The Department of Statistics Singapore (SingStat) issued a press release and report on Key Household Income Trends 2016 recently. You can look at the summary of key trends in the press release and find the detail in the report. This is one of the most interesting data reports from SingStat that I have looked at. The other being the article on households’ spending by age group. It gives my wife and I a good idea of how our income and expense level compares to the rest of Singapore.
If you have been retrenched and are unemployed, none of the income statistics is going to matter to you. I wouldn’t recommend reading any online material about the key household income trends in 2016 because it’s going to make you feel worse about yourself. This is a benchmarking exercise for the employed and you have more immediate priorities. Focus on finding a full-time job (whether in your current or another industry) or becoming self-employed.
It’s important to note a few definitions from the onset:
- A resident employed household refers to a household headed by a Singapore citizen or permanent resident and with at least one working person
- Household income from work includes employer Central Provident Fund (CPF) contributions
- Median household income refers to the household income in the middle of the income distribution i.e. half of the households have higher income than the median household income and half have lower income than the median household income
- Average household income refers to the arithmetic mean of household income i.e. sum of all the household incomes in the country and divide by the number of them
The median household income is often viewed as a better central measure than average household income because the latter can be distorted by a small number of extremely large values.
Median monthly household income from work among resident employed households in 2016 is S$8,846
Average monthly household income from work among resident employed households in 2016 is S$11,589
Remember, this includes employer CPF contributions. If you look at this table from the report, both figures have been increasing for the past 7 years.
If you are wondering why the property and stock markets haven’t experienced a major crash for several years, you are staring at one of the main reasons. People are never going to sell their properties and stocks at low prices if they had a choice. Increasing household income gives them that choice and holding power. When this positive trend starts to reverse in the absence of any economic shock event, that’s when you start to worry a lot about your portfolio, job and state of the economy. For some, it’s also the time to consider making significant investments in the property and stock markets if you have sufficient cash holdings.
Where do we stand in general?
The combined monthly income of my wife and I currently exceeds both the 2016 median and average monthly household income from work among resident employed households. This confirms that we are still on the right track to achieve financial independence via the full-time employees route. Why do I say that? Because what we have come to realise is that pursuing financial freedom by investing using salary income is only going to be possible when you meet this half of the equation – your monthly household income from work must be higher than both the median and average. The other half of the equation consists of keeping your monthly household expenses below the median and average.
That’s the harsh reality of life. If you are not earning enough from your full-time job, you will have to supplement with a part-time job. No matter how much you cut your expenses, you will hit a base level at the point which any further reduction will result in a significant deterioration in your quality of life, satisfaction and happiness index. Your goal should be to stay above the median and average monthly household income from work every year for as long as you stay employed. Maybe this won’t happen at the beginning of your career when you are a fresh graduate but it’s definitely possible a few years into your career. If you find that this is not happening, stop daydreaming about early retirement and investing. Start finding additional sources of income or a higher paying job.
Differences in household income between housing type
This table in the report caught my eye.
Can you observe the differences in average monthly household income from work among resident employed households by housing type? Especially the jump from HDB to condominiums & other apartments and landed properties. That’s probably what is pulling up the general average monthly houshold income in the country. Since SingStat is providing such a breakdown and we stay in a condominium, let’s see how we compare to similar households staying in condominiums.
The combined monthly income of my wife and I is slightly above the 2016 average monthly household income from work among resident employed households staying in condominiums & other apartments of S$20,213. This means that there are many households earning the same or more than us, which is what we thought all along. There’s nothing special about our income levels and it’s not difficult to replicate as long as you work smart & hard in high-paying industries.
What’s the point of household income trends?
It’s a good guideline on how you are tracking with your household income compared to everyone else. Use it as checkpoints for your progress and to assist with your assessment of the strength & performance of the economy. This also helps to identify certain macro trends going forward that can impact your investing approach in the property and stock markets.