17-03-2011, 06:20 AM
Mar 17, 2011
How households can tackle inflation
To cut spending, people should make temporary changes to lifestyles
By Yen Feng & Grace Chua
TALK about inflation can sometimes feel a lot like, well, just talk.
Words flew in the recent Budget debate as politicians argued over ways to curb rising prices. The issue, after all, might affect how some people vote in the coming general election.
But when it comes down to dollars and cents, the pain inflation brings is less in dispute. Nobody likes it when the same dollar today buys less tomorrow.
The inflation rate in January hit 5.5 per cent, the highest in two years. In 2008, the figure spiked at 6.6 per cent amid soaring oil costs and food prices.
Economists say this year's average may eventually settle at 4 per cent - above the 2 per cent mark it has hovered at for most of the last decade.
The result is that everyone is feeling the pinch, though for low-income workers, recent price increases can feel more like a series of punches. For them, inflation is measured in handfuls of essential goods like rice and vegetables.
A few years ago, 50 cents could buy Ms Noor Hafizah Hanafi, 29, a housewife, two 'grabs' of kangkong.
'These days, only one,' said the young mother. Her monthly household income is $1,200 - in the bottom 20 per cent of households.
The Government's latest Budget measures are meant to help families like hers fight inflation with extra cash, rebates and subsidies amounting up to nearly seven times the expected increase in prices.
But how can families also help themselves and systematically lower consumption costs, at least for the short term?
Financial planners and MPs who spoke to The Straits Times for this special report said the key to battling inflation lies in each household becoming more aware of where its dollars are going, and then making temporary changes in lifestyle that help to cut down on costs.
A look at the largest components of the consumer price index (CPI) - the official measure of price rises in Singapore - shows that food, transport, and housing make up almost two-thirds of a typical household's monthly expenses.
Financial Planning Association president James Sim said families can cut food costs by buying cheaper alternatives. This could mean buying house brands, suggested Mr Lee Yi Shyan, the Minister of State for Trade and Industry, who recently set up the Retail Price Watch Group, which monitors consumer prices.
Other MPs urged frugality - but not at the expense of nutrition. People can save money, for example, by cutting down on eating out.
'On the ground, everybody is saying that prices have gone up,' said Aljunied GRC MP Cynthia Phua. '(But) cooked food and uncooked - there's a difference. Take advantage of lower prices for uncooked food.'
Recreation - a fairly big component of expenses at about 16 per cent - is another area where households can focus on spending less. To cut costs, families need to re-examine what they would consider necessities in life, said Mr Sim.
'You have to cut down on what's unnecessary - movies, taxis and of course, credit card use. It's a discipline, an everyday decision to manage your costs of living,' he said.
Financial experts and MPs acknowledge that spending on other essentials in the CPI like transport and housing can be harder to cut. They make up 16 per cent and 25 per cent respectively in the CPI.
Those who own cars might consider selling them; if not, downgrade the type of petrol used, they said.
But what if spending is already at a minimum and money is still tight?
In these situations, Mr Sim suggested finding a second source of income - whether it is by renting out available rooms at home or finding another part-time job.
That is what admin assistant Chen Ya Hui, 40, did last December. The widow and mother of two teens said she was hoping for a better-paying job, but settled for part-time work as a supermarket cashier when things got rough last year. She draws about $2,200 a month - a third of which pays for rent.
She said: 'I don't eat out, I don't take taxis, but honestly, it's still not enough.'
Ms Ylva Ng, 24, a clerk, and her husband, 25, are both looking to take on more work too. Though they take home about $3,000 together, they are still paying for their wedding held last December.
The couple are having a baby in a few months, and in a few years they will start paying for a new flat. How will they cope?
'We'll both work on the weekends,' said Ms Ng. 'Even $3 or $4 an hour is still money.'
While those with lower incomes will need the most help, the lessons of dealing with inflation should not be lost on even people who earn comfortable salaries.
Mr Roy Varghese, an adviser at ipac financial planning, a financial consultancy, cautioned those in higher-income brackets against being complacent. Households in the upper median income levels - $6,000 and above - tend to save little. 'Ideally, they should put about 15 to 25 per cent of their income into savings, which they can then invest,' he said.
