5 WAYS TO BEAT INFLATION IN MALAYSIA

5 WAYS TO BEAT INFLATION IN MALAYSIA

Welcome to our guide on beating inflation in Malaysia

Inspired by our previous blog, Protecting Your Retirement Against Inflation in Malaysia's Economy, this post dives deeper into practical, everyday strategies to keep your finances in check amidst rising costs. Whether you’re a seasoned planner or someone with absolutely no financial background, we’ve outlined simple, effective tips that anyone can adopt to safeguard their money and stay ahead of inflation. Let’s explore how you can take control of your finances and secure your future in an ever-changing economy!

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But before we talk about those ways, let’s first understand what we mean by beating inflation.

Beating inflation means finding ways to ensure that your money doesn’t lose its value over time. It’s about being proactive, making smarter financial decisions and staying ahead of rising costs.

Now, let’s take a step back and understand: What is inflation and why does it matter to you?

Can you feel the increase in expenses with time? From a simple meal at your favorite night market stall to the rising prices of homes; everything seems to be getting more and more expensive. But why is this happening?

Well, the simple reason behind all these price hikes is something called Inflation.

Inflation happens when the value of money decreases over time, making goods and services more expensive. In simple terms, inflation erodes the value of our currency. So, the RM100 you have in your wallet today won’t buy you as much in the future.

How much lower, you ask? Well, let’s say the rate of inflation is 3 percent per year. Using something called the Rule of 72, we divide 72 by the inflation rate to calculate how long it takes for the value of money to halve. At 3 percent inflation, the value of your money is halved in just 24 years.

Let me give you an example. If you’ve saved RM100,000 today, at an inflation rate of 3 percent, that money will only have the purchasing power of RM50,000 in 24 years. Shocking, isn’t it?

Now that we know what inflation is and how it affects our money, let’s look at 5 practical ways to beat inflation in Malaysia.

5 Practical Ways To Beat Inflation in Malaysia

Tip No 1: Track Your Spending

The first step to beating inflation is keeping track of where your money goes. Use budgeting apps like Spendee or even a simple spreadsheet to monitor your expenses. When you know exactly what you’re spending on, you can identify areas to cut back and redirect that money towards savings or investments.

Tracking your spending ensures that every ringgit is working harder for you, helping you avoid unnecessary expenses and stay on top of rising costs.

👉 How It Helps Beat Inflation:

By knowing exactly where your money goes, you can identify areas to cut back on unnecessary spending. This gives you more room to save or invest in assets that grow over time, which protects your finances against rising prices.

Tip No 2: Invest in Inflation-Proof Assets

Next, invest in assets that grow with inflation. Gold, for example, often increases in value during inflationary periods. Similarly, real estate tends to hold or even grow in value over time.

When you invest in these assets, you’re protecting the purchasing power of your money. Instead of losing value, your wealth can grow or at least stay stable against inflation.

👉 How It Helps Beat Inflation:

These assets maintain or increase in value even as the cost of living rises, ensuring that your wealth doesn’t lose purchasing power.

Tip No 3: Diversify Your Income

Inflation often outpaces salary growth, so relying on one source of income might not be enough. Consider diversifying your income by taking on a side hustle, freelancing, or starting a small business.

When you have multiple streams of income, you can better cope with rising expenses without compromising your lifestyle or savings.

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👉 How It Helps Beat Inflation:

Additional income can cover rising costs without you dipping into your savings. The extra cash acts as a cushion to counter higher expenses caused by inflation.

Tip No 4: Manage Your Loans Strategically

During inflation, fixed-rate loans become a blessing because your repayments don’t increase even though the value of money changes. On the other hand, variable-rate loans can become more expensive as interest rates rise.

Focus on paying off variable-rate loans first to reduce the risk of rising costs. Meanwhile, fixed-rate loans can be maintained since they become cheaper in real terms over time.

👉 How It Helps Beat Inflation:

Paying down variable-rate loans reduces the risk of rising costs, while fixed-rate loans protect you from interest rate hikes. By managing debt wisely, you free up money to cope with rising living expenses.

Tip No 5: Build an Emergency Fund

Finally, always have an emergency fund. Aim to save 3 to 6 months’ worth of expenses. Inflation can lead to unexpected price hikes, making it essential to have a safety net.

An emergency fund protects you from financial shocks, ensuring you won’t need to take on expensive loans or dip into long-term investments during tough times.

👉 How It Helps Beat Inflation:

An emergency fund shields you from needing to borrow money or dip into investments during tough times, allowing you to stay on track financially despite inflation.

Conclusion:

Those are the 5 tips to beat inflation. Let me quickly recap them for you!

1. Track Your Spending: Monitor where your money goes and cut back on unnecessary expenses.

2. Invest in Inflation-Proof Assets: Protect your wealth by investing in assets like gold or real estate.

3. Diversify Your Income: Create multiple income streams to handle rising costs.

4. Manage Your Loans Strategically: Pay off variable-rate loans and maintain fixed-rate ones.

5. Build an Emergency Fund: Save 3-6 months of expenses to stay prepared for financial surprises.  

Follow these steps to stay ahead of inflation and keep your finances strong!

Beating inflation isn’t about avoiding it — it’s about preparing for it and staying ahead. Take charge of your finances and make your money work harder for you!