$100,000 By 30, So What?

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.