Inflation is NOT the same as cost of living increase

By Terence Teoh on 13th July 2019 in News
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Official statistics stated that the inflation rate in Malaysia will average between 1.6% and 2.0% this year (2019) due to global uncertainties caused by the trade war between U.S. and China.

But did you ever feel that the prices of goods that you buy seem to have increased more than that? Well, it’s definitely not your imagination!

The Cost of Living is often confused with Inflation. They are not the same, although closely related. Inflation is the big picture: As the cost of goods and services rises, the buying power of the Ringgit falls. The inflation rate is often measured by the Consumer Price Index (CPI) – a monthly measure by the Bureau of Labor Statistics that averages the cost of a representative basket of goods and services (mainly basic necessities) from areas around the country. It then reports the result as a percentage rise or fall.

Cost of living, on the other hand, is a more specific picture. This number averages the cost of an accepted standard of living that includes food, housing, transportation, taxes, and healthcare. Cost of living is frequently used to compare life in different locations around the country or the world. For example, if you made RM10,000 per month living in Kuala Lumpur, you could maintain the same standard of living in Seremban on less, around RM 7300 as the cost of living in Seremban is estimated to be 27% lower than that in Kuala Lumpur, according to Numbeo.

Another example of a comparison between inflation and cost of living:
If you belong to the category of consumer that buys raw meat, vegetables, and spices from the market and cook yourself, you will experience price increases that are closer to the inflation rate. But if you are the type that eats out most of the time, then you will experience price increase according to the elevation in Cost of Living, which will be quite different from the inflation rate. The reason? All the cost increase in the process of delivering and preparing food for you has to be factored in.

So we can either plan to change our lifestyle or move to the rural area to beat the rising cost of living, or we can find ways to increase our income.

Have you heard the saying “Just work hard at whatever job you had, and things will work out.”?
You do know that is no longer applicable today, don’t you?

Today, we need to work hard in 2 jobs. And it is not about a part-time job after work. Working two jobs to earn extra money will exhaust you and may not be enough to achieve the living standard you desired.

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