Did your regular daily coffee just cost more, did your transport expenditure for the month increase and are your supermarket bills creeping upwards?

Concerned about the relentless rising prices in Singapore? Alok Kumar, chief marketing officer of GE Money Singapore, shows you how to weather the financial storm by stretching your dollar.

Understanding Financial Situations

How does inflation impact my life?
As prices for the same goods and services increases and inflation takes place you may be making more money but do check whether your standard of living is changing. You may do well or you may be affected, especially if your income does not increase at the same rate as inflation. Keep in mind that inflation does not impact everything equally. Things such as petrol could double in cost and you may be spending more with a higher outflow, while your home valuation could improve.

How does an economic recession affect me?
An economic recession is a term that is open to a lot of interpretations but most would agree that it leads to a decline in activity, and it is reflected in a fall in consumption, purchasing power, investment, income growth and job opportunities. Opportunities for growth will slow down and it could also lead to changes such as a fall in your property value which reduces your assets.

With the uncertainties in the global economic environment and rapidly rising prices, financial planning is now more critical than ever. As a savvy spender, you should start planning and designing a budget or spending plan that suits your needs.

Budget Basics

There are no fixed budget categories as everyone has different financial needs. Tailor your budget plan to fit your unique situation. A budget is not just a financial diet but a tool to plan your finances, help you to save money for your well being and to even get you out of debt.

How do I start in planning my budget?
Successful budgeting is easier than you think. It should be honest, realistic and consistent. It needs to include expenses for everyone in your household, and include both planned and anticipated spending. You should also include estimates versus actual expenses, constantly review your budget to ensure that it is realistic and make changes if necessary

What should I think about for an effective budget?

• Basic daily necessities such as food staples and home essentials must be included in your monthly budget. Buying these items under house-brands and in bulk adds to your savings in the long run. Consider the wet market rather than the supermarket, and you may also save some dollars.
• Set aside money to pay off fixed monthly bills such as home loans, electricity and mobile phone charges and even your personal loans. Using GIRO automatically deducts payments from your bank account, freeing you of keeping track of bills, and saving you from unnecessary late payment charges.
• If you are in debt, set the objective to clear your debts as soon as possible. Outstanding credit card debts incur late payment charges and are expensive as interest rates are much higher . Think about other factors including whether the interest rate is fixed or variable, and the late payment charges, default interest rates and termination fees involved. Plan and avoid such additional and unnecessary payments.
• Give yourself an allowance for food, travel and entertainment keeping in mind your income.
• Scale back on wants and focus on your needs. If there are needs, consider if there are more cost effective options.
• Think long-term and consider taking out additional insurance, which will go some way towards paying for future outlay. Adequate health, life and disability insurance coverage should be at the top of your priority list. Many insurance policies do not cover certain medical expenses and that can mean paying out of your own pocket at a time when money is tight.
• Start saving! It's never too late to start setting aside some money for the future or to set money aside for investment. A portion of your household income must be put aside as it is crucial to think about future needs like retirement and your children's education needs.

Using Credit Wisely

Should we defer big ticket items? When is credit acceptable?
Firstly, determine if your big ticket item is a need or a want. While paying for a university education or a home can be expensive, you will only benefit in the long run. If you are setting up a home and need certain necessities like a fridge or even furniture, it may not be deferred. What happens if cash flow is tight? When is credit acceptable? A loan taken to help you with essentials in life can be translated as acceptable or 'good debt' especially if it is within your means. Once you have what you need in place, you can focus on building your wealth and a good credit history for your life ahead.

What is a good debt?
Good debts are debts incurred that would generate positive returns over time, through increasing ones' earning capabilities and/or income. For example, taking a loan for educational purposes falls under this category as additional skills and qualifications will likely increase one's earning ability.

Be wary of falling into the trap of bad debts on purchases that are not within your means or are not sustainable. Debt incurred for undesirable activities such as gambling or engaging in an extravagant lifestyle that you cannot afford is also seen as 'bad debt'. Avoid such debt at all cost.

What should I look out for when considering a loan?
List both your monthly fixed (housing, car) and variable (entertainment, food) payment obligations and note how much disposable income you have left over after setting aside some saving targets. Consider the terms and conditions of the loan, and ensure that you are able to afford all the charges and payments involved.

In addition, if taking a loan for an investment, as a savvy consumer, you should carefully evaluate that the anticipated return from investment is greater than the cost. It is however difficult to estimate such returns in light of the fluctuating market, and there is no guarantee of a lucrative high paying job immediately upon graduation. As such, amidst such uncertainties, ensure that you will be able to service your debt; you have flexibility repayment options with your loans, or have an emergency fund to deal with any contingencies.

Is it advisable to take up hire purchase and easy-credit loans?
In cases where a family needs an item but wants to spread out their expenditures, a hire purchase scheme can help alleviate their financial situation. When a child needs a computer for school projects, parents can consider taking an easy-credit loan and pay a percentage of the deposit followed by monthly installments. Be sure to factor this into your budget.

Speak to a friend, financial advisor or people in the business to understand how you should plan your budget and whether you should take a loan. Take note of the fine print and conditions such as the interest fee and other charges and evaluate whether a term loan or a hire-purchase scheme would suit your needs better. Some term loans come with flexible repayment options that will provide you with the flexibility you need.

Ultimately, responsible and considered financial budgeting can only mean better days ahead.

Tips and Tricks to Stretch Your Dollar

• Entertainment for less: Instead of dining out at expensive restaurants, rope your friends and family in for a delicious and possibly nutritious potluck dinner.
• Instead of going to the movie cinema, rent a DVD and watch a movie from thee comfort of your home.
• Staple items such as toiletries can be stocked in bulk when on sale.
• Trim your waistline and fatten up your pockets by packing your own lunches with healthy alternatives. Snack smart and munch on fruits and down water instead of buying soda and snacks.
• Go green and save on electricity and water bills. Be mindful of switching off the television and lights when you leave the room, and set the timer to turn off the air-conditioning when the room is cool and the air-conditioning is not needed.
• Cut down unnecessary spending and live within your means. Review your lifestyle and consumption habits and consider substituting high cost items for cheaper alternatives.

In times of rising prices, do follow these good practices to avoid overspending. By planning your budget and taking good loan with flexible options, you and your family will be able to whether any financial situations in an uncertain economic market.
________________________________________

About GE Money

In Singapore, GE Money is a leading provider of consumer finance services offering a full range of products and services from ezyCash, the award winning and pioneering personal loan; James, the personal loan that gives you 'Your Loan, You Way', and credit insurance with ezyShield.

GE Money is committed to operating a responsible and sustainable lending portfolio. With some of the world's most sophisticated risk management expertise and analytics, as well as education programmes, GE Money takes prides in lending responsibly, and offering customers highly competitive products.

For more information and to apply for loans online, visit www.gemoney.com.sg