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How to beat inflation and the GST hike in Singapore 2024

Hey there, fellow Singaporeans! Ever noticed how our money seems to be on a roller coaster lately? The Monetary Authority of Singapore spilled the beans, revealing a whopping 6.1 percent rise in consumer prices in 2022 – the sharpest surge since the financial rollercoaster of 2008. So, how’s everyone holding up against this unexpected inflation spree and the rising cost of living? Picture this: Your morning routine gets a wake-up call as your beloved Yakun Set A now demands a heartier portion of your wallet, jumping from $4.80 to $6.30.

Yakun Set A New Price
Source: Mothership

As we dive into the ups and downs of prices and our changing financial landscape, it’s clear that beating inflation requires more than just acknowledging the numbers. It calls for a savvy approach to money matters, a deep dive into the ins and outs of inflation, and, most importantly, some solid tips on how to beat it. Join me on this journey, and let’s explore practical strategies on how to beat inflation and ride out the GST hike in Singapore.

Singapore’s Inflation Projections for 2023 and 2024

Now, let’s break down the numbers for a moment. CNA’s recent study spills the beans on what to expect:

2023:

Overall inflation is gearing up to dance around 5 percent, while core inflation plans to chill at around 4 percent. Hold onto your wallets!

2024:

Next year, things are looking a bit more chill. Overall inflation is projected to cool down to a range of 3 to 4 percent, and core inflation plans to keep it between 2.5 to 3.5 percent.

Adjusting for the GST Hike:

But wait, there’s a catch. Toss aside the transitory effects of that 1 percent GST rate hike to 9 percent, and we’re looking at a more chilled-out inflation scene. Overall inflation should settle between 2.5 to 3.5 percent, with core inflation doing a laid-back dance between 1.5 to 2.5 percent.

Early 2024 Hurdles:

Come early 2024, core inflation might hit a few speed bumps thanks to the GST rate hike and some seasonal twists. Brace yourselves for a bit of turbulence in the first few months.

The Inflation Challenges We Face

Now, let’s get real about the challenges that come with inflation:

1. Rise in Expenses

Imagine your favorite morning coffee and kaya toast, the cozy routine that suddenly costs more. Inflation is like a sneaky trick, making everything more expensive – food, transport, energy, and other basics. What happens? Your everyday and monthly spending goes up, leaving less money for savings and the fun stuff.

Even though the prices of individual things might fluctuate, inflation makes everything generally cost more, from food to transport, clothes, housing, and fun activities. This means you end up paying more for the same things you used to buy.

For people like us, it means we have to spend more money each day and month. This extra spending makes the overall cost of living in Singapore go up, and we’re left with less money to save or spend on things we enjoy.

2. Rise in Expenditure, Surpassing Income Increase

Here’s a classic inflation move. Your expenses decide to grow faster than your income. Salaries, especially in certain sectors, might stay put while the cost of everything else skyrockets. It’s like a silent pay cut, making it tougher to save up for big life goals like a home, education, or a retirement.

3. Maintaining Prudent Discretionary Spending

Dealing with non-essential spending, like on things that aren’t a must, becomes a bit of a puzzle when prices go up. Now, we need to be extra careful with our budget, making hard choices about cutting back on fun stuff like leisure, entertainment, vacations, and eating out. It’s a smart money move, but it can affect how good life feels and your overall well-being.

And here’s the real challenge: as prices go up, trying to keep up with the fun spending becomes like walking a tightrope. Think about enjoying hobbies, going out, and eating at restaurants – get ready for some tricky decisions. Also, watch out for “shrinkflation” – your favorite products might shrink in size, but the price stays the same, making it harder to keep living the way you’re used to.

Take, for instance, local hawkers. Some of them raised their prices because things like meat and veggies cost more now. Others didn’t raise prices but decided to give you a bit less food to handle the cost increase. It’s a balancing act for them too!

