Tuesday, March 18, 2014

35 and totally broke or $100K savings by age 30?

I feel I have the responsibility to spread the message of financial prudence after seeing yet another article of people going into debts even when they are in their mid 30s. Here is the article on Asiaone: 35 and flat broke!

On the other extreme, there was an earlier article on the straits times which shows how a young person can save $100K by the age of 30. Which one do you want? You decide.

Let's continue with the people who're in their mid 30s and are in debt. These people are not low income earners. In fact, they earn over $4000 a month. Some as high as $6000-$8000 per month.

The curious case of being broke?

Case 1

The first person is a 35 year old who earns $5000 monthly. This person has no savings and is $20,000 in credit card debts.

The lifestyle:

  • Has a taste for designer bags and shoes
  • Enjoys eating at posh spots such as Mezza9, Otto Ristorante and Catalunya
  • Stays at 5 star resorts and hotels when travellling
Now, spends $3000 on rent, phone and utility bills and the rest goes into paying 3 credit card debts which was accumulated over the past 10 years

Case 2

The second person is a 38 year old who earns $6000 monthly. Owes credit card company $7000. 

The lifestyle:
  • Splashes on designer bags 
  • Travels to expensive places like Maldives and Fiji
  • Buys fancy clothes and toys for 5 year old son

Case 3

The third person is a 33 year old who earns $4000 monthly. Has credit card debt totalling $15,000 which was accumulated since 2007. 

The lifestyle:
  • Go to the spa every week for massages, mani-pedis and hair treatments
  • Take cabs everywhere
  • Eat at expensive restaurants twice a week
  • Always treating friends to drinks when outside
There were several instances where she was flat broke and has to walk one and a half hour from her office back home because she doesn't even have money to take a bus or MRT home.

Case 4

The fourth case is a couple of age 34 and 36. Both are lawyers and have a combined income of $17,000. This amount of salary is an envy for many but they still can get into trouble. Currently has debts amounting to a couple of hundred thousands dollars.

Their lifestyle:
  • Spent $100,000 on wedding
  • Pay six figure sum for a condo in a prime district
  • Spent even more money on renovating and expensive furnitures for the house
They said the debts will probably take them 3 years to clear. 

Are you in trouble of debt?

There are already 4 cases in just one article. Who knows how many other cases are there out there? The main problem i see is in their lifestyle. Most think since they have a good income, they can spend more and live an extravagant lifestyle. All of them know their lifestyle is not good for them but they can't control it. This has become a habit and to be honest, habits are hard to change. 

What these people need to do is to simply change their lifestyle. How easy would it be i would never know because i've never been in that position before. 

Don't get into debt in the first place

This brings me to the point that we should all realise how bad this kind of situation is and prevent ourselves from sinking in. If you have kids, teach them how to budget and manage their lifestyle at a young age. Don't let them be used to an extravagant lifestyle even though you are rich. Teach the value of money to them. 

If you're still studying and about to graduate, keep your lifestyle in check now. Once you graduate and get a job with a good pay, don't keep thinking of where to spend your money. Save a portion of your income first and keep track of your expenses. If you're getting married and planning to buy a house, know the cost involved and plan for it. I've written articles on the cost of marriage and buying a house. You can read it using the links above. 

$100K savings by age 30?

I say it is possible because i'm on my way to my first $100K by age 28. 

My lifestyle is simply taking bus and MRT everyday. No cabs unless i'm in a rush or its midnight already. God knows how many months I haven't taken a cab now. Transport cost is only $80-$100 per month. Everyday, i eat at coffee shops and hawker centres with an average price of $3-$4 per meal. Once every weekend, eating at cafes or watching movies at cinema would be possible. Averagely, I spend $25-$30 per weekend. Seldom do I eat at posh restaurants. Some weekends I stay at home to study or relax so no money spent also. Every month i give my parents 10% of my salary for household expenses. Mobile phone bills is only $25 for me as my company subsidise most of the cost. 

