Cash is king – A new era

2022 – A year to remember

  • High Inflation
  • High savings interest rates
  • High loan interest rates
  • Sharp increase in property/rental prices

A year of high inflation
Inflation percentage are no longer just a number or a line in the chart, you can really feel it, we are spending 20 to 30% more in food, daily expenses.

With the increase of GST from 7 to 8% starting from next year, some people feel that buying this year can be cheaper and the savings can be significant, however temporary(permanent) increase in prices due to the war, energy shortage, has make some purchases a lot more expensive this year.

While it is hard to predict whether prices will go down in the near future, we do note that it is easy to be penny wise and pound foolish just to avoid the 1% increase in GST without taking into consideration the price of the same product before all the temporary increase in price.

As a family, we have to make adjustments here and there to reduce the daily expenses.

Is there a reduction in the quality of life, when you seek for cheaper alternatives? Yes and No.

This year, after many years of unsuccessful calories counting, I have turn to increasing protein and reducing carbohydrates(carbs).

Carbs is a cheaper form of calories if not cheapest. Singaporean hawker food are high in carbs and sodium, you get full fast on the carbs. Proteins are more expensive, but yet there are ways to manage your meal cost, and still achieving a good amount of protein.

My lifestyle is more sedentary, and I try to keep to the upper limit of 0.8g protein/kg for someone that is not exercising a lot and not into muscle building.

After observing how much I am spending on breakfast per meal which was about $4 on average, I went on to use this budget to maximise the amount of protein i can get for breakfast, while carbs continue to be the main bulk of lunch and dinner, one meal at a time.

I got really cheap 1kg Chile salmon pack from Shopee, i eat a small slice(80 to 100g) each meal and it cost about $2 per slice, then I went on to add edamame from NTUC for a bit of green and more protein, 1 hard boiled egg, eggs are the cheapest and easiest source of protein when you are starting out.

It costs about $3 to $4 per meal depending if i add other foods into my breakfast, and there you have it, a good amount of protein to kickstart the day while keeping to the meal budget of $4, cooking by yourself of course, once you outsource the cooking to others, you are paying for the manpower, rental and energy costs which can easily triple your price to pay.

Reducing carbs and sodium is really important and a good way to fight the 3 highs, however it would definitely increase your food cost, so proceed with some planning and you will be fine.

MSG seems to be a healthier option as compared to normal salt, backed with science, however MSG has a bad reputation over the years, and it would be hard to change that perception.

You can try low sodium salt first for a 30% reduction in daily intake, eating out would means exceeding your daily sodium intake almost every time, fish soup has really high sodium content if you finish that soup too.

High savings interest rates
Singapore Fixed deposit rates were at 0.xx% to 1.xx% from 2002 till late 2022, spanning two decades. It almost seems like high savings interest rates were a thing of the past, something that was once upon a time.

In Singapore, because of our small size, we will always be a taker. In 2001, post Dot-Com Bust and 9/11, USA federal funds rate dropped from 6% to 1.75% and since then, rates has remained extremely low.

While the federal funds rate of USA were above 2% between 2004 to 2008, reaching a high of 5.25% in June 2006, the rates adjustment somehow did not make it to Singapore savings account, our savings interest rates continue to be extremely low at 0.2x% for that period.

Property loan interest rates went up though, up to 5.xx% in 2006 peak, not on the saving rates though.

Low interest rates favour people who take loans, people who are willing to take advantage of the low interest rates, to use other people money, to enrich their own purse.

In general, people who are risk taker, stands a higher chance of getting rich, this will always be the case, especially so during the low lending interest rates era.

In that era, people were punished by putting money in the bank, their money values slowly eroding by the yearly inflation rates.

In the 1990s, having an emergency fund of $10,000 was considered good, but in 2022, an emergency fund of $100,000 seems more logical for the middle income class.

However everything changed from the year 2022. Singapore has a risk free savings rates from 2.5% to 5%. Yes, it is our CPF system, provided you are ok with locking up your money till at least 65 years old. (Year of Birth from 1958 onwards)

So with SSBs, T-bills & Fixed deposit interest rates and bank account savings rates exceeding our CPF rates for the first time in recent decades, we find ourselves with much more options.

Will there be a shift in the mentality of people previously looking at voluntary top up to CPF, to reduce taxes?

High loan interest rates – Sharp increase in property/rental prices
Every country has its unique situation. In Singapore, properties loan interest rates is now at 3.xx% as compared to 1.xx% at the start of 2022.

Property investors and landlords are expected to be paying a higher monthly instalments, however with Covid disruptions and WFH arrangements, the demand is higher than supply at the moment, and the higher interest is passed on to the buyers and tenants.

Singapore rental prices are at all time high, be it HDB or private properties. For people who missed the boat of being a property owner in year 2022, you are looking at paying easily 10 to 20% more for the same property that you have been looking at, it just seems harder for younger generation to be a homeowner sooner.

I owned, and lived in, a HDB, and have no wish to invest in a second property, or to take any loan other than the default HDB loan.

So I did not benefitted in a low interest rates environment except to see the properties prices soaring higher and higher when I was young and looking to start a family back then.

HDB loan interest rates is 2.6%, and it has been so for the longest time I can remember.

And for as long as it remains the same, a high interest rates environment would benefit me more.

I paid $400+k for my BTO back then, the next buyer who is interested in my unit will now need to pay more than $1M for the exact same unit, their monthly installment 3 times of mine, I hope their combined salary is 3 times of ours too, to be able to afford it, and indirectly they are paying for my retirement too.

But next comes the dilemma, I would also be paying very high price for my next home, so this musical chairs have to go on and on, and as long as the music does not stop, we will all have to dance.

I benefited directly from this high property prices game, I got in at a good time, got a good sized flat at a good location. As long as properties prices remain high, everyone that has a property is contented, happy for people with 2 or more properties, unhappy for the one without property yet.

When it is their turn to buy their first home, they are paying for the previous owner’s retirement, while also working hard for their own retirement, a rising tide raise all boats, but when the lending interest rates increase fast and furious coupled with retrenchment and recession, you will realise there is quite a number of people swimming naked.

You cannot really fault them, because there is no choice but to swim, to own a property in this country that we called home and are willing to defend for.

Cash is king – a new era

As a low risk taker, the high savings interest rates environment is better for me. Suddenly, I am looking at an interest rates of 4% for my emergency fund parked in the bank account, like OCBC 360 & UOB One Acc. That 4% can cover all my fixed monthly bills with surplus to cover for the daily groceries, with me doing nothing special to my money.

Suddenly inflation seems much easier to manage, low interest rates punished low risk takers, and drives up prices everywhere, you see more money flowing through everywhere, the properties market, the stock market with increasing PE ratio for the same kind of business.

The high interest is not game-changing, however it is a 1 to 2 months of bonus for people who have a solid emergency fund/ cash holdings.

I am looking to pay $0 for my S&CC, Electrical and water bills, my telco bills, and some of my insurance next year.

We are progressing well from a dual income family to a single income family, with a strong stock portfolio for our retirement and yearly big expenses. The returns from the children portfolio are paying for their enrichment classes, which i enjoy a drink while waiting for them.

Everything is highly possible, with some good old planning.

2 ways to fight the inflation in my opinion.

First, staying relevant, staying employed, your salary will always be pegged to the current economic situations.

Secondly, investing your idle money, that is if you already have your first pot of gold, if not you just have to try to build it up, before 30 years old if possible.

Till then.


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