6 Tips to Beat Inflation in Singapore

Alright, let’s switch gears and talk strategies:

1. High-Yield Savings Accounts

When navigating the landscape of beating inflation in Singapore, one savvy move is to consider placing your hard-earned cash in a high-yield savings account. Popular options such as OCBC 360 and UOB One Account offer an enticing proposition – the opportunity to earn interest on your savings, and we’re not talking about meager amounts.

These high-yield accounts provide the potential to earn up to 7.8% per annum on your savings. Let’s break down what this means in practical terms. Imagine you have a significant amount stashed away in your savings account. With a high-yield option, you could potentially earn an additional $400 per month. The beauty of it lies in the simplicity – no complex financial acrobatics required.

In essence, a high-yield savings account offers a dual advantage. First and foremost, it acts as a safe haven for your money, providing a secure place to park your funds. Secondly, it turns the concept of traditional savings on its head by offering a robust interest rate, allowing your money to grow at a faster pace than in a standard savings account.

This strategy becomes particularly valuable in the face of inflation, where the value of money tends to erode over time. By earning a substantial interest rate on your savings, you’re not only preserving your purchasing power but potentially growing it.

Now, it’s important to note that the interest rates offered by high-yield savings accounts can vary, and they might come with certain conditions, such as a minimum monthly spend or the use of linked financial products. For example, the UOB One Account requires you to have a minimum credit card spend of $500 on their UOB One Credit Card and crediting your salary. Before diving in, it’s wise to carefully review the terms and conditions to ensure the account aligns with your financial habits and goals.

2. Review and Adjust Budget

When inflation decides to play hide-and-seek with prices, your budget needs to step up, it’s about adapting to changes. Regular reviews help you live within your means and allocate resources wisely. 

Start by categorizing your spending into essentials and non-essentials. Essentials are the must-haves like housing, groceries, utilities, and healthcare. Non-essentials are the areas where you can cut back a bit. The trick is finding a balance where you can live comfortably while also trimming expenses where necessary.

Inflation has a sneaky way of making prices go up without you noticing. To counter this, regularly track your spending. Budgeting apps and expense trackers can be your best buddies here, providing real-time updates and visuals of your spending. Some even send alerts when you approach the limits in your budget categories.

Flexibility is key when prices are on the rise. Your old budget might need a makeover. What worked for groceries or fuel last year might not be enough now. Be flexible and shuffle your budget categories to accommodate rising costs in Singapore. Sometimes that means moving money from non-essential areas to ensure you can cover increased costs in your essential categories. If you are curious to find out more ways on saving in Singapore, I’ve revealed my money saving strategies in another post.

Remember the 50-30-20 budgeting rule we talked about? It is crucial to budgeting success. Go find out now if you have not. 

If you’re facing challenges in adapting your budget to the changing economic landscape, check out my strategies for overcoming budget challenges.

3. Increase Income Streams

In the ongoing battle against inflation, fortifying your income stands out as a formidable strategy. A direct and impactful way to achieve this is by seeking a pay raise. Consider my real-life example: securing a 25% pay raise this year. Beyond the immediate financial gratification, this boost in income translates to a higher disposable income. The ripple effect? More funds available for investment, savings, or discretionary spending, countering the challenges posed by escalating costs.

Increase income streams in Singapore to beat inflation

But let’s not limit ourselves to the conventional 9-6 grind. Diversifying income streams is a key component of financial resilience. Relying solely on a job might constrain your financial potential. It’s time to explore opportunities beyond the boundaries of your regular working hours.

Think about side hustles in Singapore – these additional income streams act as a financial safety net, especially in unpredictable times. Jobs may come and go, but diversified income remains a constant. A side hustle not only brings in extra funds but also provides a layer of financial security that goes beyond the confines of a traditional job.

Strategically utilizing your time is crucial. Beyond the structured hours of your primary job, there lies untapped potential. Whether it’s freelancing, consulting, or venturing into a small business, your spare hours can transform into a valuable resource for generating additional income.

