My two cents: inflation

Inflation is a hot topic at the moment. While cash inflow is stable or decreasing, cash outflow is increasing dramatically – some items have doubled or tripled their price in the last two years! So, what can we do to handle the situation, or at least, survive? I’ve stepped into different shoes to understand people’s challenges and offer my two cents.

Policy makers

The aggressive increase of OCR is like a dose of Chemo, it kills cancer cells but also suffocates energy from the rest of the body. Shouldn’t the cost of funding be included in the CPI (Consumer Price Index) since most families have mortgages, and rent is more or less linked to the funding costs of landlords?

In addition, the number of compliance requirements added to the business society over the past ten years is huge. Numerous tax legislation changes in favour of one type of person over the rest, rental deduction limitation, CRS, increases in the trust tax rate, changes to OIO rules and introduction of AML/CFT rules. The list goes on. Policymakers must balance adopting a free market and becoming a heavily regulated jurisdiction.

Corporates

Don’t act too quickly on decisions such as reducing the head count. Look into all types of avenues to increase revenue and cut overheads. The story of a big corporation laying off staff can incidentally cause panic and affect other decision-makers.

Small to medium enterprises (SMEs)

SMEs have been hit quite hard by the economic situation. But there are opportunities to look for as well.  If you are confident in your business’s future and need to expand premises, now is the time to negotiate a fixed-term lease for a reasonable price; or perhaps consider investing in a commercial property. Now is also a good time to recruit talent; because the hasty decisions of some corporations downsizing their workforce mean that you’ll have better luck finding talent that was previously out of reach. Don’t be afraid to check the government and community for grants and relief to help navigate the challenges with the crazy costs and pressures.

High-net-worth individuals (HNI) and rich investors

Now is the right time to give if you have plenty. You can even give the second or younger generations cash and encourage them to find a good cause to contribute to. Now is also a good opportunity to watch for decent assets to invest in that are selling reasonably cheap. And remember, be gentle and generous with negotiating deals amid the distressed market.

Individuals

For those with limited savings and earnings and who are merely surviving the rising living costs, there’s not much to do but try and increase your income and cut costs. Increasing your cash could look like this.

• Negotiating a pay rise.
• Taking on another part-time job.
• Jumping the boat to a higher-paying job.
• Starting a side hustle (think hobby into a small business).
• Checking what government or community grants you might qualify for.
• Selling assets you don’t need.

On the other hand, you could consider:

• Finding flatmates if you’ve got spare rooms.
• Negotiating or objecting to a supplier fee rise.
• Changing your lifestyle, such as riding a bike to work, to save transportation, motor vehicle and gym fees.
• Revisiting that private school decision.
• Cancelling subscriptions.
• Switching to cheaper internet, phone, and power companies.
• Packed lunches.
• Using seasonal produce, the frozen food section, and more home brands.

In Summary

Policymakers must balance regulation and a free market to mitigate the impact on families and businesses. Corporations should carefully consider alternatives to reducing headcount and explore their options for increasing revenue and cutting overhead costs. SMEs can grasp opportunities in the market by negotiating favourable leases and recruiting. High-net-worth individuals can make a positive impact by giving to charitable causes and finding undervalued assets for investment. Individuals with limited resources should focus on increasing income through negotiations, additional employment, or starting a side business while also cutting costs in their daily lives. So, despite the challenges we are all facing, there are some ways to cope. If you ever need expert help with budgeting and financial planning, I can certainly help. Get in touch.