Other cost like buying clothes, travelling, occasional treats for my family and gifts for friends will amount to roughly $1000-$1500 per year. One thing I have to admit is I seldom buy clothes and even if I buy, I will buy at a discount. 

With this lifestyle, i can save more than $20K per year.  

Why save so much?

This is the interesting part. I hope this will change your views on savings. The purpose of savings is not for you to bring into your grave. It is also not just for some rainy days which your parents might have told you before. Don't get me wrong, saving for rainy days is important and you should prepare at least 6 months of your expenses in savings.

The key point is money can grow money. It is like a seed which when planted, can grow into a tree which bear fruits. Yes, money does grow on trees if you plant it. Have you heard that a seed can grow into a tree and the fruits can produce even more seeds which can grow into even more trees? This is primary school science. I bet your teacher didn't tell you about the money seed. 

The concept is easy to understand. To implement it is another knowledge which you have to learn. Just like a farmer who plant seeds in his land and waits to harvest the fruits or vegetables. He has to understand what type of soil is needed, what type of fertilisers to use, how much water to give?, when to harvest? etc etc. It's the same with money. When you invest it, you need to know where to invest, how to invest, how much to invest, when to sell, when to buy etc. I hope you get the idea. 

If the money tree grows well enough, one day you'll be able to stop working and still have enough money to live your life. This is financial freedom. 

Save or spend now? You decide

Delayed gratification is necessary for financial prosperity. Sometimes a simple lifestyle may make you happier too. No money problems, more than enough to spend, no unnecessary debts will certainly make you happier. I did write on delayed gratification some time ago. You may want to read this: A generation of instant gratification - The cause of unhappiness. Do you want to own a condominium but be under the burden of huge debts or have a simple house with manageable debts and be happier? 

Your happiness depends on the decisions you make. Don't ruin your future because of the lack of planning, knowledge or some wrong decisions. Choosing the right lifestyle may well be the most important choice in your life. Choose wisely. 

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  1. I have the exact same lifestyle as you and I agree it's not difficult to live frugally even with the current rising costs.
    I would love to have some form of passive income though but coming from an engineering background, I have zero knowledge about investment and generating passive income.
    The factors involved are quite overwhelming for me.
    Any gentle way to intro passive income generation for a person who is not at all familiar with the market and doesn't want to really spend time worrying about the market?
    Thank you =)

    1. Hi SIM,

      Glad you have the same lifestyle as me. I thought I was the only one. :/

      I'm from an engineering background too. It's possible to self learn all the knowledge on investment.

      To generate passive income, one needs to have knowledge on what assets to buy. Sorry to say that there's no shortcut in generating passive income. But the good news is its easier to learn all these now especially with all the free materials out there like free seminars, cheap books and of course free blogs :p

      An investor does not really worry about the market if he knows what he's doing. As knowledge and experience increases, the worrying will get lesser and lesser.

    2. I see.
      Would you mind providing a guide on how you started?
      I will be entering the workforce in another couple of months and I estimate that it will take about 3-4 months for me to pay off my current study debt.
      I would like to start on the process of generating passive income before the end of 2014.

    3. Hi SIM,

      Financial planning is important even before you start investing. Remember to pay yourself first by saving a portion of your income. Manage your expenses and plan ahead. Protecting yourself and your loved ones with insurance is also important. Then we can start investing.

      Knowing how to analyse a business is important. I've a series of post on the right side bar of my blog to get you started. You can email me if you have any questions. We can discuss more through email. :)

    4. Hi SIM,

      wa.. young and frugal. I like you. May I ask how old are you?

  2. Hi SGYI,

    Again good sharing on awareness to be financially prudent. Just a comment that even when one is in debt, he/she should not let go of good investment opportunities. Robert Kiyosaki invested in silver when spot was just USD$8 depsite being in more than $100K debt. But of course to pull this off successfully one needs to have good financial sense like him!

