Sunday, 18 September 2016

Increasing our net worth by S$10,000

On 15 Sep 2016, the Ministry of Manpower (MOM) released the quarterly Labour Market report. I'm not going to reiterate the statistics but will highlight these important points:
  • Unemployment rose further among residents aged 30 and above
  • For those aged 50 and above, unemployment rose for the fifth consecutive quarter
  • Unemployment rates among degree holders rose to their highest level since 2009
  • Highest second quarter redundancy since 2009

Professionals, Managers, Executives and Technicians (PMETs) like us should monitor the local labour market to pick up on trends like that. If the above does not light a fire under your ass to get your finances in order, then I guess only becoming one of those unemployment and redundancy statistics will.

It's easy to become complacent in our jobs. The Singapore Government keeps going on about transforming the country's industries, creating higher quality jobs and helping displaced workers through programmes such as SkillsFuture. These initiatives require a long time to take effect and might not be enough to reverse the labour market trends.

The way forward appears to be developing a technology-driven knowledge-based economy. Have you noticed the drive by the Government for Singapore to become Asia's Fintech hub? Just look at the new courses in Infocomm Technology (ICT) offered by education institution General Assembly (GA) in collaboration with the Infocomm Development Authority of Singapore (IDA).

My colleague from another division actually just resigned to do a career change by completing the 12 week Web Development Immersive course starting from Sep 2016 to become an entry level web developer. The tuition fee for a Singapore citizen like him is S$3,450 but the tuition fee for a non-Singapore citizen is S$11,350. That's a big difference and obvious incentive.

It's definitely an exciting new path for him but more possible in his scenario. Because he is young, only worked a few years in his first job at the accounting firm and has minimal financial & family obligations. Trying to make the same move when you are older, not as quick at picking up new knowledge in a different fast-paced industry with significant financial & family obligations will be much tougher.

Technology and automation will transform Singapore's industries but the high quality jobs created will be fewer in numbers and probably more suitable for the younger generation. Displaced workers from the older generation will struggle to be relevant in the new world.

We were raised with the notion that our peak earning years would be in the 40s to 50s. I reckon that's no longer true. It's probably in our 30s to 40s now and is becoming evident from the labour market statistics.

This means we have about 10 to 15 years until our earnings start to decline or even disappear. Let's assume the pace of technological advancement increases at an accelerating rate. We are now down to 10 years before we get impacted. Still think retirement is that far away?
It might come earlier than expected and not in a good way. The only question is how ready you are financially for forced early retirement. We worked the math for ourselves and figured we need to increase our net worth by at least S$10,000 every month for the 10 years.

Good news is we have already been achieving that target amount for the past 8 months. At a minimum, the S$10,000 increase of net worth in each month consists of:
  • S$2,000 of investment cash regardless of how much funds are invested
  • S$2,000 of cash on hand after spending on discretionary and non-discretionary expenses
  • S$4,000 of CPF employer and employee contributions
  • S$2,000 reduction in the mortgage liability

Bad news is it leaves us with little room to manoeuvre. And we ponder over questions such as whether we should explore interesting job opportunities at lower pay or potential business opportunities at the risk of delaying financial independence. Even the conflicting desire to leave Singapore and build a new life in another country (not Australia) but yet wanting to settle down and start a family in Singapore.

It's a win every month to get the S$10,000, which is a nice and round target number to hit. It represents a balance of meeting our personal & professional development goals vs the pursuit of happiness and job satisfaction. But I wonder whether the ever elusive life goal of finding fulfilment, meaning and purpose will tilt the scales towards the latter.


  1. are you paying off the mortgage with CPF? if so, then it might be double counting the increase in networth?

  2. Singapore is too slow moving to become a fintech hub. Adoption of fintech is very slow moving in Asia.

  3. I am glad you are aware of the work situation and I believe you will be reach your financial independence goal quickly.

    On your observation that peak income at 40 is quite true for many. Also in some jobs, young people are favoured. First, they could be more likely to work long hours. People deemed that they are smarter and think quicker. When hearing this might make the young employee happy, but we all grow old.

    Your dilemma of taking a risk in a more interesting job or doing a business was faced by me but financial independence is not only for me but for my wife, hence there was a minimum saving that we want to achieve before trying any radical things. I sometimes joke that I am a low growth dividend share. A few years more for me.

  4. There is less and less importance being placed on people these days and it's important that we learn how to maximise our potentials as early as possible before we become obsolete!