We started the New Year with an increase in GST to 8% in Singapore. With inflation news looming, what are you doing to combat inflation and rising prices?
Read these money management tips to help you beat inflation and achieve your financial goals!
#1: Know how “healthy” your financial status is
Before asking if you should start investing or purchase certain products to grow your wealth, it is important to know your financial health. Clarity and knowledge will put you in good stead to plan your finances efficiently. Do you track your expenses, savings, how much spare cash you have and how much can you set aside to make it work harder for you and your family?
#2: Are you able to spend less?
In this modern age, it’s easy to feel FOMO (fear of missing out) or wish to YOLO (You Only Live Once) by obtaining “happiness” through material wants.
In reality, power bills and petrol prices are increasing. Even groceries now cost more as we lose our purchasing power. Changing your spending habits can reduce unnecessary expenses and grow your savings over time.
Jenelle’s financial tips: Have you claimed and utilised the $300 CDC vouchers 2023 that every household is entitled to? Use this “free money” on your daily essentials!
#3: Look for cheaper substitutes
Can you give up that daily Starbucks? For that caffeine boost, consider buying 3-in-1 sachets or coffeeshop kopi instead. Find affordable alternatives or choose house brands – lifestyle changes can go a long way in cushioning the impact of inflation. When it comes to shopping, there are discounts almost every month at online stores and shopping malls – not just the 11.11 sale or Black Friday discounts!
#4: Consider refinancing mortgages
Housing prices and COE are sky high. If you are looking to purchase a new vehicle or house, consider if they are a must-buy now. If you are not planning to get such big-ticket items, you may want to check out your existing home loan package, whether are you eligible to refinance. Get in touch with me to find out how you can beat rising interest rates during inflation!
#5: Put extra cash into investment plans or assets that will appreciate
Not all investments are high-risk with high returns – understand your risk appetite before investing, purchasing any financial instrument, or buying an asset.
That said, apart from sufficient cash savings to cover 6 – 12 months of expenses, it might be smarter to diversify into investing.
Does money act as a hedge against inflation? Yes, although cash is not a growth asset. Cash will tend to keep up with inflation in nominal terms, in the situation where inflation comes with increasing short-term interest rates.
On the other hand, financial experts highlight that banks will never increase their interest rates as quickly as inflation. Holding onto extra cash seems like an underestimated risk for our personal financial situation.
That said, individuals can consider equities as good hedge for inflation in the long run. However, should inflation rise sharply, short term losses are likely. While past performance may not accurately predict what the future holds, holding onto investments over a longer term usually reaps the benefits of beating inflation.
If you are new to investing, one of the easiest options is to invest in mutual funds (similar to unit trust). A plus point is that your portfolio is diversified into investing in multiple companies or sectors. This can also include assets such as bonds, stocks and gold. Thus, you are exposed to different stocks conveniently and at lower cost, coupled with the portfolio manager’s service management.
Investors have options to protect themselves against inflation. Otherwise, use an inflation surge period to review your overall investment performance and allocation to make sure it aligns with your financial goals. Check in with your financial advisor, or feel free to reach out to me for a complimentary consultation.
With investing, your money can fluctuate a lot – but it’s better than losing value to inflation, in my opinion.
For assets, cars are depreciating assets and unless they support you in earning an income, it can be hard to beat inflation with this. Property investment can be a good option if it is within one’s means, as rental yield provides an additional stream of income.
#6: Take advantage of bank promotions in Singapore to earn extra cash
Banks in Singapore often run bank promotions to entice clients to put their cash in certain accounts or earn cash rebates. If you have spare cash and are comfortable for it to be “locked up” over a fixed period, you can easily earn a few thousands. Check out OCBC 365 and DBS Multiplier to earn step-up interest (extra cash).
Cashback versus Miles – which one do you prefer when spending on credit cards? Personally, I go for Miles accumulation and mainly use Citi PremierMiles and Citi Rewards Card. The latter is great for online shopping/grocery as it offers 10X points which is worth 4 miles. I believe no other credit cards gives this much for local spending.
For overseas expenses, I’m using Instarem amaze card (Travel Card) to link up with my Citi Rewards Card. By using the amaze card, Citi Rewards becomes an offline card as well. Essentially, when you add your Citi Rewards card to your Instarem amaze app (Travel Card) and charge your amaze card to it, transactions become online, even if you use your it physically at a retail store. This gives 10X points as if the transaction were done online.
I also use this Instarem amaze card when overseas as it helps to save on the bank and FX admin fees and provides competitive FX rates.
#7: Invest in yourself – your future self will thank you
This sounds like extra expenses, and you must be wondering how investing in oneself can tackle inflation. This translates to personal growth – increasing your skills and knowledge contributes to your work. That translates to higher bargaining power when it comes to salary earnings over time. Did you know Singaporeans aged 25 years and above are given SkillsFuture Credits which can be used for skills-related courses? Learn for less, literally!
What I’m doing to beat inflation as a financial advisor
Here are other tips as a financial planner and mum in Singapore:
- With the recent 8% GST hike, I’ve been eating out lesser, or supporting locals more. Anything to minimise paying on service charge.
- I shop more on Taobao for things not needed urgently. Online shopping with the available vouchers gives me extra bang for my buck.
- Recently I just did my mortgage refinancing. I was previously on the 3M SIBOR instead of SORA, and it went up to 4.6%. As my existing package is out of lock in period, I’ve managed to reduce my monthly mortgage by more than S$400/month.
- Putting aside more into investment, I am not afraid of the inflation now, I’m more afraid of the inflation during retirement. So, investing for the long term is a must for me.
- For my credit cards, refer to point 6 above on how I optimise my credit card privileges for more miles and online purchases!
Being financially-smart can help you beat inflation in Singapore. If you wish to build an inflation-proof investment portfolio or strategise your family’s financial plans, let’s discuss!
The statements or opinion expressed in this article are my own. The information is purely for information purposes and should not be relied upon as financial advice.