    1. Hi aceirus,

      Hmm, I wonder how a person could have money to invest when he/she is in debt? Borrow money to invest? This is kinda against my principle. May end up in deeper trouble. Robert Kiyosaki may have been lucky.

    2. Hi SGYI,

      Possible though one will have to be brave. Well, it's not like the world ended when you are heavy in debt, right? People can still work and earn money, and with proper budgeting and a positive mindset it's not impossible :) In fact, I was in this situation (not $100k debt though!) and I decided that I shall repay my debt and same time learn about investing

    3. Hi aceirus,

      Oh so sorry. I misunderstood your comment. I thought you were saying bankrupt and 100k in debt. Oh no I must be dreaming...

      All of us Singaporeans will have debts when we buy a property isn't it? Does that mean we can't invest? Of course not. As long as the debt is manageable then its not too choking. Probably 30-35% of your income will be a safe debt level.

  3. 100K by age 28, good job bro.

    I always believe taking care of personal finance come first before investment. Timely reminder for all in this blog post,

    1. Hi Solace,

      I supose you achieved 100k by age 30 also? Seeing some other bloggers having more than 200k before age 30 makes me feel that 100k is peanuts. But still 100k is an achievable amount. 200k may be a bit tough so I wonder how those guys did it?

    2. Two words: Investment Banking

      I save 80% of my bonus and 20% of my base. 200k before 27.


    3. Hi JW,

      Your pay must be very high. I heard invesrment banking starting pay is around $8000 per month? Bonus must be in years too. :)

  4. Hi SGYI,

    I am enjoying your articles more and more. Keep it up!

    I guess it's really about channelling the discipline in one aspect of your lives to the other areas.

    For financial bloggers like us who might even feel bad at the occasional splurging, we have developed a mindset to make "logical" and long-term friendly choices when managing our money. So it might seem natural to accumulate $100k or $200k by 30.

    But then I am still having problems eliminating junk food from my diet even though I know that they are not benficial for my body.

    Likely to be vice-versa for your examples in the article.

  5. Hi 15HWW,

    Good to hear from you again. You've already achieved 200k by 30. Makes me so envious. Haha. You must have saved really a lot back then. Or did you hit a jackpot?

    Oh, junk food the favourite among young people like us. I have the weakness for fried food though. Trying to cut it down now. My immune system isn't as good as the past now. Unhealthy food will take a toll on my body.

    1. Hi SGYI,

      I am probably still far from $200k since the passive income that I illustrate on my blog is contributed by both my wife and I. But if you consider the amounts we have spent on our wedding, flat and renovations, then we might be coming close to $200k each. I guess higher than avg pay helps?
      Furthermore, we don't really have any dependents now. =)

      My finances are already more or less on an auto-pilot stage. This happens when you scrutinize it over a few years. It's really diet and exercise that I am focusing more on now and hope I enjoy similar progress on that front too.

    2. Hi 15HWW,

      Oh, so its combined income. But still its quite an achievement. Higher pay certainly helps. Don't have to sacrifice too much to save also.

      My finances are also more or less on auto pilot already. It has become a habit. Oh man exercise is what I'm lack of also. Its only my IPPT that force me to exercise. Haha.

  6. Hi SGYI,

    Try not to get fixated on an amt like $xx k by yy age. Financial independence is as much about the state of mind as it is about the state of finance. If others are getting 200k by age 30k, you've no idea what sort of sacrifices they had to do to reach it, so there's really no pt comparing between people. If you ask me, I'll say it's more impt to compare yourself in across the years. If you save $500 last year, and this year you saved $1000, that's a huge achievement by itself. Never mind others who can save more than you.

    Basically what I'm trying to say is that one shouldn't be so fixated by money. THAT is financial independence, at least the psychological aspect of it. To be free of money is to be financial free. So, if you're worrying about lacking enough money to meet your needs or worrying about a certain figure to hit before a certain age, you'll never be free of money, no matter what your net worth is.

