Archive for July, 2008

How much does a McDonald’s Extra Value Meal cost then (1998) vs now(2008)?

Common topic nowadays. 
INFLATION RATE
I have clients who ask what is actually inflation rate in the first place.
Good question.

 The Economics Glossary defines Inflation as:

    Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole.
    The easiest way to illustrate inflation is through an example.
    Suppose you can buy a burger for $2 this year and yearly inflation is 10%. Theoretically, 10% inflation means that next year the same burger will cost 10% more, or $2.20.
    So, if your income doesn’t increase by at least the same rate of inflation, you will not be able to buy as many burgers.
    That’s the burger story.
    What about your plate of chicken rice? Even Long John’s Silver is increasing their set prices despite the pathetic portion still. 
    Alright, so much of the food examples.
    Well, there are so many evident examples in our dear Singapore.
    Bus fares
    MRT fares
    Taxi fares.
    ERP charges.
    Movie tickets. 
    And you should all be aware of the rising price of commodities(e.g. rice, oil).
    With everything on the rise now, my next question to you is, is your income on the rise too??
    On par with the inflation rate at least?
    No doubt this is happening.

    No doubt this is happening.

     

    For the middle-class person, you are part of the most rapidly disappearing section of the population.
    If you carry on with life as per normal, then as inflation takes its toll, your lifestyle will be no longer be what it used to be.

    You will find that things are getting more and more expensive, while your income does not seem to be able to catch up. You will find yourself falling further and further behind.
    Little luxuries that you used to be able to afford, like, say, dining out regularly at restaurants, or indulging yourself with that branded goods, will start to slip out of your grasp.

    You will start to cut back on your expenses, only to find that even that is not enough.
    You will find that things you need, whether it is food, transport, education, or healthcare, will take up a bigger and bigger chunk of your monthly budget, squeezing out everything else until, it seems, you no longer have room to breathe. 
     

    This is what inflation can, and will, do to you.

    If you are not so well-to-do, it will not get much simpler than this : as inflation takes off, the fight against inflation will literally be a fight for survival.
    The cost of food typically takes up around 10-15% of the total monthly income.
    If the cost of food doubles, this ratio goes up to 20-30%.
    But for the poorer folks, whose food expenses take up one-third to one-half of the total income, with rental and utilities taking up the rest, and with no further room to cut back on expenses, what happens when the cost of food doubles?
    Life will get very hard, very quickly. You will have to make some extremely hard choices : do you want to eat, or do you want to pay the rent – and what about the utilities? 
    Most of us do this especially at month end. No?

    Most of us do this especially at month end. No?

     

    With the current months’ inflation rate ranging from about 6-7%, are you aware that your money which you park in your bank, earning about 0.25-0.35% interest rates, is actually eroding??

    With this idea in mind, try to find other modes of savings that have returns that are equal to or greater than inflation. 

    Do something about it now. 
    Beat it.
    Fight it(inflation rate)!!

    GROW YOUR $$ and not let it erode with INFLATION RATE

    GROW YOUR $$ and not let it erode with INFLATION RATE