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$100,000 By 30, So What?

>> Tuesday, July 16, 2013

The Sunday Times article of saving $100,000 when one hit 30 years of age has caused quite a stir amongst readers. It even prompted for a short follow up piece that more details will be shared this coming weekend.
As with most financial bloggers, we can't help but contribute our two cents worth of opinion on this particular topic.

First cent, to hit that magic $100,000 many assumptions were made and most of the responses stem from those assumptions. Hence, let's strip to the bare minimum and work backwards. Ignoring all assumptions except for the fact that a consistent time line must be used as a baseline, i.e. one has worked continuously for the past 6 years before hitting 30 years old. Simple arithmetic, without all the fancy spreadsheet financial people just love to use to complicate things to prove their prowess with excel, is this: $100,000 / 6 = $16,667. To make it even simpler, that is $16,000 to $17,000 a year, that's all, no complex formula to that.

Now here are the assumptions of one that earns the medium income of about $40,000 gross annual package. That equates to $32,000 net income in take home after $8,000 goes to CPF. Of course I am assuming the $100,000 is solely in cash and not a combination of cash and CPF. Fixed expenses that will incur regardless (based on personal experience): Taxes - $200 yearly; Public Transport - $100 monthly; 3 Decent Basic Meals a day - $150 weekly; Basic Necessities like clothing, grooming (haircut), shoes, etc - $100 monthly; Who lives without a phone these days, saving for phone plus telco plan - $50 monthly. All in, it is approximately fixed expenses of $800 monthly.

On the other side of the equation, $32,000 less of $17,000 to go towards the $100,000, leaves $15,000 annually that translates to $1,250 monthly. Deducting the fixed expenses of $800, $450 is left for discretionary expenses. For most of filial children who give approximately 10% to parents, that is about $300. And for those who have tuition loans to repay, that will probably wipe out the entire reminder. This is of course again assuming that one does not help out in any way for household expenses like utilities, groceries, cable tv, internet subscription, laundry, furniture (sofa, tables, chairs, bedding, etc) replacement, equipment (lightings, aircon, tv, washing machine, fridge, microwave, etc) replacement, etc.

Since there is nothing left even after ignoring household expenses, that will also mean abstaining from being jobless at any point in time, going to the doctor when sick, traveling, dining at restaurants, celebrating birthdays/ Christmas/ mother's day/ father's day/ or any occasion for that matter, woo-ing potential partners of your dreams, hobbies, insurance, gifting during weddings, sharing in office presents, treating friends, watching movies, taking taxi even if you are late, donations in the form of cash, attend enrichment courses, shopping, getting a personal laptop computer, for those who smoke - no cigarettes, and the list could probably go on forever - Making a normal practical life impossible.

For those readers who criticize whiners, this is not meant to be a complaint of any sort; it is only presenting the cold hard facts of the cost of living in Singapore for the average working entry level Singaporean, who has to miserly squirrel away every single cent to even have any "decent" savings. Personally, I wouldn't even consider $100,000 decent.

Second cent, $100,000 - so what? After giving up a normal practical life illustrated above, one needs to find the motivation of why they are doing it in the first place. So, what can $100,000 get you in Singapore these days or even worse, 6 years from now factoring in inflation?

Most 30 year olds will spend the first bomb on their marriage. Next, CPF will be wiped out to down pay their first HDB and spend the next bomb on the house renovation and furnishings. Followed by the itch to have a car. So, $20,000 for engagement ring, wedding and honeymoon; $30,000 overall for house; $50,000 down payment for the $100,000 car; sounds about just nice. That leaves one with a miserable lifestyle for the first 6 years of working life, only to spend everything away in a blink of an eye and revert back to ground zero with no cash savings or CPF. In return, one achieved a fairly grand wedding for the sake of the parents' "face" (Chinese term of mian zi), a shoebox HDB house with another 30 years to repay the mortgage and a basic 1.6L Japanese car on a 10 year COE lease to upkeep (road tax, insurance, servicing, parking, petrol) with another 5 years to repay the loan. All these, right before starting to save again for the "dreaded" biggest money sucker of all that usually comes along after marriage - Congratulations! It's a boy/girl.