    I see pple who are always chasing money regardless of their needs as equally shackled by money as pple who are always spending money regardless of their income :)

    1. Hi LP,

      Yeah, I get what you mean. Thanks for the advise. I'll surely remind myself on it. Its true not to chase money. In the end it'll never be enough. Sometimes I ask myself why do people who have 1 million still want more? Isn't it enough for them to live their lives comfortably? My comment on some other people who have 200k by age 30 was just a poke. Haha. Don't worry I'm not really affected by it now.

      Would certainly love to hear more from you. The topic on is money enough, we want to be rich, are topics which young people struggle on. Most of us are ambitious and want to make money fast. Many go into business without knowing anything. This is what the current generation of young people are thinking of. I prefer to strike a balance in all these. Not too fast and not too slow. I live a simple life and prefer things to be simple. I'm already grateful for what I have now.

  7. Hi there,

    I suppose you are single? If so, perhaps you are writing from a bachelor's perspective? When you get married and set up your family, you will want to buy car and house. So not all debts are bad. It all depends how you manage your finances. Avoiding debt is not the solution.

    It is easy for you to comment that you are leading a frugal lifestyle because you have no family commitment now. But circumstances always change and I have been through your stage before. Sometimes, certain things are beyond your control. If your future wife wants to buy car because she is pregnant, would you divorce her because you deem her as not aligned to your financial values? If your parents in laws want to have a lavish banquet but you insisted not, would you call off the wedding?

    Sometimes life is not so clear cut as you deemed to be.

    SG Wealth Builder (www.sgwalthbuilder.com)

    1. Hi Gerald,

      Yes I'm single. I guess that's why many couples quarrel over money matters. If wife wants to buy a car and husband insist don't want, then will quarrel. If buy already and after that not enough money to pay, will quarrel again. Even simple things like credit cards will quarrel also. Wife spend too much without letting husband know also quarrel.

      Its sad not many people are frugal. If able to find a partner who is also frugal and has a frugal family, then it'll all be aligned. I think I'm dreaming again.

  8. Hi SGYI,

    Oh, I like articles like this very much! It resonates with me! :)

    I don't spend much on clothing.
    I don't spend much on food.

    If not for my car, I don't spend much money. ;p

    Do what you have been doing and at some point in time, you will save all of your earned income or more annually.

    By now, I am saving more than 200% of my earned income. So, it can be done. Gambatte! :)

    1. Hi AK,

      Same same. And I don't have car too. :)

      Saving more than 200% of your earned income is amazing. I had a taste of saving all of my earned income and more this month. I reckon its just this month only. A special case. I hope it becomes every month in the near future. Indeed it can be done.

  9. Hi SGYI,

    I enjoy this article as well as the many comments that provide good insights.

    I married my wife young, we were just 1 year into the work force and we were talking about money, honey moon, wedding ring, etc.

    I agree with Gerald that is very difficult to save when u are married, especially my wife's family is rather wealthy. My wife is no spend drift, she dun go for handbags, and is ok with hawker flair, but she spends quite a lot of her family and relatives, and given her circle of friends and relatives are all wealthy, there is a limit how she can go before she feel unbalanced. All her relatives live in condos and many have multiple cars or posh BMW.

    We only live in HDB, and she wanted 5-room, how to refuse her?

    My savings were almost wipe out with renovation, and the likes of setting a family, all without debts, but we kiss goodbye to my monthly savings, I could only save my bonus.

    When I climb the Coporate leader, just when my pay increase and I find my footing, we welcome our first baby 1 year into my marriage. Again, money money money... Hospital visits, school fees, etc.. It's choking...

    I climb the ladder further, I found my footing, her parents become old, not as active, but are still babysitting our son, she ask we get a maid to lighten her mum workload, how to refuse?

    LP says it well, I feel quite sad that my savings is just 50k when I am already 35. Many of my peers are sitting at above 100k, which come to the point that perhaps the 3 case studies are extreme than the norm.

