I love taking conventional assumptions, and then systematically destroying them. Today, let’s talk about an assumption that’s been on the Singapore personal finance blogosphere for the past week:
“It’s impossible to save $100,000 by the time you’re 30.”
Really? We’ll see about that.
The Excuses
Last week, the Sunday Times ran an article about how it’s entirely possible for an average Singaporean professional to save $100K by his/her 30th birthday. Okay, the article made some pretty generous assumptions, such as being able to earn 2 months of bonus above your Annual Wage Supplement (AWS).
But you know what I found especially fascinating? It was some of the responses to that article, published in today’s edition of the Sunday Times:
“I don’t think life would be meaningful if one is constantly stressed about every dollar and dime spent and looking forward to getting $100,000.”
“Imagine how many events, gatherings, meaningful relationships you’ll reject because you won’t go out to save on transportation or buy gifts for people you care about?
Translation: It’s totally not worth it, it doesn’t apply to me, I’ll never be rich, life is unfair, etc. Whine, whine, whine, whine, whine.
The Psychology Behind the Excuses
Isn’t it interesting how people are so quick to disqualify themselves from becoming rich? On one hand, they’ll stare out into the sky and tell themselves, “Someday, I’m going to be rich and travel the world/own 3 houses/retire early”. And on the other hand, they’ll read an article about saving $100K in 6 years and tell themselves that “it’s impossible” or “it’s totally not worth it”.
It’s interesting how people can simultaneously want to retire with $3 million dollars by the time they’re 40, yet can’t fathom trying to save just $100K by their 30th birthday.
Then again, it’s a lot easier to have airy-fairy fantasies far off into the future, then to think about concrete, actionable steps on what they can do today.
A $100K By 30 – Why It’s Totally Possible
What sort of concrete, actionable steps? Well, if you’re just starting out, the very first thing that you’ll have to do is actually start saving this year. I ran some numbers to find out exactly how much.
Since some people were unhappy with the generous assumptions from last week’s Sunday Times article, I decided to use assumptions that were even more conservative in my figures:
- You earn the median salary of $3,050 a month
- You don’t get any bonuses besides a 13-month AWS
- Both your salary and your savings increase by 4.5% a year
- No investments – you channel all your savings to a bank account earning 0% interest.
- Fixed costs: 10% of your monthly salary goes to your parents. Every month, you spend $150 on transport, $400 on food (excluding dining out and entertainment), and $100 on miscellaneous things.
Here’s what it looks like:
(If you want to check my figures, you can download the Excel file here)
After your first year, you’d have around $15K in savings, and “fixed costs” (parents’ allowance, transport, food, miscellaneous) of around $914 per month. But here’s the interesting part: After deducting all of your “fixed costs”, you’d still have around $122 of Guilt-Free Spending every week – ie cash to spend on whatever the hell you want. Okay, so you’re not going to be popping bottles at clubs every Friday, but it’s a pretty decent amount. It buys you at least one reasonably-priced restaurant meal, a movie, and a couple of beers at the bar every week. And that number grows as you earn more.
Contrary to what the skeptics think – you can save money AND have a life at the same time. Are you going to be able to afford a car and trips to London every two months? Probably not. But you won’t have to forego a ridiculous amount of enjoyment either.
My Response to the Skeptics
But Lionel, I hear you protest, you didn’t account for a whole bunch of other stuff! What if I want to go on vacation? Or buy a car? Or start a family?
Deal with it. I’ve already made some pretty conservative assumptions here, so it’s likely that your particular situation might be better. Maybe you earn more than the median salary. Maybe you’ll get at least 1 more month of bonus this year. Maybe you have other sources of income, or your food bill is lower because you don’t dine out.
My point is, instead of picking on the nitty gritty assumptions of why you can’t achieve something, start thinking about what you can do to get closer to it.
If you can’t save $100K by the time you’re 30, can you save $80K? How about $60K? That still puts you on the way towards getting rich, which is still way ahead of the whiners who make excuses and never even start.
The only differentiating factor is how willing you are to work towards it. That’s exactly why so many people claim that they want to become rich, but very few actually do it. It isn’t easy, but it’s definitely possible.
What do you think? Is it realistic for a young Singaporean to save $100,000 by his/her 30th birthday? Leave me a comment below or send me an email. I read every response.
If people want something bad enough, they will find a way. So, it all boils down to how much they want it.
Those people who say it cannot be done, unless they are severely handicapped in some way, probably do not want it bad enough.
Thanks for the refreshing perspective! I was getting tired of the nay sayers vs the people who were seemingly smug about having saved more already. I am already past thirty and was thinking should I be setting myself more challenging, enviable goals?
