Money thoughts for a lifetime

1 Money is important as a means to an end, and that end is arguably financial freedom. This happy state of affairs is defined by not having to work for a living, so one is freed to do whatever one deems important in life. This can be spending more time with the kids, travelling around the world, or taking time off to pursue a cause. With growing income inequality, ordinary people slogging in middle-class jobs might think they can never retire in their lives, and have to keep working till they are over 70. We beg to differ. For a start, those earning the median salary of $3,000 upon starting work stand a good chance of being able to attain financial freedom before they turn 60, or even 40 or 50.

This is because of two reasons: the mathematical effect of compounding, and the good financial habits one can build up over time. But you have to plan ahead, and above all, start young.

2 One question: Is one million dollars enough to retire on? Singapore is well-known for having one of the highest proportion of millionaire households in the world. Based on recorded spending patterns and a conservative rate of return of 4 per cent a year, along with inflation of 2 per cent a year, we calculated that $1 million would last a typical HDB family spending $3,600 a month today for 30 years. This means that a million dollars should theoretically be enough for a 50-something breadwinner to retire comfortably with. Of course, families spend more than $3,600 a month on both necessities like healthcare and more extravagant things like overseas holidays and overseas education. And the statistics show that a typical family living in a private flat or landed property could spend anywhere from $7,000 to $9,000 a month. In these scenarios, $1 million would not be enough to retire on.