With Singapore's inflation rate at a 26-year high, and current low interest rates, Singaporeans might consider spending more and spending now to pre-empt an expected price rise in goods and services.
Coupled with a strengthening Singapore dollar, it is also easy to see why consumers might be enticed by cheaper overseas holidays now. However, consumers should realise that a large proportion of the price increases have been in necessities such as transport, health and food costs - purchases for which there is not much consumers can do to bring forward. In today's volatile economic climate, it is even more imperative that Singaporeans manage their finances prudently and ensure that they have the flexibility to cope with changes in economic conditions.
Consumers may think about spending on big ticket items that they have been planning to purchase, especially items that may require loans at this time. For example, an apartment to take advantage of the current low interest rates or to carry out home improvements, that may be necessary and may start to cost more in a while. They may also consider commitments that will create value over time such as spending on education.
In making such spending decisions, consumers should not just consider expenditure, but also income. In times of rising prices, your income may be affected. Things and living expenses start costing more and your disposable income is reduced. The ideal situation is to aim to have savings or a financial surplus, however small each month, to prepare for and counter any future financial uncertainty and changes such as sudden medical expenses and other emergencies.
Should a loan be required, consumers must take note that taking a loan is a mid to long term commitment, and they should assess their subsequent ability to meet their financial obligations. They must be responsible, and despite the need, they should commit only to a loan amount they are comfortable with, and ensure they will be able to meet the loan commitment.
We know that consumers are increasingly looking for flexibility in their loans, which may reflect their concerns with economic volatility. In a recent GE Money consumer survey, 95 per cent of respondents stated that flexibility is an important or very important consideration when taking a loan.
We can never be certain that there will not be a change to circumstances, or an unexpected event where extra cash flow is required. With a flexible repayment plan, consumers can be empowered to deal with any changes and not have to worry about their loan commitment.
There are actually innovative loan products out in the market that will help Singaporeans be in better control in times of change or unexpected events. Consumers should invest time and conduct prior research to understand what flexible options are available. For example, GE Money's recently introduced new and enhanced James loan offers five flexible repayment options, from a payment holiday, to stepping up or stepping down interest rates, and paying interest only at the start of the loan. To encourage responsible borrowing, the loan also features a last installment waiver if customers meet all monthly instalment payments promptly.
Ultimately, a loan can be helpful when taken with prudence and responsibly. However, with the current low interest rates and inflation, we must also be mindful of savings Savings are still very important in helping us achieve our long term financial goals such as retirement and starting a family. It is through the combination of financial responsibility, prudent spending and smart investments, that consumers will be able to weather through this uncertain economic climate and provide a better future for themselves and their loved ones.
This article is contributed by Mr. Alok Kumar, Chief Marketing Officer, GE Money Singapore. GE Money is a leading provider of consumer finance services including the James personal loan that gives 'Your loan, Your Way', personal loan product ezyCash distributed through a unique distribution partnership with SingPost and James auto loans. For more information, visit www.gemoney.com.sg
