Gilbert Goh / Writer
During recession, especially when one is jobless, finances become a critical need that will become an emergency item when one is very short. I wrote in my previous article, "Facing joblessness - a personal account" that I once had only $20.00 left in my POSB savings account. The key I guess is not to wait till the last desperate minute but to take time to plan and budget your finances even before you are laid off. Doing it when you are retrenched may be too late already.
Budget how much savings you have against your monthly expenses. If you have enough savings to last 9 to 12 months, it may sound a lot but trust me, time flies and you don't want to wait till month eighth to do emergency preparations to raise cash. You have to start from the first month or even when you are still employed.
Here are a few ways that a desperate person can raise cash legitimately.
Besides borrowing from friends, there are many ways to raise emergency cash which I have tried when I was jobless for 20 months. Many resort to loan sharks and end up worse off than before. Loan sharks not only charge an imposing interest of around 20% a month but also resort to unethical ways to get back their money. Thankfully, I did not borrow from loan sharks and will not even when I am desperate.
1. Insurance Cash Value
During my down period, I managed to raise almost $20,000 just by borrowing from my five insurance policies without any questions asked from the borrower (insurance company). There is no need for collateral and certainly no need to show proof of income. Moreover, you can borrow close to 90% of your accumulated cash value. If you have $10,000 in your cash value, you can borrow $9,000 automatically. It only takes a day or two for the cheque to be issued and in some cases, this can be done almost immediately within the day.
What happened is that you are actually borrowing your own money from your insurance policies’ cash value. The beauty is that you do not need to repay back any amount though it carries an interest value of between 4 to 5% per annum on the loan amount. Nevertheless, this may affect your insurance claim, if any, as the insurable amount is less off from the loan issued to you. Premium remains payable however so that the policies will be active unless you have a policy that has the premium holiday feature, i.e. you do not have to pay any premium for a certain period and the policy is still active. If in doubt, do check this loan facility out with your friendly insurance agent. Please don't lapse your policies as when you are in financial dire straits and if something bad is to happen to you, it will be disastrous when you are not covered.
I was thankful that during those good times, I managed to set aside a substantial amount of premiums ($500-600 a month) for my insurance policies. Over the years, a substantial amount of cash value was accumulating in my insurance policies during those good years. The loan amount was enough for me to tide over at least twelve months if I used it sparingly.
To this day, I am thankful that I have deposited such a large sum of money into my insurance policies by way of monthly deduction. During rainy days, the loan that I could borrow easily provided a lifeline for me to tide over a difficult period. So when you save during the good times, you always gain no matter what.
2. Second Hand Goods
Another easy way to raise instant cash is to sell away what you do not need at home. As I bought a lot of CDs and VCDs during my good years, I managed to sell them away to second hand shops located in some HDB area to raise cash during a very difficult period. Nevertheless, the resale value is very low. I remembered selling away a original CD costing around $20.00 for a dollar and a VCD for $1.50!
Handphones are also readily exchangeable for cash especially in second hand handphone shops. Some friends told me to go to ebay website to market my products. Buyers are willing to pay more than second hand retail shops. It is well known that during down times, the Yahoo sales website exploded as many people desperate for cash posted their items on the site for sales. However, I could not find the technical expertise to navigate round ebay website to sell my stuff. I may consider hawking my second hand goods if they bring back the old Sungei Road! Desperate times need desperate measures!
So do sell your secondhand staff to Cash Converters - one of our local second hand shops but be prepared that their re purchase value is very low.
3. Recall Loans
Try to recall back loans to friends that were made long ago until they were forgotten. I managed to savage back a few thousand dollars for a loan made to a good friend many years back. I did not ask for repayment as it was a good friend and the amount was not a lot ($5000).
Nevertheless, when one is unemployed, five thousand dollars is a huge sum of money and can last 2-3 months. Though the friend was reluctant to return the amount, my desperation and urgency in my plea moved him to make out a cheque for $5000.
To this day, I am thankful for that friend who is willing to return the sum of money which came in handy for some urgent bills. He can choose to avoid me or fabricate a story not to return the amount which actually happened to another friend of mine. I rather not disclose the story here as it is not a positive one. So when the chips are down, try to retrace back those loans made out to friends when you are riding high. It is time to recall those loans back as your friends may be doing better than you now.
4. Short Term Part Time Work
I didn’t know that there is a flourishing part time employment in the market until I was unemployed. There are many jobs that pay by the hour out there – the only thing is whether you are willing to do them.
For example, the mover business always have a shortage of workers. Workers come and go as the job is temporal and demanding. Movers spent up to 6 hours a day moving heavy household items up and down stairs. The pay is miserly – around $50. However, when one is desperate such work is in demand and sometimes there is no lack of workers lining up to do them. Due to a chronic poor back, I have never attempted to move furniture before except for the occasional help rendered to help friends move their items when they shift home.
