Year 2017 alone has seen petrol price increased by RM0.40 (RM0.20 each month) and it’s only the second month of the year. A litre of RON95 petrol is now RM2.30.
Malaysians are not strangers to the effect of fuel price hikes. Not only do they feel the pinch in their pockets directly when they pump petrol, they are also indirectly impacted by the rising cost of goods due to the fuel hike.
Whenever there is a significant increase in fuel prices, households are advised to brace for more price rises on food and other essentials.
Surge in fuel prices can have significantly effect on consumer spending. Many industries rely on fuel, such as the agriculture sector. The agriculture industry is greatly harmed by higher petrol price, as this sector inevitably consumes oil to operate. For consumers, this means higher prices on food.
Building a sustainable fort around your finances when petrol prices is going on an upward trajectory is not as simple as just making sure you service your car regularly, or turn off your air-conditioning while driving.
Sure, these tips do help in optimising fuel efficiency, but let’s face facts, they are not going to help you save significant petrol money in the long-run.
Because fuel is so commonly used by almost every sector in the economy, consumers will feel the biggest brunt of petrol price hike, even if he/she does not drive. To cushion some of the blows, you need to look at the big picture of your finances.
Here are some ways you can alleviate the pain of higher fuel cost:
1. Use public transportation or carpool where possible
This is a no-brainer. Petrol prices going, use less petrol. And the most straightforward way to do that is to take public transportation or carpool.
We know, carpooling is not the most convenient way of commuting, but with services like GrabHitch, it is increasingly easy to carpool today.
And of course, taking the bus or train (LRT, MRT and KTM) rather than driving yourself to work each day could easily save you some money.
Here’s a comparison of driving from Taman Bahagia, Petaling Jaya to Damansara Heights, Kuala Lumpur, and vice versa, versus taking public transport.
|Distance (Taman Bahagia – Damansara Heights)
Distance (Damansara Heights – Taman Bahagia)
Toll at Sprint Highway (one-way) = RM2.00
|Fare^ from Taman Bahagia LRT station to
Bangsar LRT station = RM2.80
Bus fare^ from Bangsar LRT station
|Petrol = RM68.66
Monthly repayment = RM805.40
Seasonal parking = RM250
Toll = RM2 x 20 days = RM40
Total cost per month = RM1,164.06
|LRT fares = (RM2.80 x 2 ways) x 20 days
Bus fares = (RM0.80^ x 2 ways) x 20 days
Total cost per month = RM144.00
^ LRT and bus fares are based on Touch n’ Go rate.
Based on the example above, taking the public transport to work could save you slightly more than a thousand bucks every month! Even if you own a car, you can still save more than RM200 every month on petrol, toll and seasonal parking fee by opting to go public in your commute to work!
2. Cut elsewhere
If cutting your petrol spending or transportation cost is not possible, it’s time to cut elsewhere to offset the higher cost of petrol.
First of all, identify how much more are you paying for petrol every month. Here’s how much you are paying for petrol every month since December 2016 if your monthly mileage is about 600km:
|Total monthly mileage
|Price per litre for RON95
|Total petrol cost
In mere three months, your petrol cost has increased by RM18 every month.
Of course, petrol price has far-reaching effect on our expenses. Prices of necessities tend to go up when petrol prices increase. Therefore, you will need to save more than RM18 per month to offset the price hike.
Here are some of the areas you can cut back on to cushion the blow:
Estimated cost on lunch
= RM10 per day
Estimated cost for dinner
Total monthly cost = RM750
|Prep your meal for lunch the
night before, or over the
weekend, so you don’t have
to eat out for lunch at work.
Do the same for dinner.
groceries = RM400
= RM750* – RM400
Estimated cost spend on
drinks with friends per
month = RM200
Estimated cost spend on
movies per month = RM25
(2 movies a month)
Total monthly cost
|Organise pot luck and Bring Your
Own (BYO) parties at home.