4. Invest in stocks and shares

Investing in stocks and shares is a popular strategy for beating inflation in Singapore. This is because stocks have historically outperformed inflation over the long term, offering investors the potential for significant returns. Buying a stock allows you to participate in the growth of the underlying companies. As the company grows and becomes more profitable, the value of the shares will also increase. However, investing in stocks and shares also comes with certain risks. The value of the shares can be affected by various factors such as economic conditions, company performance and geopolitical events. Always do your research and analysis before you invest in any stock. 

For those that are new to investing in stocks and shares, it is recommended to get started by investing in a unit trust or exchange-traded fund (ETF). These are investment vehicles that pool money from multiple investors and invest in a diversified portfolio of stocks. Unit trusts and ETFs offer investors the potential for diversification and professional management, as the fund managers make investment decisions on behalf of the investors. In Singapore, the popular ETFs are VWRA, CSPX and VOO.

5. Consider alternative investments

In addition to stocks and shares, there are a number of alternative investments you can consider to beat inflation in Singapore. These may include real estate, commodities, or even cryptocurrency. Real estate investment trusts (REITs) are a popular choice for many Singaporeans, as they offer a relatively stable source of income and the potential for long-term capital appreciation. Singapore’s property market has historically been a strong performer, with prices rising steadily over the years. Investing in real estate can provide investors with rental income, as well as capital appreciation if the property value increases over time.

Cryptocurrencies such as Bitcoin and Ethereum are another alternative investment option that has gained popularity in recent years. While cryptocurrencies are notoriously volatile and risky, they have the potential for significant returns if invested wisely. Investing in cryptocurrencies should be done with caution and only with money that you can afford to lose. 

Personally, I have not invested in cryptocurrencies as it goes against my investment methodology. I find that they are too volatile for my risk appetite. Alternative investments often come with higher risks, therefore it is important to conduct thorough research and analysis before investing in any alternative investment option. It’s also recommended that investors only allocate a small portion of their portfolio to alternative investments, in order to mitigate risk and ensure a diversified portfolio.

6. Shop smartly

Finally, shopping smartly can help you beat inflation in Singapore. By being a savvy shopper, you can save money on everyday purchases and free up more money for savings and investments. One key strategy for shopping smartly is to compare prices and shop around for the best deals. With the rise of e-commerce platforms in Singapore, it’s easier than ever to compare prices and find the best deals online. Many e-commerce platforms offer competitive prices and promotions, so it’s worth checking several platforms before making a purchase.

Shop smartly

When shopping for groceries, it’s important to be mindful of promotions and discounts. Many supermarkets in Singapore offer regular promotions and discounts on popular items, so it’s worth checking the weekly flyers and planning your purchases accordingly. It’s also worth considering buying in bulk for items that you use frequently, as this can often be more cost-effective than buying individual items. Find out more on how you can save more money during your grocery trips with these 10 easy tips.

Singaporeans can also take advantage of government schemes and initiatives, such as the GST Voucher and the Seniors’ Mobility and Enabling Fund, to help offset the cost of living.

Conclusion

Overall, beating inflation in Singapore requires a combination of smart financial planning, investing, and shopping habits. By employing these strategies, you can help ensure that your wealth grows over time, even as the cost of living continues to rise in Singapore. It’s important to regularly review your financial goals and investment strategies to ensure that they are aligned with your personal circumstances and risk tolerance.

Eugene Chai

Eugene Chai is a seasoned financial expert with over 4 years of experience. His work has graced the pages of prominent Singapore Investment sites. He has also been featured on Channel News Asia - Money Talks. With a passion for simplifying complex financial concepts, he empowers individuals to make informed decisions about their money. Whether it's investment strategies, personal finance, or market trends, Eugene's insights are a beacon of clarity in the world of finance.

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