    If u ask me, how I know my colleagues assets? I was exclaiming that one day I saw a blangandesh in front of me at the ATM, not sure if the receipt below to him, but wow, he has more than 100k cash!! When I relate this incident to my friends and colleagues, many were shock that I dun even have that. So I guess there are many more Singaporeans that are wealthy than spenddrifts, but many know very little about investing.

    Cool article. Keep it up

    1. Hi Mike,

      I hope I didn't get your name wrongly? Thanks for sharing your story. Its something I will never understand until I'm in your position. When I read what you wrote, I'm thinking to myself it must have been a sacrifice for you.

      I guess your wife has no choice on spending when she goes out with her friends. When her friends go to restaurants to eat, I dont think she has a chance to say no right? Actually friends don't have to be rich to spend a lot. I had friends who earned average income and they still dine at expensive restaurants everytime. The amount of money spent is against my principle and if I carried on like this, I would really have no savings till today. In the end I distanced myself away. I've since found new friends who are the type like me. So its kind of a trade off. For wife, I don't think its possible to find someone who's more of a saver. That's probably why I'm still single. Maybe AK will agree with me? Lol. Maybe a miracle will happen but maybe not.

      If I want to spend freely, the only way I can think of is to have a high enough income to keep up with the lifestyle of this society. It has to happen soon if not I'll be old soon.

      Sometimes I feel is life just about money? If we don't prepare, we'll face the consequences later and if we prepare, its hard to manage between spending and saving. Why life has to always have the burden of money where most people just survive? Hard to plan for retirement especially if you're married with house and kids. By the time you're too old to work, you realise that don't have enough savings to retire. I think I'm thinking too much now. Shall straighten out my thoughts. Lots of things in my mind now.

  10. Hi SGYI

    Nice article as usual :)

    I used to spend a lot too until started working , it is when you know how hard it is to earn your own kept.

    "Actually friends don't have to be rich to spend a lot. I had friends who earned average income and they still dine at expensive restaurants everytime. The amount of money spent is against my principle and if I carried on like this, I would really have no savings till today."

    Do stand firm on this principal if you feel this way. It is very common nowadays as i have too have friends/colleagues earning average and dining out at expensive or spending on luxuries. The temptations out there are too great , and your determination to resist is definitely commendable .

    Anway money is always not enough ( 钱 不 够用)

    1. Hi Small Time Investor,

      Standing firm on that principle is not easy. But i had to do it and change my circle of friends. If not i won't be able to get out of it forever.

      Sometimes all of us say when we have xx amount, then it would be enough but i guess when we reach that stage, we still say its not enough. So its true that money is always not enough. But still in the pursue for more, i think it's prudent for us to be grateful for what we have now.

  11. Hi SGYI

    You are certainly sensibly on your way up there. So no worries on this part :)

    I am transitioning from a single life to married life to a 3 person life this year. Certainly more responsibility on my shoulder now. I hope I will be able to educate them as much as it educate myself back then.

    Good article.

    1. Hi B,

      Congrats on being a father soon :)

      Its going to be an exciting stage of your life. I'm sure your child will be taught the right mindset and knowledge by you.

      You probably need to spend more time with him or her. Don't work too much if not you'll be missing out the most important growing up stage of your child. Not speaking on experience of myself by on experience of my colleagues. ;)

  12. Haha SGYI,

    A sacrifice from me? I think it's a equally big sacrifice from my wife.

    Come to think of it, I really spend very little on myself, when I change phone, I usually go for the zero - dollars plan.

    But it is also true no everything in life can be measured in numbers. The biggest expense is kid's expenses. I have persuade my wife there is no need for branded preschool or packing the weekends with renowned enrichment centers, although we do bring him to do art classes and swimming.

    But still, all the food, classes and clothing etc caregivers cost etc, does suck a lot of money. But I says it worth every single dollars.
    Seeing my son chase bubbles, laugh, listen to his crappy talks, all these are priceless.

