10 ways to overcome the shrinking dollar

10 ways to overcome the shrinking dollar

It takes discipline and a sound investment strategy to combat the corrosive effects of inflation, say financial experts.
1. Cut down spending, live within your means
IPP Financial Advisers investment director Albert Lam's advice is to review your lifestyle and consumption patterns.
For instance, you can substitute a branded item with a no-frills one, or switch to a cheaper mode of transport like the bus.
2 Try to save 20% of your pay or more
This is a useful tip especially for those just starting their careers, says head of ipac financial planning's advisory team, Mr Bill Castellas.
Establishing a disciplined pattern of 'money behaviour' will go a long way towards building surpluses for long-term investments.
3 Do not be overly conservative
Invest your money instead of leaving all of it in savings deposits or fixed deposits, said Mr Lam.
New Independent's financial advisory manager Stanley Sim also suggests that instead of parking spare cash in savings deposits, investors can place it in money market funds that have zero sales charges and offer better rates.
Impact of inflation on purchasing power
4 Don't rely solely on guaranteed products
Mr Castellas feels that such products, like bonds, might provide peace of mind but only marginal protection against inflation over the long term.
5 Save regularly via an investment platform
The earlier you start investing a small amount that you can afford to set aside, the quicker your investment will grow till it builds up into a significant sum in later years.
'Set aside an affordable sum from your daily expenses each month via a regular savings plan,' said Mr Castellas.
'You can put it into growth-oriented assets like equities and or real estate investment trusts.'
6 Take on sensible level of investment risk
Build an investment portfolio with a reasonable spread of defensive and growth assets that suit your lifestyle.
7 Invest for returns that will beat inflation
In order to beat inflation, consider investing in a globally diversified portfolio of stocks and bonds with a long-term horizon, said Mr Sim.
A moderate-risk portfolio, comprising 60 per cent equities and 40 per cent bonds, should be able to generate a 6 to 8 per cent return a year over the long term.
8 Understand the power of compounding
Start planning, saving and investing as early as possible so you can enjoy the benefits of compounding, said Mr Lam.
He suggested investors apply the Rule of 72, a handy tool that illustrates the effects of compounding.
To work out how long it will take for your investment to double in value, divide 72 by the percentage return. With a return of, say, 9 per cent a year, to double your money, you will need eight years, that is, 72 divided by nine.
Mr Sim noted that if you can invest $10,000 in an instrument that gives you an annual return of 6 per cent, that sum will grow to about $32,000 after 20 years.
If you start early, the compounding effects will help you fight inflation by preserving and growing your wealth.
9 Invest in asset classes that appreciate
Both Mr Lam and Mr Sim gave property as an example. But invest in this asset class only if it is within your means.
If rents increase at a faster rate than inflation, your property rental yield will provide a healthy return, they said.
10 Limit exposure to depreciating assets
Such assets include consumer goods like cars.

by Lorna Tan

10 TIPS TO SAVE YOU MONEY

IT is tax time again.
You have until 15 Apr to file your tax form or until 18 Apr if you e-file.
The Inland Revenue Authority of Singapore (Iras) expects that 85 per cent of the 1.5 million taxpayers will e-file this year, up from 80 per cent last year.
Most employers are in the auto-inclusion scheme. That means you can view your employment income at https://mytax.iras.gov.sg, check that the information is correct, and click 'submit' to file your tax return. It's easy.
Here are 10 more tips to help you save money on taxes.

Tip 1: You have no tax to pay - if you earned less than $22,000 last year.
If you receive a tax form or PIN mailer, however, you are required to submit your tax return to Iras regardless of your income.
To check if you need to file a tax return, send an SMS message with your IC number to 91164900 using this format: Filetax S1234567Z.

Tip 2: Paying through Giro
About 60 per cent of taxpayers pay through Giro.
It allows you to make up to 12 months of interest-free instalments, from May 2008 to April 2009.
Otherwise, you have to pay within one month of receiving your tax bill.
You can download the Giro application form at www.iras.gov.sg.
Tip 3: Wife Relief

If your wife was not working or earned less than $2,000 in 2007, you can claim 'wife relief' of $2,000.
There is no corresponding 'husband relief' in the case of a non-working husband.

Tip 4: Qualifying Child Relief
QCR is $2,000 per child for the first three children. Either parent may claim the full amount or it may be split between both parents.

Tip 5: Working Mother Child Relief
For first, second, third and fourth children, the relief is 5, 15, 20 and 25 per cent of a working mother's wages.
Both this and the QCR can be claimed for Singaporean children up to 16 years old, or above age 16 if a full-time student with income less than $2,000 in 2007, excluding scholarships.

Tip 6: Parenthood Tax Rebate
This is $10,000 for your second child and $20,000 each for your third and fourth children born in 2004 or later. The rebate may be split between the parents in any way they choose.
This one is huge since it is a rebate, which you deduct directly from your taxes. It reduces taxes more than a relief, which is subtracted from your income.

Tip 7: Parent Relief
You can claim parent relief of $5,000 if your parent is staying with you and $3,500 if not.
The parent must be 55 years or older, live in Singapore and earned less than $2,000 in 2007. You can claim for up to two parents.

Tip 8: Foreign Maid Levy
A working mother may claim this relief even if the husband paid the levy. It is twice the amount of levy paid. So the maximum you can claim is $4,440 if you qualify for the concessionary levy of $170 per month with effect from 1 Jul 2007, and $6,720 if you don't.

Tip 9: Grandparent Caregiver Relief
Are you a working mother with Singaporean children aged 12 or younger in 2007?
Then you can get a relief of $3,000 for one (only one) of your parents or in-laws who help to look after your children. They must be living in Singapore and not working in 2007.

Tip 10: One-off 20 per cent rebate
As announced in this year's budget, resident taxpayers will receive a one-off personal tax rebate of 20 per cent, up to a maximum of $2,000.
This rebate is automatically included by Iras, so you need not declare it in your tax form.
-By
Larry Haverkamp
Mon, Mar 24, 2008 The New Paper