About the author: Raymond Lo is the Brand & Communications Manager at Hugosave. He is very proud of his mantra of visiting a shop at least 3 separate times to consider a purchase. Big signs shouting “SALE” have nothing on this guy.
We hit a new inflation high. Again.
According to news reports, July’s consumer prices in Singapore hit a 13-year high at 7%, and any relief is still a couple of months away. Who knows what else is in store for us till then—maybe things will indeed get better. Or not.
As usual, since consumer mood is generally inversely related to prices, many of my fellow millennials are probably feeling rather low right now. After all, when the last financial crisis struck the globe, we were still in school. I had no personal finance goals nor career prospects to worry about back then. Or at least, it felt like something I only needed to concern myself with in the future.
Inflation is in the future
Well, I am now in that future. Along with that is the reality that prices will continue to shoot for the moon.
The Singaporean coming-of-age ritual involves some really expensive commitments:
- HDB flats that cost S$550,000 on average; private residences are >S$1 million
- Owning a car costs about S$150,000 over 10 years
- Raising a child costs about S$200,000 over 18 years
- Healthcare costs are ballooning
- Bills like mobile, utilities, subscriptions etc.
- And many more, depending on your lifestyle
These values are hardly static. As time passes, these numbers increase. 10 years ago, resale HDB flat prices seldom crossed S$500,000—today, that value is just the starting point. Housing prices are not the only ones rising, it’s likewise for all other expenditures.
But the true culprit behind my anxiety for the future is the rising rate of inflation vs wage stagnation. Singapore’s inflation rate pre-Covid and pre-Ukraine-Russian war hovered around 1% while, after factoring for inflation, local wages rose 2.6% per year. This means your real wage increase has been a measly 1.6% per year. Inflation today is about 5%…
Tough times don’t last, sound finances do
The economic climate between 2020 and 2022 (hopefully it ends here) is perhaps the first true test of Millennials’ financial resilience. During this period, we saw some spectacular price hikes, supply chain disruptions and poor market performances.
I sat down one day to collect my thoughts and reassess my finances, and realised that, since I started investing, with my own income no less, this is my virgin experience at navigating the muddy waters of a downturn. Our predecessors have weathered so much more i.e. Dot.com Bubble, 2007-2008 Global Financial Crisis, Asian Financial Crisis of 1997–1998.
I am not diminishing the effect of the situation, but IT IS in such times we either wisen up and “git gud” or wallow in hopelessness.
Better at savings
One thing I have going for me is that I am quite basic lol. Plain Uniqlo clothes on sale excite me way more than new Balenciaga launches. As a single man (luckily?), I typically save about half of my salary. But during my reassessment, I found that I could save even more by switching to more value-for-money subscriptions like mobile plans and video-streaming subscriptions, and decreasing consumption of wants.
As a huge fan of sushi, I’ll make do with Edo Sushi instead of Sushiro.
Saving more is never a bad thing. I am managing my expenses so I can build up a cash arsenal to finance profitable commitments NOW for the sake of future returns. This is how I am making saving for the future more effective:
- Identify specific goals e.g. earn $1 million by 60, buy a condo, own a car
- Set aside monthly savings towards each goal e.g. $500/month for a car
- Apply a suitable investment strategy for each goal to accelerate e.g. investing the $500 in a high-yield portfolio
- Many equities are cheaper now. I lowered my expenditure to increase my savings so I can buy while they’re low, anticipating their values to rise in the future.
Optimised my investments
The period’s poor market performances have shown me clearly the opportunities and weaknesses of different stocks and asset classes. I consider my portfolio to be fairly diverse in asset types, but I found out that it’s perhaps not diversified enough in terms of exposure to markets. For example, I realised I might be overly exposed to the Chinese market and missed out on opportunities in others.
As a result, my investments were impacted by China’s sluggish economy and missed earnings from a 2021 US and European comeback. Since then I have improved my portfolio diversification to include more markets. In addition, I have withdrawn from some assets to buy and hold more physical gold until markets are back on the recovery track.
One thing I learnt is that I cannot hope to gain any edge trying to channel the Wolf of Wall Street, trying to predict every dip and peak. Simply averaging diligently in a well-diversified portfolio will work just fine. The better sleep I get is preferable over turning up for work looking like I just walked out of the set at The Walking Dead.
Identified the financial tools that are not for me
There are investments that are viable—lucrative even—but are just not for me. I took some time to reassess my risk appetite and the amount of effort/time I am willing to spend on managing my investments.
As someone leaning towards conservative investing with a full-time job to juggle, I opted for a portfolio heavier on equities, tech ETFs, cash and commodities (esp. physical gold). I am not ready for property and decided that cryptocurrencies are not for me.
This allows me to spend more of my attention and time on other things that matter personally, while being confident that my savings are productive towards achieving my life goals instead of idling away.
In a nutshell
It can get unnerving when the cai png stall is now charging 50 cents more, or you have to hold a balloting session with your family just to vote on whether to switch the air-con on. The problems associated with rising prices are indeed real, but we are not without solutions.
One of Sun Tzu’s Art of War strategy is “知彼知己百战百胜”, meaning “By knowing yourself and your challenges, you can overcome any battle”. By saving more, making our money grow actively in productive investments, and understanding what we should take on and let go, we can beat inflation and fulfil our life goals.
From one Millennial to another, CHIN UP, the ride has only just started!
The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of the Hugosave or its members. Suggestions do not constitute financial advice.