7 Personal Finance Tips To Fight Inflation in Malaysia

Future of Work / 29 Sep 2022

7 Personal Finance Tips To Fight Inflation in Malaysia

Like the average citizen in Malaysia, if you have been trying to accumulate wealth by doing a job or small business and setting your financial goals, events like inflation can change everything. 

In the aftermath of COVID-19, the slowing down of the economy or inflation has led to an increase in product and service prices in Malaysia. Inflation is the annual rate of the price index of consumer products.

To fight inflation, consider making a few crucial changes to your personal financial planning approach. Check out the following seven tips regarding managing your personal finance during the slow economy. 

Follow a strict budget and look for cheaper alternatives for essential commodities

The first step to fight inflation is to follow a strict budget focusing mainly on the expenses of basic commodities that might affect the future, such as food/grocery items, fuel, utilities, and others.  

Make a plan to buy cheaper alternatives of the commodities by stretching your budget and buying those things at cheap or bulk stores. Besides, think of the expenses you can cut without compromising your quality of life.

Despite dreading the possibility of inflation, you can prepare for it. If you anticipate that inflation will increase, you can mitigate its impact by making some small investments or taking reasonable amounts of a loan at low-interest rates and preparing your family for a cost spike.

Reduce your debt burden by consolidating debts 

During the slowing down of the economy or inflation, one of the common trends is borrowing significant amounts of money from new credit lines at high-interest rates. It could cause a problem for various reasons, and the temptation to use credit cards is one of them because it will increase your debt.

Instead of taking that route, you can opt for a lower interest rate personal loan from Direct Lending and work around consolidating your debts during inflation. How debt consolidation works is by combining all of your existing debts into a new personal loan. 

By consolidating, you can get a clearer picture of your debt by focusing on paying one lower-interest payment and managing your financial commitments more efficiently. Remember that the strategy of consolidating debt can work if your total debt amount is manageable. If your debt has swelled out of control, the best option could be to involve a certified financial planner to create a debt management plan for you rather than toggling with less effective methods. 

Buy long-lasting, durable products

Buying long-lasting, durable items during inflation is a wise investment decision. When you buy durable products, such as a refrigerator or washing machine, those will run for several years, and you do not have to replace them or get them serviced anytime soon. 

Although the price of these items might be higher, still the investment will keep your expenditures more manageable over a long period.    

7 Personal Finance Tips To Fight Inflation in Malaysia

Increase your income by doing an online or part time job

Doing a part time job is probably the next best option besides a full-time job to generate extra income and meet your daily expenses. 

If you are considering doing a part time job, it can give you the much-need financial leverage required during inflation.  

You can even find a part time job from home and do your job in flexible timing and give time to your family than doing a 40-hour job in a week.

You can also do part time temporarily to achieve your specific financial goal. This way, you have a second source of income. You can get a good part time job by signing up with a reliable online platform like GoGet.

Invest in property instead of living on rent

Recession is an unfavourable time for a bond investor or a lender because the available interest rates will not be able to pay off investors for inflation. However, it is the right time to take low-interest loans or mortgages. 

Instead of living on rent, if you take a fixed and long-term mortgage, you could make inflation work for you. 

Some homeowners borrow money for the long term and pay less than 3 per cent interest per year, excluding tax deductions on interest expenses. 

The best thing about taking a mortgage is that the inflation-adjusted amount of the mortgage payments reduce at the same rate as inflation increases.

Get rid of additional expenses like having a second vehicle

During inflation, the supply chain of companies might reach a stalemate or slow down because of material shortages in the industries like automobiles. Because of that, there could be a demand spike for second-hand vehicles. 

To fight inflation, eliminate additional expenses like having a second vehicle. Also, due to increased demand for second-hand vehicles, you can profit by selling your second car at a premium price. By selling the car, you can save on unnecessary maintenance costs.

Besides, you can use your primary vehicle for car-pulling and collect money for its maintenance. It could be a win-win strategy.

Buy inflation-linked bonds

Keeping money in a savings account or a certificate of deposit (CD) is similar to buying short-term bonds. Your investments will be secure that way. Also, if the rising inflation rate leads to higher interest rates, inflation-linked bonds are likely to perform better than long-term ones.

We suggest you stick to short- to intermediate-term inflation-linked bonds and avoid buying long-term until the inflation is over. Your short-term bond funds will not have an adverse effect if interest rates rise fast. 

​​This article is written in partnership with Direct Lending –  An online personal lending platform that provides bank and koperasi personal loans as well as licensed moneylenders personal loan. Apply and check your eligibility for free today.

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