Source : KBC Economics
Inflation, the infamous cause of financial erosion. We’ve all heard this story before, where coffee used to cost 90 cents, now it’s $1.20. That is a whopping 33% increase! However, no one becomes a millionaire by being thrifty with coffee, so why should we be bothered by inflation?
Inflation is the sustained increase of prices in goods and services arising from 2 main causes:
1) Cost-push inflation
An example of such would be, an increase in the price of fuel causing your Grab ride to be more expensive.
2) Demand-pull inflation
An increase in demand for a particular product causes an opportunistic increase in the raw material and skilled labour required to produce it.
As Singapore depends on our neighbouring countries to provide us with what we need, we are susceptible to the ebb and flow of external markets. Using the Consumer Price Index (CPI), which measures the general price level of fixed goods and services consumed by Singaporeans, we are aware of the following:
– As of 23rd December 2021, inflation was at 3.8% year on year, the highest in 8 years – Electricity costs have increased by 10.7% in December 2021
– Electricity costs have further increased by 17.2% in January 2021 (just check your bill)
– As of 23rd February 2022, inflation increased further 2.4% year on year, the highest in 9 years.
What can we do?
1) Create Multiple Income Streams
Some would call it a side hustle, or a side gig. It is not enough to depend solely on 1 income source, even Warren Buffett seconds this. “Never depend on a single source of income” – Warren Buffett“
This provides us a certain degree of protection in the event that the main source of income diminishes.
2) Start investing
The 2nd half of Warren Buffett’s quote reminds us that we can never start investing too early to have a second income source.
Here’s a simple Illustration of Jo and Jane:
When we say a little goes a long way, the difference between leaving money in a Bank like Jo does and Investing like Jane is almost 3 times!
It might take awhile to get used to setting aside money into investing as it takes time to see results. Yet it is better to start now than tomorrow knowing that keeping it in the Bank decreases its value by the day.
If you’re unsure or need some advice and encouragement on how to get started, we at Pinnacle Wealth are here to lend a hand. Be it coffee or over a Zoom, reach out and we’ll be happy to hear from you!
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
I am a wealth coach who encourages and motivate women, individuals and families seeking financial consistency and freedom for their future. I work with clients to create personalised insurances and investment strategies to work towards their objectives. (Refer to my clients testimonials on their experiences)
I have more than 20 years experience in the financial industry and have worked in various international financial institutions in different capacities. Few years ago, I made the switch from Private Banking to become a financial advisory manager at Financial Alliance.
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