AMA SG Young Investment
Asked by Anonymous
Asked on 07 Sep 2018
I'm actually 26 this year and planning to have a family before 30 with my other half. While I believe in saving money, I do not think that we should only enjoy in our later years. As this is an important phase with energy to enjoy now.
At 26, I didn't have a choice. I gave up a lucrative career in finance/audit to run my own business. So with that mind, I benchmark my peers who are climbing the corporate ladder. Then, my calculation was using the median income of my friends at $X,000.
I would need $X,000 x 12 months ( + 2 months bonus) x 1.17 (additional 17% in CPF from employer) x 1.2 ( 20% Risk premium for selfemployment) to make sense for me to stay in business. Otherwise, I should go back to my corporate career. Now I can't turn back.
Did I shortchange myself? Perhaps at the initial 2-3 years, but I still went for my holidays (regional to start with), invest in $4,000 courses to master business skills and bring my mom overseas every single year.
At 34 this year, 10 years since I graduated, my newly wedded wife and I both hit FRS, maxed MA and have a decent warchest ready for equity investments. I'm nowhere near FI but with the exact same planning - savings and low consumption, I'm on track. If the economy tanks today, my home (bought cheaply) can be paid for with CPF OA for the next 10 years. We can choose to travel on the cheap when there's blood on the streets, all because of savings. #genxyolo
I'm sharing with you this because I graduated in the ashes of 2008 financial crisis and have made several boo-boos in investments along the way, loosing tens of thousands. The biggest saving grace is that in the midst of it all, high savings help corrected all the mistakes I've made and give me the bullets I need that will propel me to FI when the next financial crisis come. If I chose to consume inordinately, I won't be able to sleep with a peace of mind as my responsibility as a family man grow bigger.
Nothing is forever, esp good jobs and good economy. So a good savings habit keeps you dry on rainy days. You also don't need to suffer for FI. Just live below your means.
Yes, that balance of saving money for the future, and enjoying ourselves now is something that I have thought about when I decided to start working towards my financial goals. After years of making financial decisions, here is my personal mental rubric:
I am OK with spending more money when it comes to my immediate loved ones eg. family members. I have no qualms about taking my dad to a Kansai trip on a SQ flight. That said, if I was travelling alone, I would not splurge as much. And if it's spending money with fairweather friends or colleagues - no.
For eg. if it was spending money to go to Marquee just to show people on my IG that I am at Marquee, no. The Marie Kondo concept of 'sparking joy' is over-used, but it does make sense. There are times where you feel your money is super well-spent, and other times when it just doesn't.
Having a social life does not entail spending lots of money. Some of my best conversations and catch-up with friends take place over a cup of teh tarik at the prata store. Same concept can be applied to using the energy we have now to keep fit. Some people feel that they need to sign up to an expensive gym membership and get some cool gym clothes before they even start, when all you need is to hit the neighbourhood parks to get some weekly cardio and strength training.
I think you will be getting replies from Fnce Bloggers. I am one too!. Yes, many of us are focused on saving money because we recognise the future value of our money saved and the compounding effect.
That said, I am not one who adheers strcitly to the principle of "setting aside the amount you need to save before spending". However, when I go out, I do try to evaluate if the value i dervie from the entertainment is worth what I spend on. It might have affected my social life a bit.
I do believe that besides saving, one should learn to do investing. This is because improving your investment returns will enable you to fully balance between having a social life and building your retirement. As a 30 year old who has done investing for close to 7 years, i can assure you I do not need to make much concessions on Social life now because my intital years of savings and starting to invest wisely is enabling me to have the capital to have a social life/have adequate retirment.
You have already gotten your answer. From what you have said, saving is not the only priority.
I am a blogger myself. I focus on wealth building. I would say i have an eye on it. my life involves food, family, sleep and money. Thats why i am all alone now.
I have to admit i started off saving lots of money to the extend i really shortchange myself. Over the years, i begin to discover the importance of balancing social life while still saving money. I came up with a plan and this is to focus on increasing my income.
I have wrote quite a few articles on increasing income and creating multiple streams of income. Last year, i managed to create an additional income of $19K apart from my full time job. This allows me to save more while still being able to enjoy life. You can read my post here to get a glimpse of how i create additional income for myself: https://sgyounginvestment.blogspot.com/2017/03/multiple-streams-of-income-can-it-be.html
Top Contributor (Jan)
I think everyone have different definition of "enjoy". It all boils down to your own financial goals and what you define as "enjoy".
