A Letter From A Worried Father

A Letter From A Worried Father

What do you do when you are about to lose your job but still have a mountain of debt to settle and dependents who rely on you? Such is the case with this worried father in Kepong…


I am about to lose my job in a month, and am promised six months in salary compensation. I earn RM10,000 a month. However, I have quite a high credit card debt to pay off with monthly interest rates of 15%, and belong to the sandwich generation with elderly parents and a young child to support. What should I do with my salary compensation: Continue paying off my credit card debt, or use it to sustain both sides of my family as I don’t have a new job offer yet?
– Worried Father, Kepong

Answer by Ringgit Advisor:

Hello, Worried Father.

I share your concern and anxiety and I wish I could give you a more detailed guidance but that would require me to understand and have more information from you. For time being, I hope this general framework below can help you in some way.

Firstly, it is important for you to have an emergency fund. Your situation will be less challenging if you have a habit of saving up an emergency fund, and if some unfortunate event were to happen before you find the next job offer, you will need some backup fund for event such as kids or parents not feeling well, or you have illnesses to deal with, or any unforeseen accident and whatnot.

At the current juncture, insurance (especially health insurance) is your best ally as it can offer you more liquidity than you now have. It can provide more than the RM 60,000 compensation you have if you need more in the event of illness. Therefore, If you are thinking about cutting out insurance to save on cash flow, think again. Basically, life insurance has a flexibility that eases your financial burden during a trying time like this, it is known as “Automatic Premium Loan (APL)” (Traditional policy) and “Premium Holiday”(Investment-Linked Policy). It means you could stop paying the premium for a short time but still not losing the coverage (so long the cash value is enough to sustain it),  be sure to check this out.

On your credit card debt, try to speak to bthe ank about converting your outstanding to a term loan, this could help you lower the interest rate and have a peaceful mind and timeline to repay it over maybe between 1 to 3 years period depending on your amount. Meanwhile, be sure to stop using the card but just repay it with discipline.

And if you were to need additional funding, try to consider and check if your insurance policies have cash bonus or do partial withdrawal, these are avenues of fund that will be “cheaper” as the cost of these funds will be much lower to personal loan, credit card loan, and lastly, loan shark.

On a separate note, be sure to speak about this with your family (spouse especially), and find a solution together. And when you have to get through this wild storm in time (i am sure you will), put in some effort on planning your personal finance to build a strong financial foundation for your family.

Therefore, whether you should settle the loan in full, it depends on if you have had enough emergency fund, and also depends on the degree of difficulty for you to find a similar job. Generally, the more skilled work you perform, it will take a longer time before you land the next offer, so your need for the back-up fund will be greater.

Hope the above helps. If you need more info, you may write to me at ask@ringgitadvisor.my.

We wish you all the best in your future undertakings!




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