Aside from the pandemic, Filipinos have been battling with the rising inflation rate in the country. According to the Philippine Statistics Authority, from 2.1% in May 2020, the inflation rate rose up at 4.5% in May 2021, which shows an increase of more than 100%.
Inflation is all about having to pay more for the same goods and services that you used to afford at a lower cost. Most of the time, the rise in income is not able to keep up with inflation, which puts a heavier challenge in making ends meet.
Although in the Total Remuneration Survey (TRS) 2020, business owners have expressed intention to raise pay by an average of 5.6% in 2021, more than half of the companies have indicated that they will delay the increase of salaries or revise salary increment level to keep costs down.
So how does the inflation rate affect the lives of Filipinos? Here are the things you need to know.
The effects of the rising inflation in the Philippines
- Reduced purchasing power
An increase in the inflation rate would mean you’ll have to spend more for the same goods that you used to purchase at a lower cost. For some, this may mean a lower standard of living and letting go of luxuries to afford basic goods.
- Lifestyle change
As the prices of commodities increase, an average earner may need to switch to a simpler lifestyle. A high inflation rate means you’ll have lower disposable income and will result in having less money to spend than you wish to.
- Insufficient fixed income
The effects of the inflation rate will also affect those with fixed income such as retirees who rely on pension benefits. The usual pension they receive may no longer be sufficient to sustain their usual way of living, considering the increase in the cost of basic goods, medications, and utilities.
- Compromised health
Even if it is forecasted that health care cost will have a slower rise this year, there’s still a chance that for average income earners, health may be given less priority in order to meet daily needs. Regular checkups may be reduced and you may no longer be able to buy nutritional supplements or avail of prescribed treatments.
- Lower capacity to save
As financial resources tend to be lacking with a high inflation rate, you may find yourself without enough fund to allot for your savings, your child’s education, health emergencies, business, and retirement that may eventually affect your future plans.
5 steps to manage the effects of the rising inflation in the Philippines
1. Always stay one step ahead
Strategize now even if you haven’t experienced the negative effects of inflation. Plan ahead. Identify your present expenses and the cost of your future goals. From there, create a budget and stick to it so that you can avoid overspending.
Not sure about how much you need to save for your future? Check out our Inflation Calculator tool to know the cost of your goals.
2. Explore sources of income
A smart way to beat the odds brought by the increasing cost of commodities is to also increase your cash flow. If you’re unemployed, look for job opportunities. A survey shows that 35% of companies are looking into increasing their headcount this year. If joblessness is a problem now, you may soon find openings that fit your credentials.
On the other hand, it is also important to seek potential additional sources of income even when you are currently employed. Check out part-time jobs or explore business ideas that you can keep while keeping your regular job.
ALSO READ: Business ideas to try during the pandemic
3. Reduce your expenses
With limited resources, you have to make ends meet. Reassess your budget to identify the essentials vs. the non-essentials. This will help you prioritize and ensure that your basic needs are met even with inflation. You may also want to explore more affordable alternatives to your usual choices. The small savings you’ll accumulate over time can be used for important priorities in the future.
4. Start investing
This is the best time to consider investing. Inflation in the Philippines may cause lower growth rates of bank products. If you have extra money to save, investment products would be your best option. There are financial vehicles that can offer higher returns to help you beat the inflation rate. For example, the Sun Life Prosperity Funds is a mutual fund investment that can maximize your earning potential. Apply online to start or talk to a financial advisor to learn more about mutual funds.
5. Take advantage of life insurance
Getting life insurance is like hitting two birds with one stone. It will provide you with the coverage you need plus it will help you to save up early for important life milestones.
Depending on your future goals, your life insurance will be a good vehicle to save for the things that matter to you. If you’re a parent, you’ll find big help in availing of a life insurance plan geared for education like the Sun Dream Achiever. This will afford your family more peace of mind and financial security. It also comes with increasing guaranteed cash benefits that can be used to pay for tuition costs between the 12th to the 17th year after your policy’s effective date.
ALSO READ: 3 money strategies to be inflation-proof
The inflation rate in the Philippines is higher than it was in recent years and is forecasted to persist up to Q3 of 2021. You may already be feeling its effects as you get to afford less with the same amount of money now. But still, you can look at the silver lining by taking advantage of opportunities that will help you make the most of your earnings. With mindful spending habits, it’s not impossible to survive and even thrive amidst inflation.
Reach out to one of our advisors to get guidance on how you can build a fund for your priority goals, with inflation in mind. Financial advisors are equipped with the knowledge to recommend the products you should get, whether it’s life insurance, investment, or both. If you don’t have a financial advisor yet, leave your details here so we can connect you with one.