Recently, we see newspaper headlines filled with corporate restructuring and layoffs by many global firms all around the world. As we now see Singapore’s flagship bank DBS also laying off employees, I hear many Singaporeans (and some of those based in Singapore) getting worried. This is understandable because it is possibly the tip of the iceberg and it may be a matter of time that other corporates also follow suit and more and more people are affected. These days, I almost always receive email rebounds, for each time I send a mailer to my contact list, i.e. people no longer with the organisation.
Last month, a headhunter called me and during the conversation, she asked me about conditions at my workplace and if I was concerned about being laid off. My response was: “One only needs to worry about corporate downsizing or restructuring if one does not manage one’s personal finances well…. if one has been disciplined all along to build up one’s reserves, there’s no need to be unduly concerned”
In fact, my teacher Albert said that as firms start freezing headcount and laying off people to keep costs under control, the headhunters themselves may actually be out of job themselves! I agree with his observation.
When I started working in Sep 02, I read a few of Robert Kiyosaki’s books on “Rich Dad, Poor Dad” and played his flagship boardgame CashFlow. I was deeply influenced by some of his ideas on investing and taking control of one’s personal finances and feel that these are the very basic steps for everyone, whether you are in the government service, government-linked company, corporate or multi-national company, regardless of the size of your paycheck; I know of people with huge paychecks caught in what Robert Kiyosaki calls the MONEY TRAP: every time they make more money, they also increase their two biggest expenses (taxes and interest on debt).
I quote from Pages 142-143 of Rich Dad’s Guide to Investing: “People leave school not even knowing how to balance a checkbook much less how to prepare a financial statement. They never learned how to control their finances. And the only way you can tell if people are in control of themselves is by looking at their financial statements. Just because people have high-paying jobs, big houses, and nice cars does not necessarily mean they are in control financially. If people knew how a financial statement worked, they would be more financially literate and more in control of their money. By understanding financial statements, people can better see how their cash is flowing. When people write checks, they are depleting an asset. And when people use credit cards, they are increasing their liabilities. In other words, credit cards make it so much easier to get deeper and deeper into debt….”
I was at an SGX investment talk and the instructor reiterated the following characteristics an individual should exhibit to be financially sound:
- huge cash reserve, say 1-2 years of one’s personal expenses;
- tight cost control; and
- low debt, both long term (mortgage) and short term (credit card debt)
Aren’t these characteristics similar to what we look for in a company in this credit crunch? The same applies to individuals/ households too.
Indeed, only the most resilient firms/ individuals (in terms of gearing and cost control) are going to survive this storm, that many people are starting to compare it with the Great Depression in 1929.
So brace up as we head into recession in 2009!
