Planning the rest of your life

WHEN thinking about the little question of how to live for the rest of your life, numbers can loom large, especially if you're not born with a silver spoon in your mouth. These cold, hard figures are necessary to do business with life.

They can be classified under two broad categories which, imagined as gigantic billboards, read "SPEND" and "EARN". "Spend" is far more complicated than "earn".

A place of one's own in Singapore, for example, might cost up to $1 million if you're looking at a condominium apartment, and half that if you're married and looking to buy new public housing.

Then, there are other nitty-gritty details, generalised very grossly as: rent or mortgage payments, eating out, groceries and bills, transport, a domestic helper, clothes and shoes for women, gadgets and other toys for men, tuition for kids, healthcare, upkeep for parents, the occasional holiday abroad.

Under "earn", most people will have only a single item: their monthly pay cheque.

That's a huge inequality right there. We don't even need to get into the income gap. And so many people feel they do not have control over their finances.

There is only one number contributing to the credit column of their bank account at the end of every month. By contrast, there is a seemingly infinite list of debits.

For the working young, the picture gets grimmer given low interest rates and longer lifespans. Do you really want to work every year, month, day, and endure the daily MRT crush, for the next 30 or 40 years until you hit 65? And even after all that, will you have enough saved to survive the next 30 years of retirement, given that you can live well into your 80s and even 90s on current life expectancy trends?

The number-crunching can get overwhelming and people reach for their financial adviser or insurance agent.

But sometimes, the details don't matter so much when it comes to deciding how to spend and earn.

One gauge people focus on is what their peers are doing. This phenomenon, known as "keeping up with the Joneses", refers to the powerful influence of people's spending decisions on their neighbours, colleagues and friends.

If most people around you are dirt poor, like Singapore in the 1960s and 1970s, you'd be happy watching some monochrome TV for entertainment at the end of a long hard day at work.

During the weekend, a movie is a treat. There is not much keeping up to do.

Today, society is far richer and more diverse. More than ever, people are also bombarded by a torrent of information on how other people around them lead their lives. Facebook is an effective way to show off your latest gourmet restaurant meal or that deluxe holiday to Bhutan.

The public sharing of these experiences tread the fine line between conspicuous consumption and the edge of cool - enough to elicit admiring nods and "likes" of approval from your friends, but perhaps make them a little envious. The race to get ahead does not just cover the "spend" category. Right from graduation, some people will dominate the "earn" rankings, making six figures a year straight out of school, getting 12-month or 24-month bonuses, and so on. What's a young and reasonably competitive person to do?

Given the inevitable benchmarking against one's peers, a certain strength of mind and perspective is needed.

Strength of mind is needed to catch up, if income equality is all you are after. After all, if you cannot make as much as your friends, then work on saving more.

There are many items in the "spend" category, but just one in "earn".

For those with tiring day jobs, it can be easier to cut costs than to figure out how to earn more money. Once even a few thousand dollars are saved, investing that can bring a few hundred dollars of dividends to add to the "earn" category every year. Part-time jobs can bring more.

A high savings rate, even on a below-average wage, goes a long way. Earn $2,500 a month but save half of that, and you'll hit $90,000 by the end of six years without having to invest a cent.

Without saving, even the above-average earners fall short. Bloomberg recently featured a 77-year-old former vice-president of marketing for multinational oral hygiene firm Oral-B, who earned the low six figures at the height of his career. But he managed to save only US$90,000 by 2008, before the financial crisis gave his investments a beating.

The will to cut down on costs is one thing. Getting some perspective is another. Singapore's median income last year was $3,000 a month.

About a third of locals earn under $2,000. Many don't have the luxury of planning for retirement, but will have to depend on their children or the state.

Other than empathising with the less fortunate, the other way to gain perspective is to look ahead.

If you're really going to live into your 90s, the wealth accumulation game is a marathon, not a sprint.

There is no telling what will befall the world in between. But there will always be opportunity.