This appears to be the sentiment of a huge majority of working folk here, as they have made great strides in saving more and reducing debt after being hit by inflation caused by global changes in recent years.
In a new OCBC survey of about 2,000 working adults aged 21 to 65, 94 per cent said they have been saving regularly – a significant improvement from the pre-Covid-19 poll in 2019 when 87 per cent said they were regular savers.
And 70 per cent are also disciplined in spending within their means by sticking to their budgets.
There is also a slight improvement when it comes to managing credit card debt and personal loans – 89 per cent now say they can manage their expenses well compared with 86 per cent in the 2019 cohort.
But there are at least five financial sins that continue to whittle away the savings of many people, and what is worrying is that such trends are unlikely to abate any time soon.
1. Gambling
About 40 per cent of those polled are still betting more money than they can afford on Lady Luck. While it is only human to make regular small bets or the occasional bigger ones on festive draws, you are in danger of becoming an addict if you cannot resist betting hundreds of dollars every week.
As in any game of chance, spending more does not ensure that you have a better chance of winning than those who spend much less.
Ultimately, you will become the biggest loser if you bet more than you can afford because banking on winning in gambling is never a viable retirement plan.
2. Not settling credit card bills
It is such a big contrast – some people take pains to put their money in risk-free bonds and fixed deposits that earn 3 per cent to 4 per cent, and yet there are those who just let their credit card debt incur a whopping 25 per cent annual interest charge.
This unhealthy habit is especially acute among those under 30, with more than 40 per cent of them often just paying the required minimum sum every month, the OCBC poll noted. This means the balance and the interest on the debt will roll over and continue to grow.
It is very hard to get out of a credit card debt trap, even if it is just $20,000. You will need about four years to clear this if you pay $600 a month and almost two years if you pay $1,200 a month.
Before you charge a holiday or a luxurious item that you cannot afford on your cards, ask whether you are prepared to suffer financial ruin over such expenses.
3. Speculating on stocks
Many young investors have been betting on popular US technology stocks because the volatility can result in price swings of up to 10 per cent in a single day. Of course, most people focus on the instant wins, without realising that such gains can also be erased when the price swings the other way.
The poll found that 26 per cent of investors would make excessive gambles with the hope of quick gains in the stock market. If you follow the horde blindly and make bets on stocks based on popular sentiment, you could end up with huge losses if you are slow in cashing out when the price drops.
4. Keeping up with pretences
Many people like to flaunt their “wealth” on social media, with the intention of making their friends believe that they are living the high life. If this is true, the number of people in the workforce should drop drastically, since there are already so many wealthy people living among us.
The reality is that 27 per cent of young people who do so are actually spending beyond their means just to live it up in a dream world that they cannot afford. For instance, they tend to splurge excessively on concert tickets, holidays and branded accessories.
There is no joy in living in such short-lived pretences because you will just fall deeper into the debt trap.
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5. Sponging off friends and relatives
All of us loathe colleagues, friends or relatives who are quick to join the group for outings and meals and yet often “conveniently forget” to pay for their share. As if that is not bad enough, about 6 per cent would even ask for loans that they would not bother to return, noted the poll.
Ultimately, all of us should think twice about encouraging all these financial sins because nothing ends a relationship faster than disputes over money.
High interest rates led to more savings
Higher interest rates in the past few years have imposed burdens on people with loans and mortgages to pay, but they have certainly brought much cheer to those with extra cash to spare.
The higher returns for safe investments such as fixed-income securities, bonds and deposits have encouraged around 10 per cent more people to save for their retirement.
Those who do so even saved about 10 per cent more, by allocating up to a quarter of their monthly salary for such investments, up from about 16 per cent of their income previously.
As a result, over 60 per cent of working adults here can enjoy additional income from such risk-free investments.
Unlike property investments, which require substantial cash outlay, most people can set aside fixed-income savings that are based on their affordability.
As a comparison, about 20 per cent of investors here have additional properties that would enable them to earn rental income.
Younger couples are not as savvy
It is common to assume that couples who are working but have no children are probably quite well off since they enjoy two sets of salaries, but the OCBC poll appears to show otherwise.
For a start, most of them do not seek professional advice when it comes to investing as they prefer to do it on their own, such as making bets on the US stock market via online platforms.
Not surprisingly, about 60 per cent of them have not even started planning for their future simply because they are focused on day-to-day expenses.
Many of those polled even indicated that they have no intention of making such plans in the near future.
Some of them may have more disposable income, but about 40 per cent have the tendency to overspend because they do not monitor their expenses.
It is no wonder the poll found that many of these younger folk underestimate the amount needed for retirement, especially when they wish to retire by the age of 55.
They have not made any viable plans for retirement and yet hope to retire in their own private homes, as well as be able to afford to drive “high-end” cars and have long holidays at least twice a year.
Ultimately, the purpose of such surveys is to highlight some pain points of life so that we can be more enlightened and make plans for them.
Many people aspire to retire early so that they can start enjoying the good life. You can most certainly aim for this, but note that money does not drop from the sky so you need to work hard to plan for it now so you have more to spend in the future.
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