Stream movies online at home.
cost on pot luck
savings = RM225 – RM100
The above are just rough ideas on how you can cut your spending. Of course, what to cut and how to cut will depend on your spending behaviour. Perhaps, you don’t spend too much on entertainment, but more on online shopping.
The important thing is to identify the areas you can cut back on and start chipping away on those expenses. Which brings us to the next point…
3. Identify the non-necessities
Many of us succumb to lifestyle inflation as we progress in our career and income. Lifestyle inflation is easily defined as: when you make more, you spend more. It’s not an obvious or drastic change, but one that gradually inches up.
For example, you get a raise of 10% and you decide to get a gym membership, or even go for a weekly movie outing with your friends. And before you know it, you are paying a few hundred bucks more every month. The idea of going back to your previous income is unthinkable.
It’s all too common. To rein in the inflation, you need to list down all your expenses and be really honest with yourself in identifying the items that you don’t need.
Maybe you can sacrifice your gym membership and start working out at home – for free. Perhaps the weekly happy hour with your friends can be cut down to monthly – or none. Changing to a new car? Put that in the back burner until you are 100% sure you can comfortably afford it without sacrificing your other expenses and your savings.
4. But don’t cut savings
Most people make the mistake of cutting their savings when things get tough. This results on many people not being able to save when the cost of living goes up.
There are two sides to saving: The ability to save and the willingness to save. Many think they are unable to save, but the truth is, they are not willing to forego their artisan coffee every morning so they can save that money for rainy days.
That sounds harsh, but that is the truth for most of us. You don’t have to sock away half a grand every month to save. Just because you don’t have RM500 every month to put away doesn’t mean you should abandon the whole notion of saving.
If you are committed to saving 10% of your income every month, even with the increased cost, you should stick to that commitment. Refer to point #2 and #3 to figure out where you can cut on spending to accommodate the increase monthly expenses so your savings won’t be affected.
And for those who have not started saving, now is the best time to start because you’d never know when the emergency fund would come in handy.
5. Share your subscriptions
We live in a world of subscriptions. Most businesses offer subscription plans to ensure they get long-term revenue from their customer base. From TV subscription, to broadband, meal delivery and even buying a smartphone.
When you feel financially stretched, it is time to review all your subscriptions to eliminate those you do not need. And for the subscriptions you can’t live without, you can consider sharing them with someone else.
You can do so with most of your subscriptions. Here are some examples and how much you can save every month:
|Subscription & monthly cost
|Video On-demand subscription (Netflix)
|One premium account = RM51/month
Shared with 4 others, total cost per person = RM12.75
|RM51.00 – RM12.75 = RM38.25/month
|Mobile phone subscription (Maxis ONE Plan 98)
|Principal line = RM98/month
1x share line = RM48/month
Total cost = RM98 + 48 = RM146/month
Total cost per person = RM73/month
|Cost for 2 principal lines = RM196/month
Cost for principal + 1 share line = RM146/month
Total savings = RM196 – RM146 = RM50/month
Savings per person = RM25/month
|Music subscription (Spotify)
|Single account = RM14.90/month
Family account = RM22.40 (Up to 5 family members)
Total cost per person for family account = RM4.48
|RM14.90 – RM4.48 = RM10.42/month
|1-year subscription = RM150 (Up to 3 digital access)
Total cost per person = RM50
|RM150 – RM50 = RM100
By splitting the subscription cost with your roommate, family members or friends, you don’t have to give up on your favourite subscription to cut your monthly expenses.
Fuel price hike can really throw a wrench in your budget or financial plan if you are not careful. The important thing is to ensure your spending is flexible enough to weather through these changes.
With the managed float system adopted for our petrol prices, we can never predict which way the fuel prices will move every month. But one thing is for sure, there’s no down side to staying on top of our expenses. By optimising your spending and budget, you won’t have to worry too much about the petrol prices affecting your finances too badly. That is the key to successful budgeting.