“It’s impossible to save $100,000 by the time you’re 30.”
Really? We’ll see about that.
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.