Personal Finance

So Singapore is named the world's more expensive city to live in, or so said the Economist Intelligence Unit. 

Such a headline was sure to create a buzz amongst Singaporeans who are known affectionately to love to complain, accompanied by examples of 'expensive living' – high costs of owning a car, expensive properties and perhaps, rising public transport costs.

Yet, there are also those in defence of the notion that Singapore isn't all that expensive, considering the high standard of living and how expatriates and tourists flood the city.  

Well, for most average Singaporeans, there are definitely ways for us to lower our expenses; we just need to be more conscious of the way we spend, and be more resourceful about looking for alternatives. For instance, you know you can always have a decent $3 meal at a hawker centre compared to an $8 meal at the food court, or $20 dinner at a casual restaurant. Public transport is always an efficient option for moving around our small city, and who says you need to drink alcohol on Friday night to be part of the cool crowd?

Putting aside these superficial arguments, perhaps what we need to think a little deeper about should be the importance of savings and taking care of our own future. The truth is that cost of living will keep rising, and what best we can do for ourselves is to come up with a feasible plan to mitigate these costs in the long term.

While we can only praise the foresight of the government to come up with such a brilliant scheme such as the Central Provident Fund(CPF), we also know that it may not be entirely enough for our retirement ultimately, so why not start building up a nest egg when you are young?

Deposit Savings Account

For those who are risk averse and have little knowledge or more sophisticated financial products, you can always look at building up a savings plan for yourself. There are a number of savings plan in the market that return higher interest than the average ones which sadly pay less than 1 percent, that's where you need to be creative! Look out for those that allow you to save automatically once your paycheck is in so that you learn to 'pay-yourself-first'. These sometimes give you step-up interest which increases with the amount you save. If you are cash-rich and can do without high liquidity in awhile, time deposits are definitely suitable as well.

Inflation-linked bonds 

For those who are more savvy, you can always look to buying bonds, especially inflation-linked bonds where the returns are indexed to inflation rates. The investment is great for buyers wanting protection from accelerating inflation as interest payments on these bonds are linked to consumer price indexes. 

Equities Portfolio

Common stocks have often been a good investment relative to inflation over the very long term, because companies can raise prices for their products when their costs goes up in an inflationary environment. Higher product prices may translate into higher earnings. It is thus worthwhile to look at buying into some blue-chip stocks to take advantage of capital appreciation. However, over shorter time horizon, they might be some risks involved as stocks have shown a negative correlation to inflation and can be especially hurt by uncertainty about the economy, leading to lower company earnings forecasts and lower equity prices. If you are willing to take a little bit of risk and have a longer -term investment horizons, investing in the stocks markets are known to beat inflation in the long term!

With high COE premiums and property prices still relatively expensive, the cost of living in Singapore is unlikely to come down significantly in the near future. While there is little we can do about the high costs, what you can do is to beat the high costs by being prepared for it. Save and invest early in life so that you can enjoy the fruit of your labour later!