I took some time off the blog for about a week. Was posting consecutively for a few days and ran out of topics I was interested to write about. We took last Friday off work to take a break and had a busy schedule of meeting up with friends for lunches and dinners over the long weekend. By the time Sunday came around, we were tired from all the meetups. We became even more exhausted after forcing ourselves to hit the gym for our weekly exercise session and cooking dinner afterwards.
We don’t often have such a packed weekend social calendar and it’s easy to see why we prefer to spread out the events. Oh well, can’t be helped that everyone else is only free to meet up over the weekend as well since nobody is in the mood to gather after work on weekdays. This has taken its toll and my wife has turned in early. Sound asleep. I just checked.
Which gives me time to write a blogpost. This is when I sometimes do research on personal finance, investments stuff and update our Google Sheet & blog numbers. It’s also my alone time, where I get to think and plan about our financial independence/freedom strategy. Tonight, I read about Kyith’s post at InvestmentMoats: No Matter How Much You Earn, If You Spend Too Much, You Cannot Retire.
Very useful and relevant content to us. I found myself agreeing with every point he made. It’s true that there are a large number of Singaporeans earning upwards of S$80,000 per year. This is possible in several industries depending on the years of experience, although you will probably find the largest number in the finance (banking, asset/fund management, private equity and trust group), accounting and legal sectors.
The low personal income tax rates in Singapore have allowed for high levels of discretionary spending by this group of people. Having worked in Australia (a country with high personal income tax rates) and knowing friends/colleagues that have come over to work in Singapore, all of our spending power has gone up significantly. It’s not just the difference in taxes. The fact that basic living expenses such as food, utilities, internet, cable TV and public transport are less expensive here have also helped.
I’m not sure whether Singaporeans know how fortunate they are in this aspect. By the way, I’m not arguing that paying more taxes to fund social spending is a bad thing. But when you find yourself paying a lot more taxes and most of the benefit goes to other people. It’s not going to go down well with you even if they are the less fortunate and deserve our help. No need to criticise me on this point. I have never seen a middle, upper middle or upper income employee be happy to pay the high taxes in Australia. Or even a similar person being happy to pay the low taxes in Singapore.
Anyway, we fit right into that high income, high spending family profile outlined in Kyith’s article. The challenges we face according to him are:
- Unable to drastically reduce our retirement expenses due to inability to change our spending patterns significantly.
- Potential cash flow hits after 35 years old due to the increasing volatility of our job nature.
I always get worried when I read stuff like that. Because I do actually think we are going to get screwed by the above 2 points. By my calculations, if my wife loses her job now, we will be cash flow negative every month. If I lose my job now, we will still be slightly cash flow positive every month. And you wonder why I support and encourage my wife to work?
Besides, we already have friends that are several years older and facing those challenges. Their pay has stagnated, jobs are at risk but cannot reduce the expenses sufficiently to manage the cash flow issues. Makes me wonder how many times we have to get reminded before taking tangible steps to address this eventuality.
I want to say it’s not for lack of effort. But I would be lying somewhat. Yes, we have taken steps to lower our expenses. At first, I attributed the lack of results to it taking time for the effects to flow through. Then I realise we have just been using that extra cash flow on our travel spending (supposedly for richer life experience) i.e. reallocation instead of long-term reduction.
So yes. This is harder than you think in case you are wondering why we are just squandering the opportunity to be financially independent earlier than others. Because it’s true that not many can grasp it. We worked hard, smart and got lucky to get to this position. As grateful as we are to have the privilege, we always want to rewards ourselves for still being here. Navigating that conflict between gratification from keeping ourselves in this position and understanding it’s not going to last forever is a tough ask.
It would require both my wife and I to be on board for this to work. We may not be the worst offenders of being high income, high spending but enough to be a problem. The sad thing is I don’t see us changing until a major event happens. Forced changes can be a bitter pill to swallow but that might give us the push we need. I can only hope we are ready for it.