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A chat on inflation and cost of living (UPDATED JULY 2018).

Monday, September 21, 2015

This was a chat I had with a reader who is also a very concerned parent.

T
do we see a 3% increase in basic necessities costs? 


Perhaps 1-1.5% is more reasonable?


AK
core inflation. That would be 2 to 3% per annum. 


Recently, we have been experiencing deflationary pressure but even so, food prices saw inflation of 2.2% or so, year on year. 

Oil prices being so low now contribute to deflationary pressure but I don't this this will last more than a year or two. 

I hope that the Singapore dollar stays relatively strong and that we don't see inflation at 5% again just like a couple of years or so ago.




T
(Referring to the CPF) 3% incremental retirement sum will amount to 445k retirement sum 34 years later.... 


Oh wow... It will wipe out a lot of middle income ppl's Sa! 

Seen from the perspective of a 21 yr old male who just entered the workforce at 21 yrs now in 2015

AK
Inflation is a monster but we rather have that than deflation. wink emoticon 


 things will get more challenging in the years ahead. 

I remember a bowl of Lor Mee was 50c when I was in Primary One. 

Fast forward almost 40 years, it is $3 a bowl today. 

I think the price has gone up by more than 3% per annum. 

It is not an easy job to keep cost of living down. I don't want to be the government.







T
Cost of living will definitely go up over a period of 30-40 years.... 


Think the bigger challenge would be ensuring wages keep up.... 

During that time of 50cent lor mee, wages were probably around the 300-500 mark I guess



AK
I too young to know what wages were like. 


I think everyone must be financially prudent. 

What we have control over, we must make the best of things.





T
I worry abt the daughter's future.... 


I can instill financial knowledge into her from an early age but I'm afraid cost of living goes up too fast

AK
We probably have less control over our wages or prices. 


However, we have control over what we spend on and how much we save.




T
Yup... That I totally agree.... 


If cost of living goes up much faster then wages, it does not really make sense for the future generation to live like a hermit just to plan for retirement... 

What kind of life would that be?

AK
It really depends on our expectations and if we are willing to manage them, I feel.





T
I already lead a life sorta like a hermit just so I can afford my daughter's future academic needs and my own retirement needs.... 


I think I'm not at your level yet but I'm spending less then 600 per month on my own food, transport and personal needs so I think I'm on the right track.

Anyway I just wanna let u know I learnt quite a lot just from your posts.... 


Once I have my emergency fund set and a war chest ready, I'll start investing.....

Maybe the details of which stock which REIT, gearing and debt etc I still don't understand... 


But I learnt a lot from the concepts behind it. The concept of delayed gratification. Saving 100% of your income etc.

We are approaching a time in history now that simply earning a salary and saving will not be enough for even a simple retirement. Investment knowledge is important.








AK's closing comments:
I hope that Singapore doesn't become another Hong Kong or Taiwan where young graduates cannot afford to buy an apartment. 


I hope that Singapore doesn't become another Japan which suffered not one but two lost decades.

I am sure many Singaporeans have the same worries. 












(Source:
https://www.straitstimes.com/asia/east-asia/taiwan-youth-struggle-to-find-well-paying-jobs)

.............




.............
We do what is in our power to make sure that we are able to weather the storms which could come our way. 


We should not think that we would always see fair weather.

When we are prepared, we would have less to worry about.






Related post:
Don't think and grow rich. 

5 comments:

AK71 said...

Kelvin Tan says...
Think of inflation this way, in 1980, paying more than 500k for a 5 room hdb flat would be impossible to imagine.

AK says...
What $500K? $1 million! :p

Lim Guan Seng says...
In 20 years, 25k salary is norm. 😂

AK says...
I hope it won't be like Taiwan lor.
Salary has not increased for fresh grads in more than 10 years and now most of them cannot afford to buy their own homes... :p

AK71 said...

Christopher Lee says...

Actually I recalled this saying at the turn of 2000: Billion is the new million.

These days you see companies worth billions as a norm, in fact the race for the 1T company is underway.

Honestly, I don’t know if things can sustain at such a pace, but the gap is widening is a reality. 😅

AK71 said...

PK Jan says...
I recall during the 70's when i was in Primary school, my mom was earning $180 as a shopkeeper.

The 3-rm flat cost $12.8K, and we had our first small fridge and second-hand Telefunken color TV when we moved into the flat

AK71 said...

Reader says...
Milk powder another classic example
1st kid was selling $30 then 2nd kid became 100, it's a 10 yr different

AK says...
This one, I also did not notice. 😛

Reader says...
Big Mac was 3.50 then now 5.50

AK says...
This one, I also did not notice... hmm.

Reader says...
Cone ice cream was 50c and now 70c
McDonald one

AK says...
This one, I tell you hor. It is 80c now. 😜

Reader says...
Huh
Aiyo
Giant avocado 3 pieces was 2.95 and now 3.95
Am I complaining?

AK says...
It's OK. It's normal. 😉
Remember to keep our needs simple and our wants few.
It makes everything more manageable.

AK71 said...

Vincent Chan H S says...
AK only go mac to eat ice cream.


AK says...
Very sharp observation! :p
I think the ice cream cone is value for money. ;)


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