[ST Premium] 1 in 2 high-income earners in Singapore has money problems: Poll

You know that all is not rosy when even high-income earners are getting squeezed and feeling the stress in keeping up with their expenses.

Even if you are among the lucky workers whose salaries have not been reduced amid the pandemic cutbacks, your usual annual bonuses are likely to be affected because few companies are operating normally after the pummelling they took over the past 18 months or so.

While it may be business as usual for grocery stores, for example, the same cannot be said for their customers, who would surely be feeling the pinch of the downturn and turning more cost-conscious about the items they buy.

So even if more people are buying groceries to cook meals at home, they are likely to be cutting their spending, such as choosing cheaper brands of household items and reducing expenditure on expensive non-essential treats such as wines and snacks.

Wealth management company St James's Place (SJP) recently polled around 1,000 Singaporeans aged 25 to 54 with monthly incomes of at least $6,000 to over $20,000 and found that close to half of them are worried because they do not have high savings.

Not only that, many find that their monthly incomes are not enough to cover their expenses and have to draw down on their savings just to pay the bills.

As a result, 46 per cent of them are not confident that they would have enough money to fund their desired lifestyles when they retire.

But a silver lining is that the pandemic has instilled urgency in the majority of those polled to start planning for their retirement.

While this may be their intention, the reality is that more than half of those polled have problems even maintaining their original saving plans because they have had to divert funds that were meant for their retirement kitty.

SJP Singapore chief executive Gary Harvey says: "The pandemic has had a significant financial impact on many Singaporeans and we see that many are more cautious with their money as a result.

"It is concerning that within this trend we see people borrowing from the future to pay for their costs today, with a reduced focused on retirement planning."

Interestingly, the SJP poll uncovered five main factors that are hindering middle- and high-income earners from saving more for their retirement.

High living costs

Almost half of all those polled struggled to keep up with their expenses. This does not mean that the high-income earners were foolishly living it up and splurging on luxurious items until they hit problems paying the bills in the recession we are facing.

The reality is that once you have chosen to live beyond your means, your expensive lifestyle will come back to haunt you now even if you lock yourself at home and cut all spending except for food and utility bills.

This happens if you have borrowed heavily to pay for, say, a multimillion-dollar home and a $500,000 car - your monthly loan repayments alone would be enough to cripple you once your regular income is affected.

In good times, this may not be a problem because your high annual income can easily cover this plus more. But things may not be the same now if your income is derived from two components - a fixed salary and a variable bonus that is dependent on your company's performance.

It is not unusual for senior executives to have bonuses that may add up to half of their annual pay package. So if the company's fortunes dive and the bonus payout is slashed, such executives will face a big income drop even though their normal salary is not reduced.

So what this means if that before you buy your next big home or car, you should consider your ability to afford such a lifestyle based on your fixed and stable income, minus the variable component.

After all, no matter how big your bedroom is, it will not be cosy if you have to endure sleepless nights worrying about your bills.

Supporting family members

Just over a third of high-income earners polled said they felt the strain of supporting either their retired parents or younger siblings who are still studying.

If your parents are in their 70s and 80s, chances are they will not be as adequately insured as you and your spouse. So if they fall sick, the medical expenses can be very high if they choose to be treated at private hospitals.

Even if you take out private medical insurance for them, the annual premiums will be between $10,000 and $20,000 for seniors in those age groups.

This means that retirement planning is no longer a luxury but a necessity; you would do better to start thinking about it now so that you do not add to the financial burden of your children in your old age.

Cannot control spending

People earning high salaries should not face such problems, but about a third of them confessed they have poor discipline when it comes to managing their money.

The No. 1 reason why people end up in debt is not investment or business failure but overspending. For instance, many people like to take holidays several times a year.

Even if you can afford this now, you are depriving yourself of the chance of doing so when you are retired if you do not plan your budget carefully.

Retirement simply means no more income and if you want to go on more holidays, then you should make sure you have set aside ample savings.

As the pandemic has stopped your overseas jaunts for now, it is a good time to take stock of the extra money that you can add to your retirement funds.

No financial planning

This usually happens to people who suffer from "Peter Pan syndrome" - they think they can work and earn a high income forever and so do not see the need to plan for anything.

As a result, 40 per cent of such folk have short-term goals such as buying a car or home, and they just shoot for these items without worrying about future needs.

After all, what's there to worry about since they have this idea that everything will stay the same. But the reality can be quite harsh - just ask pilots and aircrew around the world.

It is not that they are not hard-working but many have ended up jobless now owing to the pandemic.

So everyone should have this goal: either save up or invest a portion of your income every month.

Large debts

This is what happens if you fail to keep a lid on your spending and have no saving plans.

Indeed, about 20 per cent of high-income earners fall into this trap because they over-leverage and have a high dependency on loans, either for their business or for their lifestyles. They may have multiple homes and cars but they can lose everything if they default on the loans.

So the lesson here is this: A carefree life need not be out of reach if you start to plan for it now.

More importantly, you will feel rich if you live within your means because doing so means you will always have enough money.