What Budget 2018 Means for Me and My Family

Budget 2018 sees some pro-active steps by the Government, but what do they mean for the man-in-the-street?

The recently announced Budget 2018 contained some pretty attractive goodies for Singaporeans, ranging from measures to help position businesses and workers become more competitive, to continued household subsidies, and even straight-up cash.

At the same time, the Budget also announced the implementation of several new taxes, as well as increases on some existing ones.

True to tradition, this year’s Budget measures follow a carrot-and-stick approach. It’s interesting that the Government decided to go ahead with cost increases for Singaporeans. Given the revelation of record surplus for the year, some expected a wee bit more indulgence. Notwithstanding, steps have been taken to cushion the blow for Singaporeans (such as by delaying the onset of increases in some cases, or giving more subsidies in others).

The Budget highlights an irrefutable fact about life in Singapore: Costs will continue to rise - that’s the price to pay for a standard of living that is among the top in the world. But the Government will continue to help households cope in prudent ways.

However, assistance from the Government can only go so far. As a husband, father, son and boss, I have to do my part. Here’s how I think Budget 2018 will affect me and my family.

One-off Cash Bonus, S&CC Rebates and U-Save Provide Household Savings

The most immediate and direct impact to my family comes in the form of cash and utilities savings.

The One-off Cash Bonus will see every eligible Singaporean above 21 receive between S$100 and S$300 each. Instead of keeping the money individually, our family has agreed to pool together the bonuses we will receive. This amount will be put aside into appropriate savings accounts to help our children learn about the importance of good financial habits.

Another source of household savings for us will come in the form S&CC rebates (between 1.5 to 3.5 months of rebates, extended for 2018) and U-Save utilities subsidies. Plus, an additional S$20 per year will be given, which will help offset the expected increases in gas and electricity when the carbon tax kicks in next year.

Enhanced Proximity Housing Grant Gives Greater Flexibility

Another change announced in Budget 2018 is an increase in the Proximity Housing Grant. Now, multi-generational families who opt to live together can receive up to S$30,000 in grants - S$10,000 more than previously.

Although this change does not impact me personally (I already stay with my parents, so I can have some help taking care of my three young children) the increased grant is an attractive option for those who are considering moving closer to their parents, for the various benefits that can entail.

Other homebuyers, too, stand to benefit. Singles are now finally included under the scheme - they will be awarded S$10,000 for buying a resale flat that is near their parents. (In the past, the grant only applied if they chose to live in the same household). Meanwhile, singles that choose to live with their parents will get S$15,000 in grants, up from S$10,000 previously.

And one more change that perhaps benefits the most Singaporeans: The definition of “nearby” has now been increased to a 4km from your parents’ residence.

Increases in GST and Foreign Domestic Worker Levy Could Raise Spending

And now for the ‘stick’ side of the Government’s carrot-and-stick approach.

With the coming changes to GST and the Foreign Domestic Worker Levy, we foresee an increase in overall spending. However, with the right money habits, the rise in spending should be manageable.

For a start, we can take a closer look at our needs and wants to evaluate whether we need the services of a foreign domestic worker. If we can divvy up our chores, and let go of certain wants, we may be able to go without, saving a chunk in our household expenses.

But by far, the largest note of concern comes from the increase in GST, as well as the widening of its scope. GST will increase by 2 percentage points to reach 9%. This is not an insignificant change, as the effects will be felt at every stage of commerce, leaving end consumers to soak up inflated prices.

At the same time, certain types of imported services will also be subject to GST, starting 1 Jan 2020. Most notably, digital streaming services such as Netflix and Spotify will be taxed, along with app payments and online subscription fees.

This means that we may have to prepare to pay more for our favourite entertainment channels. Given Singaporeans’ voracious appetites for all things digital, this is very likely to happen, instead of say, reducing our consumption. But at least e-commerce and online shopping has been spared, for now.

Although the GST hike won’t apply until at least 2021, it is now official. Rather than sit back passively and wait for the hike to hit, Singaporeans should take a more proactive approach and take steps to prepare, starting today.

Employ Prudent Measures to Stretch Your Dollar

The Budget also announced a slew of initiatives meant to help businesses stay competitive, and increase wages for workers. It was also announced that Singapore’s economy grew by 3.6% in 2017, outstripping official forecasts of between 1% to 3%. Productivity also went up in the same period.

All these are positive indicators that we are headed towards the right track.

While the economy rights itself, we should continue to focus on making our dollar go further by practising good money habits. There are many things that the average Singaporean household can do to offset increased spending, while enjoying all that our cosmopolitan city has to offer.

Start paying your bills on time to avoid unnecessary late fees. Compare and use the right credit cards, so you can maximise your rewards (which can be substantial!) For that matter, start educating yourself on the various financial products out there, and how you can use them to improve your finances.

Look for the right bank accounts to help you reach your savings goals faster. Get the most suitable travel insurance plans, for less! Learn how to use personal loans, balance transfers and credit card 0% instalment plans to pay for big ticket items without wiping out your bank account.

Build an emergency fund up to 6 times your monthly expenses, then double it and invest the difference. Study your home loan to see how much you can save by remortgaging. Insure yourself and your loved ones (upgrading your Medishield is a good way to start).

Feed everyone at the next BBQ using only your rewards points. Fly yourself and your loved ones to your next holiday destination using air miles alone. Use offers and promos to buy the family lo hei without breaking your budget.

As you can see from the tips above (and you probably know lots more!) managing our personal and family budgets need not be a complicated affair. Even though macro factors may be out of our control, there are still many things we can do to so our bank accounts stay healthy.

Just make it a habit to seek out the best deals wherever and whenever possible.

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By Rohith Murthy

Rohith leads Singapore’s SingSaver.com.sg, a financial comparison site aimed at helping consumers in Singapore save money and time by finding the right financial products.