How Singaporeans are Being Hurt by Inflation (and Don’t Realise It)

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If you believe everything you read in the news, inflation isn’t hurting you. After all, we’ve had two years of negative inflation from November 2014 to October 2016, which means that the cost of living has been getting lower, right? Right?

No, not really. The consumer price index, which basically measures general inflation over all categories, has been falling mainly because of falling property prices due to the cooling measures, and lower oil prices.

But if you’re wondering why you’re still paying more and more for food, public transport and, well everything else, that’s because core inflation has been higher than the consumer price index. Core inflation measures the inflation of everything EXCEPT accommodation and private transport.

That means that the price of just about everything else besides your house and car continues to go up. Here’s what this means for you.

 

Your savings are being eroded as we speak

If you don’t factor in cars and homes, you can expect life to get more and more expensive for you due to rising core inflation.

(Considering that the fall in home prices has been brought about artificially by the cooling measures, and that once they come off prices are likely to rise again, as well as the fact that private transport remains unaffordable for many, the negative consumer price index is cold comfort.)

Savings account interest rates are pretty damn pathetic in Singapore—we’re talking about 0.1% for most run-of-the-mill savings accounts.

What this means is that you should find ways to invest your money and keep as little in cash as you can get away with. Other than your emergency fund and expenses for the month, try to find ways to make the rest of your money grow.

Because if you don’t, that $200,000 in cash you’ve managed to scrounge together in time for retirement will be worth the price of two cocktails 30 years from now.

 

Your wages may not keep pace with inflation

Just because everything is getting more expensive doesn’t mean you’ll necessarily be paid accordingly. Thanks to the crappy state our job market is in, changing jobs isn’t going to be as easy in the near future.

And overstaying your welcome in one job is exactly what can cause you to suffer from a stagnant salary. That’s why recruiters advise that you change jobs at least once every three years.

A recent Haus survey found that 46% of Singapore employers intend to give pay hikes of 3% to 6% this year.

That’s not bad. But what didn’t make the headline, was that 34% of employers plan to increase wages by 3% or less, and 9% of employers are planning not to award any pay rise at all. Ouch!

While inflation isn’t as high as it was 5 or 10 years ago, job growth has also slowed. So monitor your own wage trajectory, and if you realise your salary isn’t able to at least keep pace with inflation, it’s time to leave.

 

Businesses are having a tougher time

Everybody already knows the economy is in trouble. Well, the bad news is that 2017 is going to be even worse than 2016 was.

Businesses have been complaining about suffering from high operating costs and manpower problems such as not being able to retain talent or fill vacancies.

Inflation will only intensify the cost-related pressures felt by businesses and raise their bottom line, which is bad news considering many have already complained about plunging sales.

You might not be a business owner yourself (or maybe you are), but your employer is one. If your company isn’t doing well, you can kiss that fat bonus and generous increment good bye, and start worrying about retrenchment instead.

 

Inflation has an impact on your financial decisions

You might not realise it, but many of your financial decisions are influenced by inflation.

For instance, when buying a home, many Singaporeans tend to try to commit to as expensive a property as they can afford.

In 2014, the MAS estimated that 5% to 10% of Singapore mortgage holders were overburdening themselves and making loan payments of over 60% of their monthly incomes. In addition, about 25% of borrowers were forking out between 40% to 60% of their monthly income in loan repayments.

Inflation has a part to play in this kind of behaviour. Because people expect property to get more expensive later on, they are not only in a hurry to jump into the property market as early as possible (cue couples who apply for a BTO flat two days after meeting on Tinder), but also want to buy as much home as they can, both for investment purposes and because they’re afraid they won’t be able to afford as much later on.

Trouble is, this buying behaviour often happens to the detriment of your quality of life. If you’re chained to a huge mortgage you can’t really afford for the next 30 years, you’d better pray you never get retrenched or so burned out you need to get off the hamster wheel.

How has inflation affected you? Tell us in the comments!

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.