Telemarketing is also in demand, whether it is in a down or up period. They also pay by the hour and can run on shift work. I managed to secure a one-month telemarketing job that paid $7.00 an hour during that period. All I need to do is to contact the clients to change some of their data. To me, it is easy money and my only regret is that the assignment ended after one month. I also managed to make some good friends there and kept in contact for a while before the out-of-sight-out-of-touch syndrome took over. So if you need to, there are regular part time jobs out there for the taking. It is all over the papers and contact is spread also through word of mouth.
5. Stocks and Shares
Of course, if you have any stocks and shares it is good to slowly sell them to raise cash. I made the mistake of waiting too long to sell off some shares and in the end they were worth much less than if I were to sell them off in the beginning of the downturn. I am no financial stock guru here and the only advice I can give is to liquidate your positions if you are unemployed as cash is king in a recession unless you are in a very cash rich position.
A friend of mine also had to sell off her car during the down turn as she could not handle the repayment of the loan comfortably. She told me that she was very reluctant to hand over the key on the day of transition and was depressed for a while. So be prepared for the day when you have to part away with your possessions. It can be quite traumatic especially if it is an item of sentimental origin like one’s home. This is so true especially for men who tend to view their possessions as a reflection of their status and esteem. It is time to refocus where our true happiness will be during this recession. There should be less pursuit of materialism but more emphasis on building up relationship.
Again, selling expensive items like cars or motor bikes may incur extensive losses in a downturn. So be prepared.
Pawn shops are also doing a roaring business during down times when people start to pawn away their belongings that are of value. Though pawning can give you instant cash, there is still the stigma of visiting a pawn shop. I remembered when I decided to pawn away some items to raise cash, I wore a baseball cap to hide away in case some friends spotted me. There is still the shame to visit a pawn shop as though you are a loser which is not the case as it is a legitimate legalized lending institution and can be a source of help when one is financially down.
Pawn shops operated by lending you cash over interest for an item of value such as gold chains, luxurious watch pieces and diamonds. I was surprised that pawn shops charged less than 2% interest for a three to six month loan period. Nevertheless, they only lend you an amount much reduced in value to the item that you pawned. For example, if you decide to pawn a gold chain and the current market value is $1000, you may only get a loan for $750 as if you defaulted in payment at the end of the loan period, the chain belonged to the pawn shop. Suffice to say, pawn shops are also out there to do a business and they need the margin to survive when you defaulted. As you still need to return the loan to the shop, pawn shops can only be temporary emergency places that provide you cash for a certain period to tide over. If you can return the money on time, pawn shops will make fantastic legal loan institutions as their interest rate is super low compare to financial houses (12% up) and loan sharks (20% up).
The major difference between a pawn shop and a loan shark is that the interest rate is very small for the pawn shops and they don’t go around pouring paint over the loan taker’s homes if the person defaults in payment. I am surprised that only uncles and aunties visit pawn shops. Executives need to know that pawn shops provide cheap loans to tide over a difficult period and should never be shunned like parasites. Some pawn shops are well renovated and except for those ugly iron bars that shield you from their officers, they are decent business places to visit. You can even haggle for them to give you a better rate if you are a regular customer.
My mum ever told me that she had pawned away her pair of gold bracelets close to ten times so that she has cash to tide over when we were much poorer and younger. However, my heart sunk when I realized that recently her pair of gold bracelets were no where close on her hands. Maybe she could not pay up the loan amount readily and the pawn shops had confiscated them for sales at their shops. I did not ask her about it for fear that it may stir up unpleasant
To raise cash, a friend of mine took the drastic step to rent out his 2-bedroom private apartment for around $2,500 during that down period and moved his whole family of four to stay with his in-law in a HDB 3-room flat. The rental amount was sufficient to repay the monthly bank mortgage with some spare change. It was a drastic step and it worked for him. His family was less stressed and life went on as normal as before. If you have have family members who are willing to let you stay with them for decent rental, such a step seems feasible and could provide you a stable monthly financial return to help you tide things over the mid term.
I am sure many others have their own way of raising cash for emergency use. Some extreme cases include selling one’s pet to raise cash whereas others resort to breeding their pets to sell the puppies. Others prostitute their bodies to live one more week. Some I heard went for those new drug trial in hospitals and received adequate compensation for their bodies that were clinically tested. We all have different ways of raising cash when we are at the end of the rope and I should not comment too much here as we all live our life differently. People will resort to extreme measures to raise cash when they are strapped and in urgent need. Some who experienced extreme stress over a prolonged period will even resort to taking one’s life to end their misery. Such is the harshness of today’s society and sadly only the fittest survives.
