Financial Freedom During Inflationary Times

Singapore's inflation hits 25-year high of 6.6%

The headlines from Channelnewsasia says it all. Our inflation rate has hit a high of 6.6%!

The combined effect of the 2% hike in GST, global commodities price increases as well as increase in annual value in properties and oil makes the inflation rate much higher than any decent risk-free returns you can obtain from safe investments.

Your purchasing power is shrinking right now

Some people advocate more spending given this low interest rate regime coupled with inflation destroying any interest gains you get from the miserable fixed deposits or treasury bills yielding 1.35% to 1.5%. Those who believe in a live for now approach to life feel that what's the point of saving what you are getting a negative return of 5.1% (assuming 6.6% inflation and 1.5% return on fixed deposits). So might as well spend.

I choose to see it the other way. Because your purchasing power is now squeezed by inflation, you have to be more concerned about how to stretch that dollar you earn.

Living a frugal but full life by choosing to buy housebrands;  consuming my rolled oats every morning from Mondays-Fridays; not spending much of clothes, shoes and other accessories continue to be my lifestyle. The sad fact of life in Singapore is that inflation hits the poor harder as income statistics have shown that the higher income earners are getting higher wage increases compared to the poor.

The system is against you

The Government has contributed to part of the problem as the 2% GST hike was imposed as a matter of fiscal policy. Even though GST rebates and some of the growth dividends and tax rebates will return some monies back to taxpayers, the taxpayer loses out. He loses out because he gets hit with the inflationary pressures all the way from the time prices increase but will only receive the rebates LATER, after his monies was taken away from him UP FRONT. If you understand the time-value of money, then you will know that money now is worth more later due to interest. Thus, the Government imposed the 2% GST hike that affects us up front but we get the rebates much later, losing out through the time value of money.

What can you do to fight the inflationary pressure?

Under this unrelenting pressures of inflation, in a time when ministerial salaries are increasing at a higher rate than public assistance, the brutal truth of living in Singapore Inc is that you need to look out for yourself and your family.

Singapore Inc in its glory is ALL ECONOMY and NO SOUL. GDP growth at all costs is the name of the game when you see through the policies being promulgated at all levels. In the end, only your own financial freedom matters because it is the way that allows you to decide how to live your life without worrying about inflation and cost of living.

To be above the inflationary pressures is to move yourself from a wage earner in the rat race to a capital owner with income producing assets. Attaining financial freedom puts you beyond the worries of a 6.6% inflation because you investments are already putting you on a virtuous cycle of passive income growing your investible savings upwards.

Live within your means.

Save and invest.

Investment prudently.

Grow your means.

Be well and prosper.