sisters Caryn and Noelle Wong, who have taken to selling brownies online to supplement their salaries.

But running a business is tough too. One way Malaysians can approach this is by adopting the bootstrap mentality – being cost-efficient while maintaining agility.

For instance, operating a business from home means a low starting capital, and using social media means free or low-cost marketing.

Creating a financial plan is critical, especially in these times of uncertainty. Assess how long your cash flow can last without the company generating any revenue from the start, and set aside liquid reserves for your business to deal with potential cash flow issues.

With the right drive and good planning, a new business can flourish even in a pandemic.

Small and medium-sized enterprises (SMEs) can reach out to RHB BizPower/-i Relief Financing for financial facilities, with rates between 4.75 per cent to 6.45 per cent per annum, that can assist with cash flow problems, while sustaining business operations and safeguarding jobs. LEARN MORE >

Business-savvy Malaysians find new opportunities

After a decade of attending to passengers in the skies, Jasmine Leong now serves customers in her new grocery store in Seri Kembangan, Selangor, along with her husband.

The former flight attendant, who was on unpaid leave since March and retrenched in October, never expected to become her own boss.

“It was a 180-degree change for me,” said the 32-year-old, who opened her store in September.

Besides fresh food, Jasmine stocks items such as shampoo and other daily necessities for customers to get all their needs in one place. “The rising need of essentials during the MCO made it important for us to diversify our offerings in order to survive,” she noted.

More than survive the pandemic, Jasmine has gained a whole new work experience by running her own show, even earning 10 per cent more than she used to in her previous job.

A short drive away in Petaling Jaya, sisters Caryn and Noelle Wong have also set up their own business – an online bakery on Instagram selling brownies.

Between the duo, who work in a digital agency and the telco industry respectively, their salaries had dipped by 30 per cent and their benefits reduced. However, a chance to recoup their losses came in a serendipitous moment.

“I had a meeting in office and decided to bake brownies, and everyone loved it,” said Caryn, 31, who co-founded the online bakery with her sister in July.

“During the pandemic, there are still lots of uncertainties, so we thought this could be a way to maintain an income.”

Turning their hobby into a full-fledged business has not been easy. Every other day, the sisters bake through the night to fulfil orders – once even ending at 6am the next day. But it has been a big help with the household expenses.

“It’s a way for us to maintain a stable income to ensure that if anything happens, our family is not affected,” said Noelle, who lives with Caryn, their mother and brother.

Building passive income with property

Another big worry during a crisis is housing. The age-old question of whether to buy or rent will resurface, and like all major decisions, individuals need to weigh the pros and cons.

Consider your financial constraints, length of stay and potential investment gains.

For example, if you regularly switch jobs to far-flung locations or prefer to invest your down payment in high-yield investments, renting may make more sense in the long run. However, this means you may miss out on equity gains if property values rise.

Government aid and low prices may make the decision easier. Now could even be a good time to invest in a home that can contribute to your income stream in the long term, if you can afford it.

A survey by KGV International Property Consultants in May found that 61 per cent of potential homebuyers and investors believe the market will recover in two to three years².

This confidence could be linked to the Malaysian government’s reintroduction of the Home Ownership Campaign in June³ – as part of its short-term economic recovery plan – where buyers are offered significant stamp duty exemptions.

Malaysians who purchase new homes priced between RM300,000 and RM1 million from June 1, 2020 to May 31, 2021 will enjoy a full stamp duty exemption, which could mean over RM10,000 in savings.

A lower mortgage interest rate – with Bank Negara Malaysia slashing the Overnight Policy Rate from 2 per cent to a record low of 1.75 per cent⁴ on July 7 – has also allowed Malaysians to pay less for their homes every month.

With COVID-19 underscoring the vulnerability of jobs, these initiatives could be an attractive solution for investors looking at property to diversify their income stream and build passive income for the long term.

New home seekers can settle into your dream homes with RHB’s Zero Moving Cost, which offers zero stamp duty, legal and valuation fees, making space for other expenditures. LEARN MORE >

Investing in a COVID-hit market

Another way of creating an alternative source of income can be found within the stock market.

Many are already investing. Digital equities platform Rakuten Trade revealed in April that more than 11,000 new accounts⁵ were opened in Malaysia during the Movement Control Order (MCO), of which almost two-thirds were activated in the first two weeks.

Bursa Malaysia also saw greater local participation in retail investments at 41.44 per cent, compared to 25 per cent in mid- June last year.

Given the highly uncertain market, it may seem counterintuitive to invest. All investments carry inherent risks, yet there are silver linings in a recession.

For one thing, the current low prices present a good opportunity to pick up some high-quality stocks, while positioning for recovery. The equities you accumulate along the way can add to your diversified portfolio of income-generating assets, which would be helpful in times of crises.

However, there are caveats. Always conduct research and seek advice from professionals.

If you are keen to invest in unit trusts, for instance, speak to a financial consultant and understand the market before making any rash decisions that might be sparked by hype in the market.

It is also critical to build a solid savings buffer before investing. A good ballpark would be to set aside at least six months of emergency funds to ride out gyrations in the stock market.

Most importantly, know your risk appetite. Some people may earn more and have fewer commitments, allowing them to plump for higher-risk investments. Avoid investments that promise high returns with almost no risk – they might be too good to be true.

Planning for a rainy day

Despite the pessimistic outlook, there are opportunities ripe for the taking. While no endeavour is truly fail-proof, there are ways to mitigate the risks that come with every plan.

For Vikneswaran, the hard lessons have spurred him to prepare for the unexpected.

“I made a big mistake in being so confident in my events management and magic business,” he said. “But COVID-19 taught me a good lesson – get your umbrella ready before it rains.”

As your business ally, we are working around the clock to ensure your company is running as usual, with the means to thrive. Contact your nearest RHB branch for advice on how we can help you power through these unprecedented times.

Sources:
¹Randstad Malaysia. Work Monitor 2020: January to June – 56% of millennials want to be entrepreneurs . June 2020.
²EdgeProp. Property buying: It's all about the price post-MCO. May 22, 2020.
³iProperty.com.my. HOC 2020 (Home Ownership Campaign) extended until 2021! Here’s what homebuyers should know . Jul 3, 2020.
⁴The Edge Markets. BNM maintains OPR at 1.75% as global economy continues to improve. Sep 10, 2020.
⁵Channel NewsAsia. COVID-19 lockdown stimulates Malaysia’s retail investor boom . Jul 16, 2020.