Borrowing is by far the easiest but yet the most humbling experience for many to raise cash in this down time. I am not advocating that people who are cash strapped go round borrowing money from friends but when at one’s wit end there is simply no choice and this remain the best option besides going to the loan shark or doing something illegally.
I remembered when I approached friends for loans, I did it when I was in dire straits and that there was no other way out. The thought of asking them out for a cash loan already freaked me out. Moreover, as you also need to return the loan money, it will be difficult if you have to regularly see the person either in the office or in a church setting. There is also the fear that the person will slip out and share it with others. I would not recommend borrowing from office colleagues as once it is leaked out the whole office will know and not many people will react kindly to such news. I think friends whom you know well and are your buddies are the best people that you can approach for loans. AS they know you well, they are also sympathetic and will be understanding of your situation. Such friends are hard to come by these days and there will be some that will avoid you once they know that you are in dire straits. They will return to your side only when they know that you are doing better. So much for a friend in need is a friend indeed.
So how much should you borrow? I don’t think there is a ballpark figure here but anything between $1000 to $3000 is manageable. Remember that you need to return the money so the more you borrow the more you need to return.
Some may also lend you an amount lesser than you wanted and there is nothing that you can do about it. Some may also ask for an IOU and if you sign on the dotted line it becomes an official loan document that can be used against you in the court of law in the event of a dispute. There are some friendships whom I have heard went sour due to a loan dispute and it is wise to lend from people whom you really know and trust. The last thing you want is someone suing you to return the loan when you are still down and out.
So far, none of my friends have asked me to sign anything and except for one none has chased me for repayment. I have slowly pay off my loans to friends but not entirely yet. So the key message here is to only borrow when all avenues are close and borrow from close friends who have supported you all these years. As money is a very sensitive issue, it is wise to think twice before resorting to borrowing from relatives. You never know when they may backfire on you. Many also approach their own family members such as brothers and sisters first. Though it is easier to approach them but take note that some siblings do not take to lending money kindly even for their own kind and this may breed bad blood in the family. So do think twice about borrowing from siblings also though it sounds easier. If they refuse to lend you the cash, the disappointment may be catastrophic for you and even affect your kinship. The news may also spread within the whole family network and if discretion is what you need then borrowing from siblings may not be a wise move.
I am always eternally grateful for my group of friends that stood by me when the chips are down and that is essentially what true friends are for. Those who avoided you when you are down are apparently not your good friends and you can let them go in peace.
Some of you may resort to gambling which is rampant during lean times. Especially for the lower income, this is a form of get-rich-fast scheme. Betting on Toto and 4D increase during periods of recession as people want a chance to get instant cash quickly. Our easy access to those hundreds of betting booths spread round the island give us the convenience to wager some money for huge sums in return. I wonder how many people lost more of their money when they resort to gambling than keeping them in their wallet.
I always see long queues of elderly people during 4D days and it is not uncommon to see some office people in ties joining the queue too. I find that gambling not only drain your money but also give you the false hope that there may be real chance of a win on that feel-good days. When the numbers don’t come in good, your lucky days may turn to sorrow. A friend tried this method of putting all his wager money on match days into a tin box. He was shocked to realize that not only the numbers did not strike any 4D prices but that his tin book grew a few hundreds every month. That was the time that he quitted betting on those dreadful numbers any more.
However it is easier say than done. Many have wagered on 4D since they are in their twenties right up to their golden years. To ask them to completely stop gambling is like asking them to stop eating. It has become a part of their lifestyle and habit. If need to, approach a counselor to help you ease your gambling habit. Many families were ruined as a result of gambling problem. So please lay off wagering on those numbers that have high odds of striking.
In an article on Today’s paper dated 28 Oct 08, Credit Counselling Singapore (CCS) reported that bad debt as a result of gambling rose to 27.8 percent from previous year figure of 23.9 percent. Four out of ten people who have credit card debt also roll over their credit payment i.e. they only paid the minimum sum payment. Bankruptcies also rose to 290 in September 08 from August 08’s figure of 240. During the Sars period in 2003, a total of 5,400 people became bankrupt. I am afraid bankruptcy figure will rise in the coming months as the meltdown hit not only Singapore but the world. IT is a global recession and looks very ugly.
I hope that I have given some valuable tips on how to raise some cash during those tough period. It is good to list down those avenues that you can go to when you are still working and financially sound. This is call preparation for the worse. When you are really down to your last dollar, you may not have the right frame of mind to think rationally on how to raise money. Your desperation may also drive you to do something silly to look for cash. So it is good to be ready and prepared when the crunch time arrives. You just need to activate those instruments to get cash.
If you want to approach the government’s welfare arm at Community Development Council (CDC) for some welfare money, it may take a good 4-6 weeks for them to process your application and there is no guarantee that you will be successful. So doing it earlier is wise.