Commentary: Single and secure? Does family life come at the expense of financial freedom?
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Commentary: Single and secure? Does family unit life come at the expense of financial freedom?
So many factors can modify how much we need for financial freedom. What's important is to make active efforts to earn, salvage and better invest our coin, says financial trainer Ng Wai Chung.
24 Oct 2022 06:01AM (Updated: 24 October 2022 06:01AM)
SINGAPORE: Family plays a declining role in Singaporeans' journey to a better life.
At least according to AXA Insurance Singapore when information technology released findings of its Better Life Index 2021.
Young man financial bloggers alerted me to this interesting finding that millennials viewed financial freedom as a more important purpose in life than having a happy family.
Unsurprising perhaps, when 2022 census data from the Section of Statistics showed a rising proportion of singles, particularly those aged 25 to 34.
Still, the conclusion seemed depressing and alarmist. Surely they aren't mutually exclusive pursuits in this journey of life? Though having financial command is often an important prerequisite for a happy family life and so nosotros don't have to endure mean solar day-to-day worries.
My own experience reflects this: More than a decade agone, I worked aggressively to live inside my investment income as a bachelor and grew it further to back up my married woman and two children.
In fact, my family of 4 had no breadwinner in the four years I pursued my constabulary degree.
Today, fifty-fifty though we can alive comfortably on investment returns, I continued with my business to set bated savings for the kids' education and our time to come healthcare needs.
Only only how much do nosotros need to put for a happy, fufilled family life of comfort?
Financial advisors say y'all should focus on the safe rate of withdrawal - a staple in retirement planning that states we tin can spend the amount equivalent to iv per cent of savings at retirement for 30 years without running out of money.
Going by this, someone with S$one million in investments could spend S$40,000 annually, inflation-adjusted, for most 30 to 40 years.
SINGLES HAVE Total Command BUT ALSO ALL THE Responsibleness
There is no running fashion from the fact that the greatest advantage of singlehood is total control over personal finances.
Like many singles in Singapore, I had mostly lived with my parents, so near all my earnings went into dividend-yielding investments. I saved every dollar possible, with cheaper meals and at i point even used a safe band to attach the battery to my Nokia handphone to avoid replacing it.
Yes, I was crazy frugal. But I felt a sense of achievement at historic period 32, when I could sustain all my expenses, including taxes and parents' allowance, with only investment dividends.
Sometimes good financial planning can start with small steps. One fewer cup of bubble tea a week tin can relieve Southward$200 every twelvemonth.
In a recent study, the Lee Kuan Yew School of Public Policy estimated that a single person aged 55 to 64 in 2022 spends S$i,768 monthly, or S$21,216 yearly, on basic needs.
This is a great baseline to aim for every bit a Gen Z fresh graduate starting to salvage and invest. Applying the safety withdrawal rate, one can sustain this level of spending for thirty years with Southward$530,400.
Can you become in that location before getting married, such that everything you earn can be channeled to housing and household needs without worrying about whether in that location's plenty to retire?
It's a challenging feat for nigh. Say yous can set aside S$2,000 monthly, you lot'd still need a tough and risky fourteen.one per cent return on investment to accumulate S$500,000 inside a decade.
But this is possible for thrifty, single professionals who can fix aside salary increments and bonuses.
COUPLES SHARE AND LIGHTEN THE LOAD
The financial effect of getting married of grade is that expenses get up. My married woman worked and we remained a frugal couple, then it took little fourth dimension for investment income to catch up.
In the same report, a couple at historic period 65 in 2022 would need a basic budget of S$two,419 monthly, or Southward$29,028 yearly, lower than that for two singles. Couples can derive economies of scale living together, the most obvious being housing-related costs.
The target sum for financial freedom would be S$725,700, or S$362,850 each equally divided, and probable a more realistic goal for many. Information technology's a useful data-point for young couples to commencement planning even if they likely spend more retirees.
Examining these numbers, my appetite as a bachelor might accept been extreme. A single professional person today can start saving less aggressively and update their strategy to share the load with a like-minded soulmate when the fourth dimension comes.
So marriage demand not be a trade-off to pursuing financial freedom and could actually brand information technology more easily attainable together.
TIME-Limited CHALLENGES FOR FAMILIES
Things modify when children come into the picture just there's no need to fright.
My married woman and I decided to have our kickoff child after making plans to grow our investment income and she quit her day task to await afterward our daughter full-fourth dimension.
We tried to live only inside the dividends, which meant picayune "excess savings" and we struggled to put funds into her Child Development Account.
My colleagues were puzzled past my reluctance to impact my salary. But when we occasionally "overspent" and had to dig into my pay, it felt like a footstep back from being financially free.
The study also calculated a budget of S$vi,426 monthly or $77,112 yearly for a family of four with i child aged between vii and 12 and a teenager aged between thirteen and xviii.
To sustain such spending for 30 years, the family would need $ane,927,800. But information technology might not be meaningful to peg financial planning to a immature family unit every bit expenses tend to go down later children leave the nest.
Fiscal Freedom STILL Inside Reach
There are so many factors that might modify how much we need for financial freedom.
Would you lot spend this much every bit you get greyer? Might you have future goals of upgrading to a bigger house? Will adult children proceed to live with y'all?
The sandwiched grade will also have more complex needs, juggling eldercare and parenting.
Perhaps the key thing to remember is many of us bike through all three life stages described – each with its ain demands and considerations.
What's of import is to arm ourselves with a stiff understanding of what we demand and how much it'll price, then make active efforts to supplement – non necessarily supercede - income with investment returns, in a combination of earning, saving and ameliorate investing our money.
Nosotros tin can save more by irresolute retail habits, such equally ownership clothes infrequently from mass mode bondage and austerity stores, or finding culling family outings like libraries, parks and museums at shut to no toll.
We can look for better investment returns - higher than the 4 per cent rubber withdrawal rate but frequently at a similarly college adventure.
In Singapore, we are fortunately in a system that doesn't tax capital gains or dividends, with real manor investment trusts (REITs) on the stock market place structured to pay up to four times a year. You can build a conservative portfolio of blue-chips, REITs, and business trusts could potentially yield v to 7 per cent, based on SGX dividend yield information.
An achievable start can exist saving S$30,000 for investment, which translates into Due south$100 in passive investment income every month.
Making a deliberate attempt to achieve fiscal freedom doesn't take to come at the expense of setting upward a family unit.
The all-time fourth dimension to first aiming for financial freedom is xx years ago. The second best time is correct now.
Christopher Ng Wai Chung is a Singapore-based freelance trainer with Dr Wealth and conducts an Early Retirement Masterclass.
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