This was first published in BankBazaar.
We all have these ideas about what we're going to do with our lives when we start making a lot of money; buy the gold and diamond adorned Birkin handbag or add the IWC Da Vinci watch that was released in 1969 to our collection and so on.
Did you ever say something like, "I'm going to start investing and planning for my retirement"?
Any takers? Raise your hand. No? Well, that's most of our paths going into our 30s.
Here are the money mistakes that Singaporeans make in their 30s:
1. SUDDEN MONEY OUTBURST AFTER "INDEPENDENCE"
When you compare Singaporeans to countries such as the United States, the culture is completely different.
Generally, Americans move out of their homes between the ages of 16 and 18 years (when they start college), but us Singaporeans choose to move away from the comforts of our homes once we complete our education, land a good job, and get married. That's around mid-to-late 20s.
Having a steady income and managing household expenses in our 30s can get tricky. Setting a budget for monthly expenses is at the bottom of our list that we hardly ever get to.
Once we get a good job, of course, we need a good credit card and once we open that portal, we need more cards. Owning multiple cards leads to lifestyle inflation where we literally live larger than what we can afford. You know what this leads to… consumer debt.
Lesson: You don't have your parents anymore to 'baby' your expenses and applying for a new credit card to pay for everything does not qualify as "managing/meeting expenses". Setting a budget and meeting it is a must, there's no way around it.
2. ASSUMING CREDIT CARDS MAKE LUXURY EXPENSES MORE AFFORDABLE
We all have that one or few things that we think about and say, I'm going to buy that when I make enough money. And then, *boom* banks shove their credit card instalment plans in our faces. In all honesty credit card instalment plans are a great option to make large purchases because you can pay off in instalments at 0 per cent interest rate.
But when it's not offered free by the merchant, have you considered the service charge you're paying to utilize it?
All major banks charge a processing fee of between 3 per cent and 5 per cent (OCBC charges up to 9 per cent). Although this fee is a one-time payment only, is buying that designer bag really that necessary when you're in your thirties and have more important things to look forward to? Say, your bag costs S$1,500.
If you think it is affordable to pay it off in an instalment, that's where you're wrong. For a 6-month instalment plan with 3 per cent processing fee, you're repaying S$1,545. How is repaying more, affordable?
Lesson: Credit card instalment plans are an excellent choice when making large purchases that are necessary such as appliances for your new home, gadgets such as mobile phones, laptops, etc. Using such plans to pay for luxurious items that you can't afford is once again resorting to lifestyle inflation.
3. GOING ALL-OUT BECAUSE YOU INTEND TO GET MARRIED ONLY ONCE
Our wedding day is supposed to be the most special day of our lives and Singaporeans have an attitude of, "Go big or go home" when it comes to weddings. If you haven't really achieved your financial goals yet, is that fancy pre-wedding photo shoot really necessary?
Many of us save for an emergency fund but not a lot of us save for a marriage fund. So, the answer is invariably using credit cards or applying for a personal loan to cover all costs.
Yes, it is understandable that you get married only once, but you should understand that filing for bankruptcy once is enough to ruin your financial life for the foreseeable future. It is not uncommon for a wedding in Singapore to go up to S$50,000.
But is that really for you? Do you really want to start your married life with debt even before your honeymoon?
Lesson: Make your wedding plan realistic to your financial circumstances. Don't use your credit card or a loan to cover your entire wedding expense. If you really want a wedding with multiple photo shoots, dinner banquets and several gowns, save before-hand for it and use your credit card merely as a mode of payment.
Pay off the outstanding bills in full once the bills come.
4. TREATING YOUR FIRST KID AS A 'MIRACLE BABY'
C'mon, we all know how babies are made. To most of us, it's not really a miracle to welcome a child into our family. But new parents can become so obsessed with the first child that they spend like it's nobody's business! Literally, it IS nobody's business, but hey, we're only trying to help here!
Do you really need that state-of-the-art crib and bottle for your infant who isn't even old enough to say the word "crib" yet? Don't misinterpret comfortable environment for your child to mean "buy that stroller 'Kimye' got for their baby". A Kardashian can make money, hand-over-fist, but you're no Kardashian. So stick to what is necessary and affordable.
Lesson: Instead of blowing your money on strollers, bibs, and onesies, save-up for your child's education. This way, you're putting your money to great use by securing your child's future. Who knows what your financial situation is going to look like 10 to 20 years from now.
5. YOUR CHILD'S EDUCATION OR YOUR RETIREMENT?
You see that? The question itself is incorrect. This is not a competition between whose future is more important. And if you think just because you have a CPF Retirement Account, you're sorted, well, picture this:
This is what your BRS and FRS savings need to look like and you need to consider if you can live the rest of your life on this income alone. Also, you need to have a minimum of S$60,000 in your Retirement Account 6 months' prior to reaching your payout eligibility age if you wish to make a withdrawal.
Lesson: Of course it is understandable to put your child's future needs ahead of yours, but that doesn't mean you don't consider your future needs at all. Supplement your CPF LIFE savings with voluntary contributions or other sources of retirement income.
Remember, that while these figures might seem manageable now, cost of living always has an upward trajectory.
6. A CAR AND A HOUSE, REALLY?
Once we're in our thirties, there's this need to have everything sorted. Settling down, getting a car, getting a house, making babies, etc. There's this rush of feelings that tell us to check a lot of these boxes, if not all.
You look around you and think, "OMG, Sandra already has a Honda Jazz and her own apartment, I need to get there and I need to get there now!"
Don't evaluate your life on the basis of how someone else is living theirs. Evaluate it based on your personal and financial situation.
Buying a car and a house are two huge financial commitments. For an average Singaporean, it means two separate loans. Can you manage a car loan, a home, loan, credit card payments and your day-to-day expenses?
That is something to think about.
Lesson: Don't commit to something that you're not ready to at the moment. If you're looking to get multiple loans, calculate your TDSR (Total Debt Servicing Ratio) first.
If your TDSR is 60 per cent or more, chances are that your loan will not be approved.
MANY PEOPLE MAY MAKE THESE MONEY MISTAKES, BUT IT DOESNT HAVE TO BE YOU
The big "3-0" can mean major life and financial changes, but it also means hasty financial choices.
You don't have to carry forward your "YOLO" attitude from your 20s to your 30s. You have enough experience now to make sound financial decisions. If not, you can always get some help.