Well, this topic of $100,000, more or less maps out the experiences and life of a typical Singaporean after graduation from tertiary education. Actual resembles to real life people living or not, are purely coincidental.


SG Young Investment July 17, 2013 at 8:17 AM  

It depends on the lifestyle we want. Do we want to enjoy now and suffer later or make some sacrifices now and enjoy later?

The 100k if you ever reach then you'll need to know what to do with it. If you save that amount by 30 and you know how to invest, this 100k can create a decent investment portfolio. Even by just investing in dividend paying stocks like reits, you can get a decent supplement to your income of about 7k yearly assuming 7% dividend which is quite common.

I choose to study part time in uni just because I don't want to end up with student loans. Its tough working and studying at the same time but to me this is worth it. While paying my school fees fully, I still can have savings. A car after marriage? I think we can do without it. Another benefit of working while studying is I have accumulated more than enough cpf savings to buy a house. I don't have to worry for at least a few years.

B July 17, 2013 at 10:23 AM  


I think that's what life is for.

The money earned is motivation for marriage, building up a home and raising a children - at least that's what my motivation is.

I don't save my money so that I can buy a branded bags or luxury goods 10 years from now.

In short, life is about going through things that you and I already know about. There isn't much difference these days between the activities we do in life. We all go through the same stage ;)

CreateWealth8888 July 17, 2013 at 12:33 PM  


Majority of us will choose to walk down this path:

"The money earned is motivation for marriage, building up a home and raising a children"

SG Young Investment July 17, 2013 at 3:54 PM  

Yes, the process of settling down with your partner and setting up a family of your own is what most of us want to do. Seeing your children grow up under your care is a great accomplishment.

What we don't want is to enter a marriage and later find out the financial troubles we put ourself into. Many arguments or even divorces happen because of financial difficulties. In the end, the children suffer too. A little financial planning helps a lot and goes a long way.

Lau July 18, 2013 at 7:55 AM  

B and cw, that was my point. It depends on the motivation. If there is no reason, might as well enjoy some instant gratification then live a miserable pointless life.

Young, thanks for sharing about part time studies. That would have been a whole new topic of sharing ideas to save, like tuition, bursaries, scholarships, working part time, starting an internet business, just to name a few.
Of course everyone knows 100k can be invested to yield returns. But then who is going to sponsor all the other necessities mentioned. Everyone's life is different. Some may be fortunate, like perhaps yourself, with parents who provide daily necessities, a roof over your head, pay for studies, wedding, housing down payment, no allowance required, financial support, etc. The luxury to amass that 100k to solely use for investments without any worries that if you fail, there are parents for a backup plan.

Kyran Tan July 27, 2013 at 8:34 AM  

Hi Lau, just to share my own sentiments. $100k is a significant amount if u look at it as a whole figure. However as u rightfully puts it, with a 'standard' typical Singaporean lifecycle of pak tor, proposal, housing, wedding and kids, this same $100k becomes a drop in the ocean.

To invest for returns, allowing time for it to grow is a major factor (if it grows haha). So if we have to withdraw our investments due to the above mentioned life events then whatever theories on growing your wealth and early retirement planning gets thrown out of the window. This seems to be a blind spot for many enthusiastic young investors. Probably stood a better chance if u intend to remain single in your life, buying a resale flat and collect rents while staying with your parents. That would be a whole different story.

Personally I face this predicament as well because I know sooner or later, my investment pot will have to be somewhat sacrificed or significantly reduced. Anyway, I am 33 and should be able to save close to $200k by year end.

lau July 28, 2013 at 10:10 AM  

Hi kyran. I think today's Sunday Times senior journalist puts things back in perspective. Savings are for a means not an end. And congrats on saving towards your goal.

you are right most will have to remain single n stay w parents to achieve investing. No wonder babies are a problem in Singapore.

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