'Do that, live within your means, and you'll be providing for your future.'
zengyan@sph.com.sg
caiwj@sph.com.sg
How households can tackle inflation
To cut spending, people should make temporary changes to lifestyles
By Yen Feng & Grace Chua
TALK about inflation can sometimes feel a lot like, well, just talk.
Words flew in the recent Budget debate as politicians argued over ways to curb rising prices. The issue, after all, might affect how some people vote in the coming general election.
But when it comes down to dollars and cents, the pain inflation brings is less in dispute. Nobody likes it when the same dollar today buys less tomorrow.
The inflation rate in January hit 5.5 per cent, the highest in two years. In 2008, the figure spiked at 6.6 per cent amid soaring oil costs and food prices.
Economists say this year's average may eventually settle at 4 per cent - above the 2 per cent mark it has hovered at for most of the last decade.
The result is that everyone is feeling the pinch, though for low-income workers, recent price increases can feel more like a series of punches. For them, inflation is measured in handfuls of essential goods like rice and vegetables.
A few years ago, 50 cents could buy Ms Noor Hafizah Hanafi, 29, a housewife, two 'grabs' of kangkong.
'These days, only one,' said the young mother. Her monthly household income is $1,200 - in the bottom 20 per cent of households.
The Government's latest Budget measures are meant to help families like hers fight inflation with extra cash, rebates and subsidies amounting up to nearly seven times the expected increase in prices.
But how can families also help themselves and systematically lower consumption costs, at least for the short term?
Financial planners and MPs who spoke to The Straits Times for this special report said the key to battling inflation lies in each household becoming more aware of where its dollars are going, and then making temporary changes in lifestyle that help to cut down on costs.
A look at the largest components of the consumer price index (CPI) - the official measure of price rises in Singapore - shows that food, transport, and housing make up almost two-thirds of a typical household's monthly expenses.
Financial Planning Association president James Sim said families can cut food costs by buying cheaper alternatives. This could mean buying house brands, suggested Mr Lee Yi Shyan, the Minister of State for Trade and Industry, who recently set up the Retail Price Watch Group, which monitors consumer prices.
Other MPs urged frugality - but not at the expense of nutrition. People can save money, for example, by cutting down on eating out.
'On the ground, everybody is saying that prices have gone up,' said Aljunied GRC MP Cynthia Phua. '(But) cooked food and uncooked - there's a difference. Take advantage of lower prices for uncooked food.'
Recreation - a fairly big component of expenses at about 16 per cent - is another area where households can focus on spending less. To cut costs, families need to re-examine what they would consider necessities in life, said Mr Sim.
'You have to cut down on what's unnecessary - movies, taxis and of course, credit card use. It's a discipline, an everyday decision to manage your costs of living,' he said.
Financial experts and MPs acknowledge that spending on other essentials in the CPI like transport and housing can be harder to cut. They make up 16 per cent and 25 per cent respectively in the CPI.
Those who own cars might consider selling them; if not, downgrade the type of petrol used, they said.
But what if spending is already at a minimum and money is still tight?
In these situations, Mr Sim suggested finding a second source of income - whether it is by renting out available rooms at home or finding another part-time job.
That is what admin assistant Chen Ya Hui, 40, did last December. The widow and mother of two teens said she was hoping for a better-paying job, but settled for part-time work as a supermarket cashier when things got rough last year. She draws about $2,200 a month - a third of which pays for rent.
She said: 'I don't eat out, I don't take taxis, but honestly, it's still not enough.'
Ms Ylva Ng, 24, a clerk, and her husband, 25, are both looking to take on more work too. Though they take home about $3,000 together, they are still paying for their wedding held last December.
The couple are having a baby in a few months, and in a few years they will start paying for a new flat. How will they cope?
'We'll both work on the weekends,' said Ms Ng. 'Even $3 or $4 an hour is still money.'
While those with lower incomes will need the most help, the lessons of dealing with inflation should not be lost on even people who earn comfortable salaries.
Mr Roy Varghese, an adviser at ipac financial planning, a financial consultancy, cautioned those in higher-income brackets against being complacent. Households in the upper median income levels - $6,000 and above - tend to save little. 'Ideally, they should put about 15 to 25 per cent of their income into savings, which they can then invest,' he said.
'Do that, live within your means, and you'll be providing for your future.'
zengyan@sph.com.sg
caiwj@sph.com.sg