I generally don’t have the habit of keeping cash in my bank account, because I will always be tempted to use them, either spending on contemporary cute frivolous stuff or yet another live performance or shopping around the investment space and locking the money up in a new vehicle.
The best
way to resist the temptation is just to make it irrelevant, so I try to hide my
money in places that are less accessible (in investments) or somewhere I will
forget (in my favourite books or old wallets or some decorative storage space –
alike to Grandma’s biscuit tins under the bed)
So what if
I found myself in an emergency situation in need of cash?
While it
wouldn’t be regarded as a safety margin, my first response would instinctively be
to cut down on expenses.
My
lifestyle is very flexible, so while I do splurge on theatre tickets, meals in award-winning restaurants, quality education in denominations of thousands and sports activities
in hundreds, I could still enjoy my life with free live concerts around the
island, $1 homecooked meals, free education resources and training online and take
a walk to the beach or enjoy the breeze while cycling around the reservoir.
My first
line of defence is a Buy Now Pay Later (BNPL) service with a limit of $3,000. Of
course, there is a limit to what can be spent on this, but if I need to make a
payment urgently and they it as a payment method, I will not
hesitate to use it. The outstanding balance can be paid at the end of the month,
and I can then use my credit card to top up the e-wallet to clear the balance. This
allows me to have an additional month to pay off the credit debt. I’m
currently using a credit card that doesn’t incur any charge to top up the wallet,
but there may be policy changes in the future.
My second line
of defence is my credit card. I have two credit cards, and they both share a
credit limit of $5,200. In case when BNPL is not acceptable, a credit card is my
next go-to, even if I have sufficient cash at hand. In my usual spending, I
have never carried a balance forward but in emergency situations, I may consider paying the minimum amount and carrying a balance forward to ensure I have more cash
at hand for liquidity’s sake
The third line
of defence is the minimum balance across all bank accounts. That adds up to a
total of $3,500 for me. Although this would incur service fees from $2 to $5
depending on the account type, it is usually waivable out of goodwill by the
bank if you call them up to put in the request politely. I will use the balance
to pay off the credit card bills
The fourth
line of defence will be to pawn my gold accessories. To satisfy my shopping urges
and to have something nice to wear while preserving the value, I used to buy
gold accessories when the prices were lower a few years back and even though it’s
not much they have accumulated to a tidy sum of around $4,000. I don’t wear
accessories nowadays except for a crystal bangle. In need of quick cash, I can always
pawn the gold accessories and redeem them at an interest rate of 1.5% per month.
If the dire situation prolongs, I may even sell it once and for all, but having
the option to pawn allows liquidity while still having the option to get back
the assets.
The fifth
line of defence is to cash out my memorial notes’ collections. I collected some
memorial notes in the past years when the country achieved a certain milestone.
They are worth their face value and can mark up to a few per cent for collectors.
In emergency cases, I can either ‘pawn’ them to my friends or relatives with no
interest or if there is no taker I could just deposit them into the bank for their face value. This amounts to
about $10,000.
The above 5
methods are my ways of getting cash urgent to temporary relief emergency
situations while I liquidate other assets such as stocks, bonds and even insurance
which will take from 3 days to a few weeks or waiting to get paid for some side
hustles.
There may be
a few rare cases where it may not be ideal to liquidate a certain asset because
it’s suffering from substantial paper loss but has the potential to recover in
the future. In times like this I will then have to make the decision to cut losses if having extra income and liquidating other assets is not sufficient
to deal with the situation.
There is a credit
limit of $5,200 ($8,200 including BNPL) and about $17,500
in cash to deal with emergency situations so I would be having a total of over
$22,000 to cushion.
We don’t know
what may happen that will require this amount of money urgently, but at least if
(touch wood) it happens, I will still have some, albeit a little, capacity to deal with it.
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