How households can tackle inflation

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#1
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

My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
Its easy to advice until you live in the individuals shoes and experience the various factors that cause a person to not be able to save or even have enough money.
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#3
What a joke. Their advice is as follows: Suck it up. Spend less money. How does this classify as newsworthy anyway?
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#4
(17-03-2011, 06:20 AM)Musicwhiz Wrote: 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.'

The couple are still paying for their wedding long after it's over? Sounds like they may have over-budgeted for it. I remember paying mine off with most of the red packet cash + some top up by credit card, and it was settled the following month and NOT through installments. Since they also chose to have a baby, I guess they must have worked out some sums?

$3 to $4 an hour is simply not efficient as work. Imagine working 8-10 hours and earning just $32 to $40. I would think teaching tuition for example, for 1-2 hours per day, can earn you about $70 to $80 as the rate is about $35 per hour for secondary students.

The upper median income levels of >$6,000 (I assume this means gross household income indicating BOTH husband and wife) save very little? This is a surprising find as they are supposed to have more disposable income. If they lived frugally and without a car, I should think they can save at least $2,000 to $3,000 a month, unless they have many kids.

Comments are welcome.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#5
(17-03-2011, 06:10 PM)Musicwhiz Wrote:
(17-03-2011, 06:20 AM)Musicwhiz Wrote: 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.'

The couple are still paying for their wedding long after it's over? Sounds like they may have over-budgeted for it. I remember paying mine off with most of the red packet cash + some top up by credit card, and it was settled the following month and NOT through installments. Since they also chose to have a baby, I guess they must have worked out some sums?

$3 to $4 an hour is simply not efficient as work. Imagine working 8-10 hours and earning just $32 to $40. I would think teaching tuition for example, for 1-2 hours per day, can earn you about $70 to $80 as the rate is about $35 per hour for secondary students.

The upper median income levels of >$6,000 (I assume this means gross household income indicating BOTH husband and wife) save very little? This is a surprising find as they are supposed to have more disposable income. If they lived frugally and without a car, I should think they can save at least $2,000 to $3,000 a month, unless they have many kids.

Comments are welcome.

Agree. I was reading the other thread where it was mentioned that the civil servant who was taking home 3.3k a month had a car. And the car was costing him 1.4k a month in total, which probably explains why he was finding it hard to save for a house. I'm just commenting based on what's written in the article, I don't know know, he might have other pressing reasons for owning a car.

I'm not saying that prices aren't high, but I'm just saying alot of people live beyond their means.



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#6
(17-03-2011, 06:10 PM)Musicwhiz Wrote: The couple are still paying for their wedding long after it's over? Sounds like they may have over-budgeted for it. I remember paying mine off with most of the red packet cash + some top up by credit card, and it was settled the following month and NOT through installments. Since they also chose to have a baby, I guess they must have worked out some sums?

$3 to $4 an hour is simply not efficient as work. Imagine working 8-10 hours and earning just $32 to $40. I would think teaching tuition for example, for 1-2 hours per day, can earn you about $70 to $80 as the rate is about $35 per hour for secondary students.

The upper median income levels of >$6,000 (I assume this means gross household income indicating BOTH husband and wife) save very little? This is a surprising find as they are supposed to have more disposable income. If they lived frugally and without a car, I should think they can save at least $2,000 to $3,000 a month, unless they have many kids.

Comments are welcome.

Hey MW, I think you might have missed this line.

"Though they take home about $3,000 together".

Don't think they'll be able to save $2-3K/ month with that kind of salary.

You're right to say that $3-4/hr is not a very efficient job but unfortunately this couple looks like they fall into the low-income category. $3-4/hr might be efficient in their case. Going by the latest census from Singapore DOS (Dept of Statistics), only about 1 in 4 Singapore residents have a University degree. Although that number is almost 1 in 2 if you are in the age bracket of 25-34 yrs, this couple probably falls into the other 1/2 of the coin.

I totally agree that they must have over-spent on the wedding. The problem with most people is that they see a wedding as a 'once-in-a-lifetime' event and hence go all out on that. In the end, if they aren't conscious of the spending, it becomes a lifelong nightmare.
(17-03-2011, 06:20 AM)Musicwhiz Wrote: '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.'

I think this sentence is the most telling one. This is the problem with Ivory tower politicians and academics. Throw them a problem and they give you a solution that works only in a ceteris paribus world.

I don't think this dear MP counted the costs of taking the time to prepare and cook the food. Very often, the lower income group will be working in more labour intensive jobs or jobs that require longer or more odd hours. If you account for those, sometimes, buying uncooked food may not be the best option for them.
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#7
(17-03-2011, 07:06 PM)kazukirai Wrote: I think this sentence is the most telling one. This is the problem with Ivory tower politicians and academics. Throw them a problem and they give you a solution that works only in a ceteris paribus world.

I don't think this dear MP counted the costs of taking the time to prepare and cook the food. Very often, the lower income group will be working in more labour intensive jobs or jobs that require longer or more odd hours. If you account for those, sometimes, buying uncooked food may not be the best option for them.

Like I said earlier, "Its easy to advice until you live in the individuals shoes and experience the various factors that cause a person to not be able to save or even have enough money. "
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#8
Buying uncooked foods can be more expensive and time consuming.

Maggie Mee or Plain Porriage is another matter. However I do not think after so many years of nation building, that we worked on this range of consumptions as fair comparison of living standards in Singapore to ask for this level of frugality. Heath may suffer if they are not careful and Medical cost will worsen their financials further.


Cory

Just my Diary
corylogics.blogspot.com/


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#9
So the garment is urging us to cut expenses.
What about them? What cut backs have they made and are they passing back the savings?
Talk is cheap and we have heard a million times what they want us to do.
But they themselves are not doing anything in their own backyard.

To give examples,

better faster cheaper....
encouraging us to more kids....(try to recall who in the garment has a large family)
encouraging us to take risks and be entrepreneurial...(when an eagle is lead by a mole, the eagle can't soar)
... ....






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