    In fact, I grow closer to my spouse because we have a strong common goal, wanting our son to grow up a good man.

    We are contemplating a second child, I can kiss goodbye to my savings plan again. But u ask me, am I envious of u or other who can save so much, of course I am, but do I have regrets, not at all! Ask me to choose again, I will take the same path, but maybe some different in minor decisions.

    Money is never a problem, it's human expectation that is the problem.

    1. Hi Mike,

      Its the parents love for his or her child which is so noble. Its totally worth it seeing your son grow up more everyday.

      I guess kid's expenses is very hard to budget? Many sudden cost like healthcare, food etc which we can't really anticipate.
      I think your son will love to have a brother or sister. Its good for a child to grow up with siblings too. But of course it'll be another sacrifice for you and your wife again. No wonder many singaporeans stop at 1st or second child.

      If we live a simple life, money is never a problem. With all of us educated to a certain extent now, our income is actually enough. Its humans who always want to have a better life.

  13. great article! i have often wondered how people afford their extravagant lifestyle of fine dining and designer bags - do they earn it or did they inherit it or what? maybe they are just not saving! I was once really thrifty (now lesser) but less now after being with my better half. learning to enjoy life and spend on the important stuff, and not worry about the numbers!

    1. Hi gagmewithaspoon,

      If I want I also can have an extravagent lifestyle of fine dining and even afford a car. Just spend all my pay and I can have all that. But why do I want all these things and have no savings later?

      Now as my pay increases, I can meet my goals easier and this also means I have more to spend without affecting my plans! Well, people have told me not to have a fixed number as a goal like reach xx by yy year. I may be focusing too much on numbers but it does give me a rough guide on how much I can spend and how much I should save. I don't know if without that guide, will I be lost and lose control or even over spend my money?

  14. Hi SGYI,
    "Sometimes I feel is life just about money? If we don't prepare, we'll face the consequences later and if we prepare, its hard to manage between spending and saving." At times I just get too engrossed and plan too much n far. So I remind myself " I dont know about tomorrow, I just live fr day to day".

    1. Hi,

      I would say money is not everything but everything is money. We don't need a lot of money to be happy but we certainly would not be happy if we're too poor. The key is to live a simple life. In this way, we won't be spending too much. The irony is that when we live simple, we'll be more happy. Those luxurious stuff that we see don't necessarily make a person more happy.

  15. I'm kinda worried. I am 35 this year and have zero savings. I don't go shopping or buy branded stuffs..but the money always go low end of the month.

    Any advice on how to start saving?

    - Kopitiam

    1. Hi,

      If you realised that you can't save much even when you don't spend much, then it is time to look at whether you can increase your income?

  16. i am a 22 years old male, working since 19 months..i have S$18k in savings as of now...how would you rate it and any recommendations ?

    would get back to your blog to check your reply SGYI ! thanks

    1. Hi,

      I see you're saving about 1k per month. That's quite good. You're definitely on track to 100k before 30 if you keep this up. The next step is to learn how plan your finances well. Learn the various aspects of financial planning such as insurance, investment etc. You have a bright future ahead.

    2. problem is I have been a hefty spender. in dec'14 it was hardly 8k (i.e. end of 15th month). anyways, raked it up again to this much now.

      have invested bit in creating 2nd source of income now.

      what do you recommend, at this age a person should invest in creating more and more sources of income (more return in the long term), or saving..

      thank SGYI, I should have found you earlier !

    3. Investing in stocks for the long term is good for us since we got the time on our side. Learn as much as you can and have a well diversified portfolio. You can look out at other investments such as properties when you have more money.

  17. Haiz save so much for wat?You Onli Live once!!Who knows wat will happen tomorrow.
    Juz buy whatever you like la

    1. Hi,

      Ultimately, its our own life to live. If we suffer in the future ourselves, its still ok. But if we become a burden to the people around us because of our life, then it doesn't seem that good at all. Its all about choices and each choice lead to a different outcome. It depends on which choice will we make?