Everything is getting more expensive! From rice, fishball, noodle (and fishball noodle!) to petrol. Inflation strikes again!
It is hip to be frugal again! Coupon cutting, sales promotion everywhere tempting us to spend more than we can save. When inflation strikes it is not about cutting on consumption (although we should cut the luxury item but how to cut on rice?). We are simply forgetting an important element - the rate of return.
During inflation if our income remains the same, we are actually not keeping up with the rising costs. Falling interest rates make it worst.
We have to think about A Financial Backup Plan (FBP...sounds nicer with acronym). Some called it Multiple source of income or passive income.
Hey, we have backup for our computer files and records, shouldn't we have a backup for our finance? There are always ready subsitutes to replace the injured main players in competitve team sports. Retrenchment and recession are common nowadays. Can you guarantee you have a job forever?
It is best if we can build up our Financial Backup Plan (FBP) sigma curve (see diagram below) when we are at the peak of our career or business so that when (in case) the main source of income goes down, the other can be ready to support it.
That said, You can have a backup plan for finance; you can even buy insurance to hedge those uncertain costs but there is only one source of security in life (see my post on The meaning of Easter) because life can still throw a curve ball at you.