So here I was thinking about crafting my own blog post and you beat me to it! Kudos and thanks for sharing 🙂
All the best! And it’s never too late to start a blog if you’re committed to it. Let me know the URL when you start 🙂
Nice article Lionel! What you have written addresses what I feel is sorely lacking in the ST article.
I think its focus on $100,000 creates an all or nothing mentality. Between $20,000 (reasonably low figure) and $100,000 there are a good 80,000 other numbers a person could end up at and each will be better than $20,000.
Ultimately each person should have a target that he/she is happy with and that he can achieve with reasonably conscious effort and of course start making that effort. E.g. If someone has plans to get married before 30 there is no way he can save up $100,000. He should not even be investing in the stock market because a wedding is a short term commitment. Perhaps even $20,000 would be hard.
Good point! Most people tend to frame decisions in terms of binary (all or nothing) terms, which severely limits their options
Finnnneee you finally got me Lionel 😉 i will now turn advice into action ;D
YES
We must not forget this:
Don’t lose our saving through bad investment and then struggling to recover from big losses.
I agree with all of your points, but you’ve made one very terrible assumption here. And that is – everyone’s rent is free. Of course, if the article is catered towards Singaporean Citizens only, and the general assumption is that you don’t move out after graduation, then this is accurate. If, however, you’re living on your own, a decent room in Singapore costs around SGD 600 to SGD 1000. If you factor this in, then you must admit that 100K is a bit too high a target. However, all your other points are valid.
True – I’ve made some assumptions (eg being rent-free) to simplify the argument. But the $100K goal is simply arbitrary. The point here is that even if someone has higher expenses, he should be focusing on building his nest egg to get CLOSER to that $100K goal.
Good stuff Lionel, like what you’re doing with your blog! Hope all is well with you. My gf sent me your link and I was pleasantly surprised to see that you are the author 🙂
It assumes you don’t have a girlfriend too! Hahaha….fastest way to derail your saving plans! XD
Hah, I have a girlfriend and we save just fine 😉
it is possible bcos i hv done it! started really saving when i graduated and saved hard, played hard. perhaps good thing is i didnt hv a student loan.. but i’m only 27, so even with the student loan, i think i can achieve $100k by 30 yrs old. i think it’s abt being practical, i dont own a car, only travel to nearby places, furthest is taiwan / korea or indulge in a trip to london, but save by staying at friend’s place. have a nice brunch with friends occasionally, and not weekly.
there’s no point wanting to ‘enjoy’ all of life’s luxuries and say want to save money.
Love it! Good on ya and totally agree 🙂
I would like to ask if its actually possible for a graduate to save $100,000-$150,000 SGD before he actually officially starts working and joins the all too familiar rat race, for instance at age 25. I used this age so as not to sideline or disadvantage the guys whose general mean working age of joining the labour force is after completing a bachelor’s, double degree and honours programe which typically takes 4 years after NS. I would agree that this article was good because it helped people understand the importance of saving,investment and being frugal. But it would even be much better to save a relatively sizeable monetary hoard before starting work to have some financial stability isnt it?
Now question is for guys like ourselves, we need that kind of competitive advantage over the female counterparts who start working(for JC pathway girls-age 23, and poly girl graduates who enter university start working at 24),so if saving up decently before starting work, is 100-150k SGD achievable and feasible. why and why not?
I don’t really understand your question 🙂
What he is asking is if one can save between $100k – $150k even before starting work.
i’m inspired! but this is assuming in the period, you don’t have any luxury splurges or vacays! But after deduction of the above, you still have $80k! I shall try! 🙂
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Awesome! Let me know how it goes 🙂 And I’d just like to point out that you CAN take vacations with your guilt-free spending money. Notice the column on “weekly guilt-free spending” in the table. That’s how much you can spend on luxury items, vacations, going out, or anything you want. If you had $122 a week to spend on anything you want, take $50 off from that per week and save it for your vacation. By the end of the year, you’ll have $2,600 – enough for a short vacation 🙂
I agree with your analysis. It is realistically possible to save $100k by 30. Discipline is the key.
Hi Lionel, I think this is definitely possible. Because I personally managed to save SGD100K + drive a 2nd hand car by age 27. I set my sights on achieving this at age 23+, i.e. it took me 4 years to achieve this. I recently wrote about how I did it on my new blog. If you’re ok, can I share the blog post link in the comments so more people can learn & duplicate my methods?
Very impressive! Sure – I think everyone will benefit from learning how you did it 🙂
Thanks lionel. This is the link to how i saved SGD100K + drive a 2nd hand car by age 27:
https://happymoneyhappylife.wordpress.com/2016/08/01/i-saved-s100000-cash-drive-a-2nd-hand-car-by-age-27-and-you-can-too/