by Fazila Aspandi

Have you ever wondered what causes the increase in price of goods? People always say “The economy is bad these days” or “’Because of inflation lah, what else?”. But well, do we actually know what that means? 

Inflation roughly means the continuous increase in price of goods and services. So, how does this happen? Well, too much spending can lead to this.

Before we dive into the topic of crunching your budget, let’s go back to the basic rule of economics which is demand and supply. When there are a lot of people that are willing to spend their money, the demand for goods increases. As the goods get sold at a quick rate, suppliers struggle to keep up in providing a steady supply of goods. Hence, the price of the goods increases as the goods become limited. This is why limited-edition goodies are always so expensive. 

Inflation is a national-level phenomenon which can only be solved by Bank Negara Malaysia by implementing a monetary policy. This can help control the nations’s overall money supply whilst controlling its economic growth. From an individual perspective, how can we combat this money-eating-monster called inflation? 

List down your monthly commitments to see if there are any expenses that you don’t actually need. Get rid of any financial burdens that do not benefit you! 

As the world gets more developed, it is tempting to keep up with the latest trends. For instance, technology is one of the biggest trends that people will keep up to. Re-evaluate your wants to ensure your expenses cover your basic and relevant needs. 

Before you make an impulsive decision to buy the latest iPhone, ask yourself – is there really a need to upgrade to that latest version if your current phone is working perfectly fine? 

I know it’s a cliché tip but hey, it works! As consumers, we should know how to shop smart, especially when it comes to buying basic goods such as groceries. If you have the time, take a trip to your nearest Pasar borong (wholesale market) to get your freshest supply of vegetables, seafoods and meats at a fairly low price. You will be able to compare the prices offered by all the vendors there.  

Don’t let your money lie idle. Instead, take advantage of the high interest rates to get more returns for yourself! One of the ways the government combats inflation is by increasing the interest rate so that borrowing money becomes expensive. But this opens more opportunity to invest as more financial institutions will offer high rates of return (eg. fixed deposits). The more you deposit, the more money you will get in return! 

It is advised to avoid taking any loan during these times. As previously stated, it is expensive to borrow during inflation due to high interest rates. For instance, if you take a car loan costing RM 100,000 with an interest rate of 4% (which is high) and the loan term is for 9 years, that will be RM 36,000 in interest fee, causing you to pay a grand total of RM 136,000 in the long run. So instead of spending your money to pay a hefty interest, why not use it to invest instead. 

With these tips and tricks, hopefully you can plan better and make smarter financial decisions. Remember: It’s better to act now than to suffer the consequences in the future!