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We are experiencing one of the toughest economic environments over the past decade due to rising inflation, higher commodity prices, and unprecedented interest rate hikes. This could be a particularly difficult time for some, who may struggle to cope with the unexpected rise in the cost of living, which may lead to taking some undesirable actions as quick-fix solutions.
In such times, we can take inspiration from the quote by Robert Schuller, “Tough times never last, but tough people do!”. Though it’s an oft-quoted phrase in the army to motivate soldiers to overcome the pain and complete their training, it’s also applicable to our everyday lives.
The decisions that we take to overcome our current financial struggles can be crucial as they may cause us to be in further debt. In this article, we will share some things that you should avoid doing, even when times are tough, and what you could do instead.
#1 Stop Making Impulsive Purchases
One of the ways that we could cut down on our expenses is by buying what we need and not what we want. Many a time, we make impulsive purchases like buying an expensive new dress or a gadget, only to have buyers’ remorse afterwards as we may no longer like or need them as we initially thought. This contributes to unnecessary spending, which we want to avoid. Instead, we could keep most of our spending to only the necessities, like groceries and cooked meals.
To save even more on our spending, we could try to be a more informed buyer by making price comparisons before we make any purchases, both online and in physical stores. We could use mobile applications like Price Kaki by CASE, which is available on the App Store for iOS users, Google Play for Android users, and Huawei AppGallery, to help us compare prices of groceries, household items, and cooked food.
The Price Kaki app allows us to take advantage of any special discounts available by conveniently displaying the promotional price and period hence, enabling us to make smart shopping decisions by benefiting from the best deals around us.
In addition, we can further increase our savings by considering house brands for our necessities as compared to leading brands, which are priced higher. These small changes to our spending habits allow us to stretch our dollar, which in the long run could lead to incremental savings.
Read Also: 7 Ways To Save Money On Your Renovation Cost
#2 Do Not Borrow Money To Fund Day-To-Day Expenses
Borrowing money could be one way that some of us may choose to tide over our cashflow shortages. This could be borrowing from friends, moneylenders, or financial institutions. Though the short-term funding from these lenders might be sufficient to meet our current needs, it usually comes with high interest and financing costs. Unwittingly, we may actually be digging a bigger hole for ourselves as our debts could snowball quickly.
Another misguided way that we may fund our day-to-day expenses is by rolling our debt onto credit cards or through Buy Now Pay Later (BNPL) services. BNPL, which has lately become popular, is a zero-interest payment plan that allows its customers to spread the payment of their purchase over a period of time (typically over 3 months).
Unlike traditional instalment payment plans, BNPL could be used to pay for everyday items, from a meal to clothing items. This may encourage us to buy more things sooner than we otherwise would have been able to and rack up more debt in the process. We are also likely to incur administrative charges for any late or missed payments due on these loans.
We could easily avoid getting into these extra debts if we stuck to our monthly budget and paid in full for all our everyday expenses. Otherwise, if we want to use these BNPL services, we could keep in mind the following tips from CASE:
#1 Distinguish wants from needs. Wants have lower priority in being financed and should ideally not be financed by BNPL services.
#2 Consciously set reminders and money every month to pay for instalments.
#3 Understand the terms and conditions before stepping into an agreement.
#3 Be Mindful To Not Overspend On Holiday Trips
International travel, which was stopped due to the coronavirus pandemic, has resumed in full force with more countries reopening their borders with relaxed COVID-19 rules. This might tempt more of us to leisure travel again.
However, the cost of overseas travel is much higher now, by as much as two times or more than pre-pandemic levels, due to higher airline fares and accommodation costs. For example, it may easily cost ten thousand dollars or more for a family of four to travel to Europe, the United States, or even Japan for a week-long vacation.
One way to be prudent is to set aside a separate leisure fund that we could then use to budget for our holidays. This way, we would not touch our savings meant for other purposes. We would also be conscious of our available funds to prevent us from overspending on our holiday trips.
To get more value out of our money, we could choose to travel to countries where our currency is stronger than the currency of the destination country. The favourable exchange rate gives us better mileage when spending overseas for the same dollar amount.
Another thing we could do is to avoid holiday seasons (if possible) and to plan our itinerary ahead and book our flights and hotels at least one to four months in advance. This may result in better savings, as booking closer to our travel date would cost more. We could use aggregator sites like Airbnb, Google Flights, Skyscanner, and Trivago to search for flight and accommodation options that fit our budget.
By adopting these travel tips, we can save more on our holiday expenses without compromising on our travel experience.
#4 Avoid Cancelling Insurance Plans Because Of Tight Cashflow Concerns
Another expense that we might think about cutting back on when we are facing with financial difficulties is our insurance premiums. But should we?
Medical costs have risen steeply along with inflation over the years. With the rise in Singapore’s ageing population and median age, we may face higher medical costs as more people, including those from overseas, compete for the limited medical resources and facilities. Therefore, we need to have sufficient medical coverage to be protected against unexpected bill shocks when we or our loved ones are hospitalised.
However, when faced with financial constraints, it may be hard for us to continue paying our premiums, especially when we are still in good health and believe that nothing bad will likely happen to us. This could lead us to either cashing out our policy early or terminating it early because we are unable to pay for our premiums.
Instead, we should first consult our trusted financial advisor to review our insurance portfolio. They will then be able to provide recommendations on how our insurance portfolio can be adjusted to suit our current financial situation.
This way, we can still maintain our medical coverage without overcommitting our finances to premiums.
Read Also: 5 Insurance Policies Singaporeans Can Pay Using Their CPF Account
#5 Resist The ThrowAway Culture
Rapid technological and digital advancements have not only boosted our productivity but also allowed us to stay better connected than ever before. Inevitably, this has caused us to spend more on upgrading our gadgets as they become outdated quicker as newer, better ones are produced. Moreover, as the cost of electronic items gets cheaper, it also makes us more prone to replacing our electronic devices when they become faulty in favour of a newer model of the product. This has developed into a prevalent throwaway culture.
However, the frequent replacement of gadgets might be costly, especially if they can be repaired for less than the replacement cost. For example, a 43-inch LED television might cost between $200 and $300 to replace its motherboard compared to a full replacement, which might cost at least between $700 and $900. Similarly, when our computers start to lag, we could consider replacing or upgrading some of the computer parts, like the RAM, storage device, graphic card, or power supply unit. These upgrades to individual parts might make the computer run faster while keeping the overall cost low compared to a full replacement.
Alternatively, we could “Do-It-Yourself” or DIY some basic and simple repairs by watching self-help video guides or even attending repair workshops to pick-up new skills. These small actions would not only lead to big savings but also reduce society’s e-waste problems.
The post Struggling To Cope With Inflation: 5 Things To Be Avoiding, And What We Should Do Instead appeared first on DollarsAndSense.sg.
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