100K. I was so obsessed with this number as a fresh graduate. No, I’m not talking about 100k followers on my instagram (which I don’t lol). I’m talking about my obsession, financial freedom.
I believe that financial literacy is one of the most important skills to teach to our kids, but unfortunately not emphasized in Singapore’s mainstream education.
Many believe that it is hard to save with the rising cost of living, giving reasons like “it’s possible because your pay is high”, “you can’t YOLO if you save and scrimp” or “I cannot do it. I need to travel/ pay for car etc” .
But it is precisely the high cost of living that’s why we need to save even more.
I grew up poor, my parents live paycheck by paycheck and every month I pray that my teacher doesn’t call me out to pay outstanding school fees. I am the classic example of a sandwich generation, taking care of two kids and dependent dad. I am now paying for the retirement and medical expenses of my dad as he didn’t plan for his own.
I’m not a high flyer and certainly not high income earner too. I studied in a local university and worked for the Government after graduation.
If you are curious how I saved my first $100,000 the Singapore civil servant way, read on!
There are mainly two ways to accumulate wealth, reduce expenses and increase income. I will first talk about reducing expenses as it is easier to achieve.
A) REDUCE EXPENSES
1. Clear Your Bad Loans Asap
There are two school of thoughts when it comes to loans. Some would like to make use of the low interest rate and delay the payment so that they can free up the cash to invest in something where the interest is higher.
For me, I knew I had to clear my tuition fees loan ASAP upon graduation as the interest is not low. To avoid the bank interest, I borrowed $10,000 from my mum and paid off the entire loan ($12,000) at one go.
I returned my mum $1000 every month in my first year of work and was debt free in less than a year after graduation. Whatever I earned after that was all channeled into savings and investments. Being debt free gives me a peace of mind when I invest.
Assuming a loan of $20,000 over 5 years at 4.5% p.a., monthly instalment is $373.
Money saved from age 23- 27: $373 x 48 months = S$ 17,904.
2. Do Not Buy Car in Singapore
It was tempting to buy a car after seeing your peers showing off their new car on facebook. But I decided that I have no need for a car as my workplace is easily accessible by public transport.
Technology has evolved and it is so easy to grab a taxi now. I am now a mum of two kids and is still car free. I take public transport with my two kids and occasionally take grab.
A car loan and maintenance will easily set me back by $1000-1500 a month, which was about 1/3 of my starting take home pay. No way!
Assuming I spent $1250 on car a month,
Money saved from age 23- 27: $1250 x 48 months = S$ 60,000.
3. Avoid Frequent Entertainment/ Dining out
I tend to head home for dinner with family instead of hanging out with colleagues after work. This saves me a lot of money as eating out costs an average of $25 per meal.
Most importantly, I believe in spending dinner time with family as I’ve already spent too much time with colleagues at work.
I don’t mind having dates at coffeeshops and limit myself to 1-2 restaurant meals per week.
I don’t go clubbing because I rather spend my time meaningfully with my family and my ex boyfriend who is now my husband. I save a lot from not clubbing as the alcohol prices and the late-night cab fares will easily set me back for $100 each time!
Assuming average dining out cost is $300 and $200 of entertainment fees per month,
Money saved from age 23- 27: $500 x 48 months = S$ 24,000.
4. Avoid Taking Taxi
I stick to a no taxi rule unless I’m running late, the place is out of the way or I can save significant time by not taking public transport. This also forces me to have better time management.
I’ve some friends who take taxi/ grab to work everyday. This costs an average $20 per day which is $400 a month for 20 working days.
Assuming average monthly cab fare of $400,
Money saved from age 23- 27: $400 x 48 months = S$ 19,200.
5. Live a Minimalist Lifestyle
It is easy to fall into the “earn more spend more” trap. Many of my friends tend to buy more luxurious items, dine at more expensive restaurants and travel to more exotic places.
It is perfectly fine to reward yourself but try to stick to one expensive hobby only otherwise your income will never keep up with your expenses.
My personal indulgence is on travelling and shopping. I’ve cut down on shopping and limit myself to 3 pieces of clothings each year as compared to 3-5 new pieces every month previously. With this, I also feel less guilty towards adding waste to the environment.
I still reward myself with travel but I keep to one Asian and one non-Asian destination each year so that I do not overspend.
Assuming average monthly shopping on clothes is $150,
Money saved from age 23- 27: $150 x 48 months = S$ 7200.
B) INCREASE INCOME
The following two ways can help you increase your income without depending on promotion or pay rise, which is not something that we have full control of.
1. Start Saving and Investing ASAP
This sounds like a no brainer but how many of us really save and invest at 21?
“My wealth has come from a combination of living in America, some lucky genes, and compound interest.”
– Warren Buffett
I bought my first stock at 23 (which is considered late) upon graduation. It was 1 lot of Capitaland. Sold it three years later and made $600 capital gains. Needless to say, the profit is far greater than $600 when you let the magic of compound interest and time work for you.
2. Have Multiple Sources of Income
I’ve a friend who is able to save 100% of his main active income because his side income (dividends, tuition assignments and rental) can cover all his expenses.
His tuition and rental income gave him $1500 monthly, and his 5% dividends on a $600,000 dividend-based portfolio generated $2500 yield monthly. $4000 is sufficient to cover his entire expenses as he lives frugally (that explains how he could have $600,000 in stocks).
Another friend does e-commerce business in addition to her full time job and earns an additional $3000 on average each month.
Of course it is not easy but possible with patience and some sacrifices.
-If you have a spare room to rent and willing to sacrifice some personal freedom, renting out a room sounds good.
-If you have spare time to Netflix, why not start a small e-commerce business or learn to invest?
-If your voice is unique, perhaps you can do a voiceover on fiverr?
There are so many possible side hustling out there, the problem is laziness..
During my university days, I was diligently teaching tuition and earned about $14 000 in 3 years, which I used it to partially fund for my school fees. I also sold my preloved items on marketplace.
It sounds difficult to amass a 6 digit portfolio but if you can save up your first $100,000, many things will fall in place nicely. Your next $100k is easier to achieve as your first $100k will compound with time.
Monthly tuition salary of about $500 and about $5000 of revenue generated from marketplace,
Money earned from age 19- 22: ($500 x 48 months) + $5000 = S$ 29,000.
Conclusion
My greatest mistake is that I did not get started on this earlier.
I was obsessed with fast fashion in my early 20s and spent a huge amount in Forever 21 and H&M. In 4 years, I accumulated over 200 pieces of clothing which was about $6000.
Another important takeaway is that the money spent now is actually more than what it seems. If the $6000 is invested properly, it would have become $9,773.37 now (10 years with 5% dividends). This means I’ve wasted $9,773.37 (not $6000!) on clothes! 😨
If you’re still not convinced to make a change in your lifestyle, look at this.
If I’ve had spent $60,000 on a car 10 years ago, it is actually worth $97,733.68 if invested for 10 years at 5% rate! This means everyone would have an additional ~$100k more if we don’t buy a car!
START NOW.
With the mentioned lifestyle, I was able to save 70% of my take home pay. Combined with the additional streams of income, I successfully saved $100,000 a month before I turned 27.
We all have different starting point, it is definitely ok to achieve your first $100k after 27 (of course don’t aim for age 60!). It is also ok to buy a car if your lifestyle demands for it, just make sure to cut on other expenses.
The intention of this sharing is not to flaunt my wealth but simply to encourage you to START NOW.
I wish you the greatest success in your journey to financial freedom. 🙂
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