Ways to Cope with Inflation in Malaysia 2022

Md. Meher Ullah • October 17, 2022 • 9 mins read

After two years of being devastated by the Covid-19 outbreak, Malaysia's economy is continuing to recover quickly, but we are still confronting numerous internal and global issues.

With the prospect of a revival in economic development, the research company predicts that inflation will turn around but stay relatively mild at 1.7% this year. In agreement with Kenanga Research's findings, CSG-CIMB Research added that officials at BNM are likely to exercise caution in light of the patchy economic recovery and keep the OPR at 1.75% through 2021. The research firm predicts that overall inflation will be 1.6% in 2021.

  1. What is Inflation
  2. Ways to be financially prepared for an inflation
  3. It’s about how you see inflation

What is Inflation

The rate at which prices increase over a specific time period is known as inflation. It is frequently used to compute general prices, such as the rise in a nation's cost of living, but it is also used for more particular items, like food, or services, like getting a haircut.

In simpler language, it is sometimes explained as follows: with the same amount of money, a person's purchasing power decreases over time as inflation rises.

For example, if you buy a bowl of Nasi Lemak for RM5 in 2005, it will cost you RM10 in 2020 with the exact same serving and features, or double the original price, despite providing the same value.

Ways to be financially prepared for an inflation

Here are just a few strategies you can use to get ready for the onslaught of price increases brought on by inflation.

   1. Adopt the art of Investing
One of the best methods to protect your life savings from the effects of inflation is through investments. You may increase your personal worth faster by taking the risk and investing your money in a varied portfolio of stocks and bonds than you would be able to if it were just sitting in your bank account. Start focusing more on financial news and trends to find the best areas for investments.

Because you have a longer time horizon (otherwise known as: duration to invest) and because returns on investments often increase over time, the earlier you start investing, the better. Time is an investor's best friend, and that adage is absolutely true.

   2. Manage your cash flow with financial services
As you may already know, inflation causes an increase in the price of most items, meaning the machineries and other resources your business may need for daily operations will also be more pricey. The key to this strategy is to always have extra money or emergency funds prepared for trying times like this so that your business can still afford the necessary resources for continuous production.

Besides that, you're in luck because there are numerous funding solutions available that could be advantageous for all parties involved in this situation while posing little risks.

   3. Discover fixed rates
Time is often your worst enemy when it comes to inflation. Regular dues and fees that are associated with most transactions increase along with the general increase in pricing.

By keeping your interest rate in line with your real savings, a fixed interest rate stops your regular payments from escalating with inflation. You need to discover a contract that ensures fixed rates for the duration of the transaction, whether it be on a personal loan, savings account, or future investment.

   4. Buy a home
And by "home," we mean a physical residence constructed on a parcel of land owned by you. Having a property means you will have a tangible asset you can leave to your heirs or utilise for another reason in the future.

You can browse around for a home loan with conditions that fit your existing budget if you can't afford to pay cash for a property (which is normally the case for most of us). Real estate investments are frequently regarded as inflation hedge investments in addition to gold and Bitcoin since they are assets that are anticipated to rise or sustain value over time. Due to its increasing value, potential for increased income from rents, and declining debt, real estate is a fantastic weapon to combat inflation.

It’s about how you see inflation

In all honesty, it is how you perceive inflation which could have an impact on your business. The truth is, most of us can’t prevent inflation, but we can certainly improve how we manage it. While some of the above suggestions are easy enough for you to include into your daily spending routines, others could be needed for longer-term engagement.

The good news is that financial literacy is a gift that keeps on giving because it can better position people for any upcoming changes in the financial sector. Get a jump start on your finances today to avoid major problems in the future.