5 Tips To Combat The Rising Cost Of Living

cut rising living cost

We live in trying financial times, with many of us struggling to make ends meet to keep up with soaring living costs. But it appears that things are likely to get even worse before they get better.

Rising cost of living in Malaysia
Inflation has been increasing, reaching 4.7% in August 2022, according to the Department of Statistics Malaysia (DOSM).

Looking at the bigger picture, one can take comfort in knowing that the subsidy rationalisation, price hikes and other initiatives will be able to help bring in higher revenue for the country, reduce gross development spending and contain the fiscal deficit which has grown to 5.8% of gross domestic product (GDP) in 2022.

The bad news? Individuals from low and middle-income groups will feel the high cost of living even more.

With inflation expected to remain high into 2023, this will come as a blow to already cash-strapped families and pensioners.

Fortunately, iMoney is here to help with some top tips for Malaysians keen on mitigating the impact the rising cost of living will have on their finances.

Tip #1: Paying down your debt

With the high interest rates on credit cards, it makes sense to consider using any spare cash to reduce any outstanding balance on your credit cards – rather than injecting them into a savings account. And the best way to make inroads into your debts is to pay as little interest on your credit cards.

You can also consider utilising a credit card balance transfer facility to make full use of the interest-free period provided. Maybank 2 Gold Card and RHB Travel Money, are among the cards offering 0% interest for up to 12 months. Compare and find the best balance transfer card that suits your needs, using our credit card quiz.

If you carry a substantial amount of debt, engage Credit Counselling and Debt Management Agency (AKPK) to help manage your debts.

Tip #2: Make the most of your savings

If you are fortunate enough to have no credit card or other unsecured debts that need paying off, then your main priority for any spare money at your disposal should be to put it into a financial instrument that offers a rate that can keep up with the inflation rate. One such option is a fixed deposit account. At the moment, it’s still losing out to the rate of inflation but rates for longer fixed terms of up to a year may offer slightly higher returns.

Even with fixed deposit, it is prudent to take advantage of the promotions offered by different banks. Use our Fixed Deposit calculator to find out current rates offered by banks.

Fixed deposits let you grow your money but has one drawback; it does not allow you to be as flexible with your money as you would like to – at least not without penalties. If flexibility is a definite must for you, consider a other higher risk investment options, such as unit trusts. However, different investment types cater to different risk appetites.

Tip #3: Cut down on expenses

While getting the best deals on your savings, loans and credit cards can help to reduce the strain on your finances, cutting your day-to-day expenditure can also have a massive impact.

Identify areas with the highest monthly expenses and try to reduce it. For example, if most of your money goes to petrol, toll and car maintenance, perhaps it makes sense to commute using public transportation more often.

Making use of loyalty cards at places you shop the most will help, too. If you always go to the same hypermarket for groceries, then a loyalty or co-branded credit card will help you save more.

Tip #4: Consider refinancing

With inflation high and interest rates on home loans low, you can save some money on monthly interest by opting to refinance your home. If you bought your home before 2010, chances are that your home loan carries a higher interest than the rates currently offered by banks. The good news is you can enjoy these low rates too, just by refinancing.

Find out how much you can cut down on your monthly repayments by using our home loan refinancing calculator.

Tip #5: Invest intelligently

With all investments, higher returns means higher risk. However, letting your money languish in low-return financial vehicles may not be the best way to combat inflation.

At an inflation rate of  over 4%, RM100 earned will be worth less in terms of purchasing power after a year if it is not invested. That is why one always has to be on the lookout for investments with returns exceeding the prevailing inflation rate.

Some of the common go-to investment vehicles for this purpose are mutual funds, real estate and stock market. However, just like any investment, thorough understanding of what you are investing in is needed before embarking on the investment.

This article was first published in March 2015 and has been updated for freshness, accuracy and comprehensiveness.

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