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Keep discretionary spending in check: Experts advise as prices rise

Study found that spending on shopping, entertainment and travel saw some of the largest increases over the past year

People holding shopping bags in Paragon Shopping Centre
Financial experts are concerned by the rise in discretionary spending, amid high inflation and slower income growth. ST PHOTO: DESMOND WEE

What first caught Ms Yvonne Leong’s attention was the price of eggs.

“I used to buy a tray of 10 eggs for less than $3, but the average price for one tray is about $3 to $4 now,” says Ms Leong, 43, who is married and has a 15-year-old daughter.

She also noticed that her grocery and utility bills had gradually gone up.

As part of the “sandwich generation” – those who care for both their children and ageing parents – Ms Leong is acutely sensitive to price changes. She lives with her family and her mother in a four-room Housing Board flat.

Higher prices have prompted Ms Leong to be more careful in her spending. But is she representative of the majority?

Figures released by the Department of Statistics on Monday suggest that others, perhaps those younger, may not be so prudent.

Overall, retail sales grew year on year to 13.7 per cent in July. This increased by 0.6 per cent from the month before. People spent more on apparel and footwear (68.3 per cent), food and alcohol (53.1 per cent), and watches and jewellery (41.7 per cent) in July than they did in 2021.

This supports a recent study by DBS, which found that discretionary spending had increased among its customers. The study analysed anonymised data of the bank’s 1.2 million retail customers.

Expenditure on items such as entertainment and travel (56.7 per cent) and food (38.7 per cent) saw some of the largest increases over the past year.

Ms Fiona Chong, 29, a creative strategist, says she spends more on food and alcohol now compared to last year. “I hang out with my friends more, whether it’s dinner at a restaurant or drinks at a bar, since restrictions have eased.”

Financial experts are concerned by the trend at a time when income is lagging behind the rise in prices.

Ms Lorna Tan, head of Financial Planning Literacy, DBS Bank, says: “This is fuelled by a combination of inflation and pent-up spending from the pandemic, especially on categories that had faced social restrictions.”

It is crucial to be more strategic about how we spend to stretch our dollar in a high inflationary environment, and find ways to save, she adds.

Says Ms Evy Wee, head of Financial Planning, Investments and Insurance Solutions, DBS Bank: “It is timely to review our budget, reduce discretionary spending and set aside adequate emergency cash to ensure that our quality of life remains sustainable.”

Spend wisely

Older consumers, with greater household responsibility, are cutting back. Ms Vivien Tan, 57, a remittance clerk who works in Orchard, has stopped eating out during lunch breaks.

“I no longer buy food where I work, because the price increase was very stark. I feel like the portions have become smaller too.” These days, she brings meals from home instead.

“Inflation is beyond our control. But we can do something about it, by managing our spending however we can,” says Ms Tan, who lives with her family in a four-room Housing Board flat. She has three sons, the youngest of whom is aged 20.

When it comes to buying groceries, Ms Tan looks for cheaper alternatives. She buys house brand items and compares prices across supermarkets and online shopping platforms for the best deals.

Ms Leong has since switched to buying a cheaper brand of eggs, and buying discounted groceries when she can. This includes produce that are blemished or bruised, which are often sold at a cheaper price.

“Even though prices are up, I still have to find a way to feed my family well,” says Ms Leong. “It's all about looking for better deals. I can't cut out certain food items just because they are more expensive now.”

Things that she considers as “wants” were also cut out. Ms Leong no longer takes taxis. She uses the fan instead of the air-conditioner, and does not buy new clothes anymore.

Those who struggle to stay disciplined might want to start by setting aside at least 10 per cent of their pay the moment it is credited into their bank account, says Ms Wee.

“When you develop a routine that prioritises savings, you’re likely to stick to it. This will go a long way to building a disciplined savings habit.”

In particular, cabbies, private-hire car drivers and freelance delivery workers should pay more attention to how much they spend and save.

“Generally, gig workers are more vulnerable to the impact of inflation due to the inconsistency of their income flows,” says Ms Wee. “It is advisable for them to have at least 12 months’ worth of emergency savings, compared to the usual guidance of three to six months.”

She recommends protecting your money using low-risk instruments that offer liquidity and interest that is higher than that of a regular savings account. Examples include higher interest-yielding savings accounts like DBS Multiplier Account, Singapore Savings Bonds, money market funds and short-term endowment insurance plans.

“While emergency cash should be kept liquid, keeping the rest of your savings in a simple savings account will not preserve your purchasing power, especially in a high inflationary environment,” she adds.

Beyond savings, you should consider investing your money for a better chance at beating inflation, adds Ms Wee.

Spend smartly

Both Ms Tan and Ms Leong are also relying heavily on tools to help them stretch their dollar.

Ms Tan uses the PAssion POSB debit card, which allows her to chalk up rewards when she spends at supermarkets like Giant and Cold Storage. By spending about $728 on monthly expenses, including groceries, food and utility bills, she could earn a cash rebate of about $25 – more than what some loyalty cards in the market are offering, says DBS.

She also uses an app by the Health Promotion Board to earn points for buying healthier products. The points can be converted into supermarket vouchers.

“It helps to offset the price of my groceries, but I had to spend time learning how to use it at first,” says Ms Tan, who notes that those from the older generations may need more support with using tools that can help them get more bang for their buck.

But with so many cards and apps in the market, how do you decide which to use? Taking a close look at what you usually spend on can help you narrow down your options.

“Use credit or debit cards that are more suited to your lifestyle to earn cashback, reward points or miles,” advises Ms Wee. “Do ensure control over your spending, as credit card debts can snowball quickly if they are not well managed. Pay your bills in full and on time.”

Ms Leong, for example, chose the POSB Everyday credit card that lets her earn rebates for spending on daily necessities, including her daily train rides. She also tracks her spending using the DBS PayLah app.

“I'm going to have to spend on essential things like food and utilities anyway, so why not get something out of it? It benefits me,” says Ms Leong.

This is the second of a four-part series titled "Win the race against inflation", in partnership with

Find out more about how POSB can help you here.

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