The document discusses how to cope with inflation in Singapore. It provides historical examples of inflation in the 1970s due to the oil crisis and expanding economy, and again in the 1980s and 2008 due to rising food and oil prices. The government and labor movement were able to reduce inflation to under 3% by 1975 through policy measures. The document recommends individuals hedge against inflation by reducing discretionary spending, finding alternative housing and transportation options, and engaging in financial planning to build wealth through savings, investments, and insurance that can outperform inflation in the long run.

1. How to Beat Inflation
It’s clear we are entering into another period of high inflation.
The story of inflation in Singapore reflects our over reliance on imports and
vulnerability to changes in the global economic climate.
According to Department of Statistics, in the 1970s, Singapore’s rapidly expanding
economy and the oil crisis of 1973 led to prices soaring to a historic high.
In 1974, inflation hit 22.3% - the highest ever since our Independence in 1965.
The government and labour movement’s action and measures caused inflation to fall
back to 2.6% in 1975.
In 1980, the second oil crisis shock the world and our inflation shoot up to 8.5% in
1980.
Fast forward to 2008 and inflation hit 6.6% due to spiraling food prices worldwide.
That year, the wholesale price of rice in Singapore went up by 50%.
As of the time of writing this article, the latest reported inflation is 5.5% in Jan 2011.
Not surprising, due mostly to high oil prices again. The other causes would be due to the
rise of China and India, the recent floods in food producing nations and government
policies.
How will we cope with inflation this time?
Apart from relying on the Government’s recent Budget measures of personal tax rebate,
child development credit, growth dividends, utilities save, S&C charges rebates and
others, as an Insurance and Financial Practitioner, I help my clients to hedge against the
rising cost of living, healthcare cost and wealth accumulation through good financial
planning.
Each family can battle inflation by becoming more aware of their spending patterns, and
make temporary changes in lifestyle to cut down on costs.
The Consumer Price Index showed that food, transport, and housing make up almost
66% of a typical family’s monthly expenses. Recreation, at about 16% of family
income, is one of the first areas where families can reduce expenditure.
Spending on essentials such as housing and transport are difficult to cut but families can
reduce costs by buying less expensive alternatives, cutting down on eating out, and
finding a second source of income.

2. My practice is to give my clients the big picture in world of Financial Planning.
It’s simplified with 3 segments:
The 1st segment is what we call Cash Management. This is where our bank savings and
CPF funds comes in.
We advise our clients to set aside 3-6 months of income as emergency funds and
to keep their short term funds (needed in 1-5 years time, for example downpayment for
a house or car) in the bank as the time frame of less than 5 years might be too risky for
them to invest in the financial market.
We advise our client to set aside the necessary funds in their banks before they consider
any other form of investments.
The 2nd segment is what we call Wealth Accumulation.
This is where Investments come in.
There are so many forms of investments in the market but generally there are 4 types.
1. Savings or Endowments
2. Unit Trusts
3. Stocks and Bonds
4. Others – real estate, commodities, futures, options
When it comes to investment there are different levels of risk: Low, Medium and High
risk. I help my clients to explore their investment options according to their risk profile.
Lastly the foundation of good financial planning is Risk Management. This is done
through Insurance. We advise clients on protection against untimely death, total and
permanent disability, diagnosis of a major illness, accidents cover, hospital and surgery
cover and early stages of critical illness and disability.
We listen to the client’s dreams, goals and hope for themselves and their families and
only when we understand their deepest needs, wants and their priorities, will we give
advice and recommendations that will always be in their best interest by giving full and
adequate disclosure of all facts necessary to enable the client to make an intelligent
decision.
SAMPLE QUESTIONS WE ASK OUR CLIENTS:
1. How much risk are you taking?
2. Is your money liquid and easily accessible?
3. What rate of return should you expect in this low rate environment?
4. How do you protect yourself from taxes and inflation?
The financial world is full of investment opportunities, offering countless avenues to
pursue. Selecting the right combination of these opportunities is the challenge. How do
you choose an investment mix that will help you to achieve your financial goals?
“A bunch of good funds isn’t a portfolio,” says Kurt Brouwer, co-author of "Mutual
Fund Mastery" and an investment adviser in Tiburon, Calif.

3. Asset allocation is a time-tested approach to portfolio management. It means spreading
your investments among multiple asset classes such as stocks and bonds. This strategy
helps to lessen the effects of market volatility, manage risk and provide the potential to
maximize overall returns.
Common assets classes
1. Stocks, IPOs
2. Bonds, SGS, Corporate e.g. F & N bonds
3. Mutual Funds, Unit Trusts, Investment Linked Plans
4. Property, Residential, Retail, Commercial,
Hedging Inflation
After doing proper budgeting, spare resources should be positioned for long term
growth in the above investment vehicles.
Why?
Consider the local bank interest for the last 20 years and with currently the Singapore
benchmark interest rate stands at 0.38 %, it is clear that inflation will most likely shrink
bank savings in the long term. So spare resources should be positioned for long term
growth in the above mentioned assets classes as they will give a better chance to
outperform inflation.