Inflation is the increase in the prices of goods and commodities over a given period of time. It means a decrease in the value of the amount you actually have. One good example is for the amount of 20 pesos, you can already buy one (1) kilo of rice some years back. However, at present time, the same amount of money won't be enough to buy a half kilo of rice. It means that the inflation rate has gone up to more than a hundred percent over this period of time.
Inflation can affect the purchasing power of the people in a particular place. In the case of the Philippines, the controlling currency we have is the Dollar. The higher the value of Dollar, the lower the value of our currency, the Philippine Peso.
Current Inflation Rate in the Philippines
While watching television yesterday, one of the news that caught my attention was the announcement of the current conversion rate of Dollar against our Peso. At the time of reporting, the Dollar is equivalent to Fifty-Three and Twenty Four Cents (PHP 53.24). Being an online worker earning, I was delighted while thinking about the value of the amount I could earn within this week. I guess I share the same sentiment as those who are working in foreign countries or most commonly known as the Overseas Filipino Workers or OFW.
However, I am aware that the increase in the conversion has a negative effect on the current economic situation in our country.
Screenshot from ExchangeRates.Org.Uk
The highest inflation rate in the Philippines since 2011 has been recorded when consumer prices increased to 4.6% in May 2018. Such economic condition in the country has been associated the said situation with the implementation of the Tax Reform for Acceleration and Inclusion TRAIN Law. Though taxes for the employed individuals were lowered, the taxes for sweetened beverages, fuel and gasoline had a huge jumped. Thereby causing the rapid increase in the prices of commodities in the market.
Image credits: TradingEconomics.com
Factors Affecting Inflation
During the start of the year, TRAIN Law has been implemented. The lowering of the taxes to the employed individuals has given a temporary relief to those who are employed. However, the prices of commodities continue to increase resulting to almost same or even worse than the previous setup before the implementation of the new Tax Reform Law. Worst case scenario for those unemployed individuals who do not have fixed salary but need to purchase the same products.
The most evident effect of inflation is the decline of the purchasing power of the people. The increase in the price of major commodities such as gasoline has a domino effect in all other aspects. Admittedly, this will cause further problems such as an increase in debt, increase in the number of malnourished children, increase in drop-out rates and other issues related to children's health. Expect the increase in child labor incidents and this can even lead to the commission of crimes.
What Can the Government Do?
Inflation is not a new thing and in fact, this situation does not only occur in one country but to the rest of the world.
There are many ways to mitigate inflation. Though some of these might have a negative effect so it is imperative that the government conducts a thorough study before implementing actions. Price control could be a possible solution but this might cause a recession.
Increasing interest rates and reducing money supply are also some of the ways to be adopted by the government in order to reduce the effect of inflation.
The Philippine government is considering this solution:
Among the measures singled out are an earlier release of unconditional cash transfers to poor families, tariffs on rice to replace quantitative restrictions, possible transport subsidies, and tighter government monitoring on basic commodity prices to root out attempts to manipulate prices by unscrupulous traders and organized crime.
Source: PHILSTAR GLOBAL
What Can We Do?
We cannot escape the effect of inflation. It is part of our lives. It is a part of the society we are living in. But somehow, we can learn how to go about the effects in a way favorable to us.
(1) Live Below Your Means
Budgeting is necessary. It doesn't matter how much we are earning so long as we live below our means, we can make it. Control your expenses by avoiding unnecessary spendings. Living a simple life would be better than living in debt. Think about where you spend your money, think about your lifestyle.
(2) Consider Long-Term Investments
There are many ways that we could consider in term of investing. Stocks, Bonds, Time deposits and many others. We can start small. Visit your nearest banks to know further details.
(3) Find Additional Source of Income
Unless we are earning extremely high income from our current jobs, we should also consider having other sources of income in order to increase our current earnings. This can give us the opportunity to save more or to augment financial difficulties.
Discover what you can do during your free time. It can be a hobby which you can turn into an income generating activity or an extension of what you are currently doing.
If you have an exceptional writing skill, you can find sites where you can submit your articles or you can find clients who might be needing such.
Never Depend on a Single Source of Income. Make Investment to Make a Second Source
Image Credits: mongabong.com
Here is another video that helps us understand more about inflation...
On the Final Thought
It would be okay if our income would increase in the same way as the prices of commodities do. But that is not the case. What does it imply? It means no matter how high our income may be if we spend all these in the current time and we are not thinking of saving or putting it into investment, we won't be able to cope with the daily cost of living.
Let us learn how to live below our means, save, and invest. Looking for an additional source of income would certainly help.
Thank you for reading.
More from this Author:
- The New Philippine Tax Reform Law: How Will It Affect Us?
- Different Ways to Earn From Our Blogs
- What Do You Need to Know Before Opening an Online Shop?
- Different Ways to Earn Through Writing
DISCLAIMER: The views and opinions expressed in this blog post are that of the author and does not in any way represent the agency or department she currently belongs.
ADDITIONAL NOTE: The sites mentioned in this post are for information purposes only and links are provided for easy access. The author does not receive any remuneration from the said companies or sites.
Written for Bitlanders
by Sharon Lopez
Date: June 15, 2018
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