The figure “S$10,000” had a magical ring to it. Since time immemorial, a S$10,000 monthly pay cheque has been a measure of financial success for working-class Singaporeans. For many in the workforce, having a five-figure paycheque at the end of every month would mean being able to buy an executive condominium, a car, vacations, the best tuition classes for your kids, and a fair level of luxuries.
A 2014 survey by Jobstreet revealed that Singapore’s average monthly wage was at S$4,998. Some 83% of Singapore employees surveyed said they were dissatisfied with their current salaries and more than half believe that S$6,000 is the ideal monthly salary given the high cost of living here.
But while many Singaporeans still see that number as a prized income, it doesn’t necessarily roll out the red carpet anymore. Here’s why:
Like it or not, Singaporeans are paying more than ever before for food and education, on top of the ever-growing list of “necessities” of middle-class life.
While Singapore’s inflation is expected to be about 0.8% this year (which is well below average), food inflation is forecasted to rise 2.3% in the fourth quarter of this year.
We already know that currency depreciates with inflation, so given the average rates, the same “basket of goods” (of food) that costs S$100 in 1995 would cost S$145.93 in 2015 – that’s nearly 1.5X more!
Tuition fees at local universities have also seen a year-to-year increase since 2010, mainly due to rising operating costs. A study by the Economist Intelligence Unit (EIU) projected that a four-year degree will cost 70.2% of an individual’s average yearly income in 2030, up from 53.1% in 2015.
With the cost of things going up year-to-year, it is only a matter of time before a five-figure salary can no longer be equated to wealth and prosperity.
2) Stagnating wages
Inflation is a real factor in any economic environment and stagnating wages in recent years has made it an even bigger problem. As is, salaries in Singapore are already rising at a lower-than-average rate across the Asia-Pacific region.
According to a survey by Willis Towers Watson, salaries here are projected to rise 4% in 2017, compared to an average 5.9% across the region. However, after factoring in Singapore’s inflation forecast of 0.8%, salaries here are expected to rise just 3.2% in real terms.
What this basically means is, what you are earning today will not be able to buy you as many things in the future.
Where a person lives has a tremendous impact on how far a monthly income of S$10,000 will go. For instance, someone living in Singapore – the most expensive city in the world according to EIU – would clearly be spending more on a daily basis than someone living in Johor Bahru, Malaysia.
Singapore is also the most expensive place in the world to buy and run a car, due to the Certificate of Entitlement (COE) system.
Further, when you live in a high-cost metropolitan, it gets harder to save money as more of your income will be going to your daily expenses.
No matter how much you make, if you live beyond your means, you’re going to feel the financial pinch.
With today’s culture of conspicuous consumption, even those who try to keep an eye of their budget might end up succumbing to societal pressure and spend a large portion of their income on what financial advisers call “lifestyle inflation”.
After all, who can stand to be seen without the latest smartphone these days? Many middle-class citizens also now see tablets, computers, multiple televisions and gym memberships as “essentials”.
Such expectations clearly lead to higher consumption and spending for individuals of all income levels. This ultimately means less savings over the long-term.
One way to build and safeguard your wealth from the ravages of inflation is by utilising the right investment tools. The good news is, the emergence of fintech and online investment platforms in recent years has made such processes much simpler and more accessible for users than ever before.
When it comes to investing, establishing a financial plan and clear goals from the start can help you stay motivated. In this case, the earlier you start, the better, and the work you do today could set you on the path to a sound financial future.