If you want to achieve 1mil by age XX and you want to enjoy the high life, going for luxury holidays, then either you really earn alot or you have to be realistic about it. For most of us average people, it requires sacrifice. Sure, it does not feel nice when you see rich people enjoying life but life is not fair.
I agree that 20-30 is a time to enjoy also.For example,i will cut back on my spending if i am spending too much on a trip out with friend or family.Also,i will set aside a portion of money to go for a major holiday once per year with friend or family.Other then that ,the joy of managing my blog and investing keep me up most of the time.
Do visit my personal finance blog if you have the time
In the question, you have two key points - balance social life and enjoy with the energy now.
I would say just budget and spend within your means. Though its really taken a while for me to find this balance because so few talk about it.
Since six years ago, I started saving for travel. The travel bank account accumulated about 11,000 at one point. I have now changed this to a Rewards savings goal, 500 per mth, and it covers travel, buying tech toys and basically anything I could want and not need an approval from myself to spend it. Sounds a bit weird hor.
But its worked out for me. Coz I really hate to waste money. I dont believe in trying to keep up with the Joneses and spend money on things you dont like or enjoy.
This savings goal has helped me be more focused, and balance priorities. I know I have a pot there, and sometimes I deliberately am not choosing to spend, because I thought about those things and decided they weren't a priority or must have.
I am saving the money for my bucket list, and eventually some travels with the one. Still not found lol.
Divide your income into different segments. Wealth, savings, necessary expenses, etc. Set aside a segment for indulgence too, and make sure you stick to the amount you set aside :)
I don't believe in FOMO or YOLO but i always believe in balance.
My parents always said i can go holiday when i work now and enjoy later. My reply is that when i'm old, where do i find the energy to go travel ?
But we also cannot be one sided YOLO travel because everything in life cost $. So we need a balance strategry.
Your target: 26 this year and planning to have a family before 30 with my other half. this means you have aout 4 years of your runway.
Do a budget see where you $ goes monthly now.
Decide what you wanna do on the wedding , houseing ,honeymoon etc. Do the costing first (can ask questions here) on how much needed for each activities / plan.
Check how much you can both save now for these target.
Reduce your cost (Tranport, meals, telco bills and other entertainment is the best way to cut) and see how much more you can come out with monthly.
Plan allocated into these savings and investment instruments.
P/S: Suggest that for wedding target, reduce to keep norm or basic, learn from the different financil blogger (SG Budget babe) or ask questions here on how to save the cost on wedding. After all , the wedding is just few days, live after housing and the live that is the most important is for many years down the road. So do give up the main thing for these secondary. Cheers!
There are free places that you can have social life with. Not necessarily you need to spend money for social life. You can check out the museums, go to the beach, exercise together. Checking out YouTube and do arts&craft together.
As a Fit and Muscular Financial Blogger, I focus on making money work hard for me and spending within my means not just for myself and also my Parents and Grandma.
In reality, you will still need a consistent income, be it a career or business to make money before you can make money work for you.
Getting value from our purchase and enjoyment is the right habit to cultivate as we progress into investing in income generating vehicles.
I buy gifts for good people from money I saved from circumstances tt have to be paid which I manage to save 4 digit amount by doing my homework and taking actions.
I do communities work and guide people towards good habits and fillial piety.
That being said it doesn't mean everytime you save, you have to spend it somehow.
Rather, what plans you have for the amount you saved.
Certainty vs Uncertainty
As a Fit and Muscular Financial Blogger, is painful for me to see people makes silly decision like how I see people takes a dumbbell and swing all over the gym wasting time and effort which might result in injury.
That is also why I focus on getting ppl to plan their CPF as a retirement vehicle since in a way is compulsory and the accumulated funds could be use for useful instances like buying a ppty.
Best of all, usually you have an employer/s who help to contribute towards ur cpf fund.
Basically for me, I will help a person not get injure in the gym rather then training them myself. Everyone circumstances are different and they have to plan their own retirement from the lifestyle they chosen.
Lastly, you don't have to be anyone but yourself but bear in mind that the decision you made today will affect the future you desire.