Formulating Financial Planning in Times of Economic Uncertainty
The current economic situation is not good. Some of us may not feel the worst of it yet, but for the majority of Indonesians, the economic conditions have become almost unbearable. Finding work is very difficult, even for graduates of prestigious universities. Prices of goods and services have risen far more than the accompanying wage increases. The only thing making us feel that Indonesia’s condition is still comparatively better than some other countries is that Indonesia has not been directly involved in armed conflict or real war. The current bad state in Indonesia is simply economic trouble (utterly uncertain). Unlike countries directly affected by wartime events, the current uncertainty can still be managed through sound financial planning (financial planning). However, financial planning during times of uncertainty should be more focused on financial safety (safety) rather than pursuing maximum investment returns (growth). I read on social media (note: news on social media may not be reliable) that the Indonesian Minister of Finance, Purbaya Yudhi Sadewa, reportedly shared five recommendations (tips) for surviving the crisis (2026 to 2030) as follows:
Stop taking on credit for now: do not add new installments or debt; deal with existing debts first.
Focus on the existing business. Do not rush to expand the business at the moment. First focus on maintaining the existing business to keep it stable.
Secure employment. Refrain from resigning. In a crisis, having a fixed salary is a luxury.
Frugality is key to safety. Cut non-essential expenditures. Self-reward is allowed, but only in moderation.
Be careful with investing. Do not be easily lured by new businesses or MLM (Multi Level Marketing) schemes promising grand returns.
In line with the minister’s advice, I would also like to share my suggestions as an Independent Financial Planner to IPOTNEWS readers who wish to formulate a financial plan in this period of economic uncertainty (we use ‘economic uncertainty’ rather than ‘crisis’ because in financial literature the term ‘economic crisis’ has a different definition).
- Strengthen your safety net
Prepare an emergency fund larger than usual. The minimum emergency fund is 6 months of regular expenses, but in this severe situation it should be raised to 9 to 12 months of regular expenses.
Re-evaluate existing insurance coverages—ensure that health insurance, life insurance, and general insurance coverages are adequate to cushion all shocks from economic uncertainty.
- Prioritise essential (mandatory) expenses
Differentiate between expenses driven by wants and those driven by needs. You should focus on wants because these discretionary expenditures are not essential and can be cut in an uncertain economy.
If possible, postpone all non-essential (discretionary) expenses until economic conditions stabilise.
- Diversify sources of income
Consider new income sources such as side jobs or other passive income.
Update existing skills to remain competitive in the current labour market.
- Manage existing debt
Pay off all existing debts, starting with the highest-interest debts to reduce the financial burden.
Avoid taking on new debt where possible.
- Maintain a diversified investment portfolio
Keep investments diversified across various asset classes, including financial assets and tangible assets.
Consider shifting existing financial assets (intangible assets) into low-risk assets. In times of high uncertainty, safety should be prioritised over growth.
- Stay informed
Keep abreast of all economic and political developments, and not be easily swayed by hoax news.
Do not make investment decisions based on impulsive short-term signals.
Review your financial plan every quarter to adjust for changes in income, expenses, or market conditions.
- Focus on long-term goals
Continue to set aside part of your income for a retirement fund.
Contributions to the pension fund, even small, will compound significantly over time.
By: Fredy Sumendap, CFA
Source: IPS