Are you deflated by inflation? Here are some tips on stretching your dollar to keep up with rising costs.

Can we maintain our current lifestyle with the same dollar value today?

After all, the war in Ukraine and the resulting sanctions against Russia have taken a toll on commodity markets. 

If you’re wondering how, that’s because Russia is a major supplier of oil, gas, and metals, and together with Ukraine, of wheat and corn.

Both countries account for producing about 30 per cent of the entire world's supply, and reduced supplies of these commodities have caused their prices to skyrocket sharply.

Combine this with supply-chain disruptions, and it’s a perfect storm.

To you and me, this means two things:

1. Increase in fuel prices. Case in point: the price of 95 unleaded petrol rose from just under S$2.50 per litre in Jan 2020 to the current price of S$3 per litre. This has a knock-on effect on everything that relies on transport – from food deliveries to ride-shares and even airfares.
2. That our money – including savings and retirement savings that our parents have, will be able to buy less.

To illustrate this, in February 2021, a carton of 30 eggs cost S$4.64. In April 2022, that same carton of eggs cost S$7.50*.

Despite how inconsequential this may seem; these two things are enough to potentially change our lives and lifestyles drastically.

So how does the average person cope, adapt and even thrive in such times?

As Albert Einstein once said, “In the midst of every crisis, lies great opportunity.”

Here’s a two-pronged strategy to maintain our lifestyle or maybe even make something better out of this:

1) Manage outflow

This could possibly be the most painful thing to do, or not.

Most of us tend to consume more than we need to and end up spending more than we ought to. 

To put a positive spin on this, here are some things you can do to minimise the outflow of moneys:

• Learn to live without the frills

When moving home recently, I threw out about 70 per cent of everything I had. This was shocking, but it also taught me a few things.

1. The general rule of thumb I now abide by is, possessions that are crucial to functional and joyful day-to-day living should fit into two large suitcases, one carry-on sized luggage and no more than seven boxes. 
2. If you have not looked for an item for two years or even thought about it, and if it has no value to be passed on to your children, consider giving it away, recycling or junking it.

The amount of stuff I threw out represented a huge amount of money that was spent in the last decade buying items I thought I wanted or making a purchase on a whim.

• Change grocery shopping habits

You’d be surprised how much you can save by planning meals in advance so that you buy only what you need.

With the savings, you can opt for better quality ingredients and still enjoy savings.

Supermarkets also have discounts or house brands to help consumers cope with the rising cost. It takes just a little effort to keep a lookout for these offers.

Okay, okay. I hear the moans and groans. Changing habits is always hard. And even with savings gained, the power of the dollar still diminishes with inflation.

So how about flipping the coin? Cost is always a factor of income, right? 

2) Grow income

Instead of having to learn to live with less, how can we grow our income or at least preserve it to match inflation?

• Explore new job opportunities. 

Find a new job. 

*GASP*! 

Alright, hang on a second, before you cast a condemning stare and shake your head, let’s look at it squarely in the face.

The job market is pretty buoyant, according to reports. 

It presents a window of opportunity to jump into a new job and negotiate for a higher pay -- one that matches or exceeds inflation.

Whether it’s a lateral move or a step-up, you could get a potential pay increment, which might help you beat inflation in the next few years. 

So, dust off your CV and upload a more professional looking picture on LinkedIn!

• Diversify your investment portfolio

Singapore has a plethora of investment instruments and platforms. 

Get educated, get investing. The earlier you start, the longer your runway, and the more resilient your investment can be to ride out the highs and lows.

Investing to grow your money and savings is essential. But there are downsides. 

Unit trusts don’t always perform and if people with higher risk appetites put their money into speculative instruments, they could lose everything.

So, is there a way to grow money to keep up with inflation and yet offer stability?

Thankfully, in Singapore, there is.

• Maximise your CPF 

The earlier two methods are important if you’re looking to beat inflation in the short to medium term. 

But there’s another tool that you can consider to grow your savings in the longer term: CPF.  

Dabbling with investment instruments, I used to be a little cynical about CPF. 

But a closer look at it actually makes sense (and dollars).

The interest rate of up to five per cent** per annum in your CPF Special Account helps to grow your retirement savings, higher than inflation. 

So, if you have the extra cash, why not consider doing a top-up to your CPF savings? 

Separately, when you turn 65, your retirement savings will help you to join CPF LIFE, a national longevity insurance annuity scheme that provides you with monthly payouts, no matter how long you live.

You can choose one of these three different plans, Basic, Standard and Escalating. 

For those who are concerned about rising costs, the Escalating Plan provides monthly payouts that increase by two per cent every year, to help you maintain your standard of living. 

If you do not require the funds, you can choose to defer the payouts until you are 70. For each year that you defer, your payouts will increase by up to seven per cent.  

That’s a double win! 

And because of the way it’s structured, it offers more peace of mind, so you can sleep better at night, however the markets move.

So, whatever your risk appetite and wherever you are in life, have a look and have a think. 

The world is changing, and we have to keep up.

Inflation, yes, but you can be proactive and create an opportunity to not just preserve but grow your savings to beat inflation.

The alternative of course is finding a nice quiet corner and assuming the Asian squat. 

You can get bite-sized financial tips by following CPF Board on Telegram here.

*The price point of the everyday items mentioned are based on current observations and subject to changes.

**Includes extra interest paid on the first S$60,000 of a member’s combined balances (capped at S$20,000 for Ordinary Account) 

This sponsored article is brought to you by the CPF Board. 

Top image via Viki Mohamad/Unsplash