SGD100k by 30... seriously?
Ok let me put this in perspective. This "challenge" was for an average graduate to save SGD100k by 30. I'm assuming that this youth is not mired by debt or that his family is in dire circumstances. Simply put, the fresh grad is living an ok life, staying with his parents and just wants to save up SGD100k by 30.
Let's start with some calculations to see if this is even possible. Single male. Males have a more challenging time as there is a 2 year handicap due to National Service, so let's use a male for the scenario with a 6 year horizon similar to his example.
Using his numbers, starting pay SGD3k per month. If you aren't getting SGD3k per mth, then please go and find some place that pays this amount. He uses 15 mths of pay per ann which includes 3 mths of bonus.
Pay increment 4.5% per ann, approximate annual income below.
1st yr - 45k
2nd yr - 47k
3rd yr - 49k
4th yr - 51k
5th yr - 53k
6th yr - 56k
If we add up all of these we'll end up with SGD301k. Let's remove 20% which will be for CPF contributions, remaining would be SGD240k (SGD301 x 80%)
Ok looks great currently if the person at hand doesn't eat or anything.
Next his savings style is ridiculous. Like most people, he starts talking about saving a percentage of his income. Why do people even do this? Let's do this the EarlyretirementSG way. We're going to spend a constant amount every month for 6 years and save everything else. Let's try to work backwards for now.
With the remainder at SGD240k and the target to save SGD100k, means we can spend SGD140k in 6 years or about SGD23k per year. Which leaves about SGD1800 per mth.
EarlyretirementSG is going to work on SGD1500 per mth so that there is an additional SGD300 saved per mth for emergencies and to account for "inflation" across the years. But I don't think inflation is so significant unless you're really spending a lot. Example if you buy a SGD3 bowl of noodles vs SGD3.50, it doesn't make much of an impact.
So what would EarlyretiremenSG be spending on using his SGD1500 per mth.
The scenario is a fresh grad out to work. So he needs to eat and get to work.
Approximately 20 work days in a month,
SGD10 per day for food means mthly food cost is SGD200.
SGD3 per day for transportation, mthly would be SGD60.
Handphone subscription at SGD40 per mth.
Clothing and shoes at SGD100 per mth (That's a real lot of money for clothes but I'll let him have it.)
Insurance at SGD200 per month, since he is already saving up for himself, he should be getting term insurance as there is no need for a savings component such as endowment/whole life policies. SGD200 per mth is plenty.
SGD150 per week for weekends out or SGD600 per mth up to him to allocate between food/entertainment/taxi.
Misc expenses at SGD100 per mth (Yea maybe some gifts for friends, birthday celebrations, whatever.)
Current spending is at SGD1300
It's up to him to determine how much he wants to give to his parents and how much he wants to spend, considering he can use from SGD1500 up to SGD1800 per month.
I believe that I've actually given him a lot of leeway in entertainment and misc budget. About SGD700 per month. That's an insane amount which can be used to reallocate to his daily food budget. Not to mention why would someone spend SGD100 per mth on clothes. He can roll over excess funds for a holiday, whatever, he should be a mature adult and be able to work within the annual budget. There's plenty more to trim off if I was the person handling the budget. But I hear so many complaints that to save SGD100k by 30 would take so much sacrifice so I decided to allow the budget a lot of flexibility.
I'm not going to go into investment returns as they will fluctuate and the end number might be less than SGD100k. Maybe a fixed deposit just to make the money work for you. That's negligible. I'd prefer to say to just invest the amount since this plan should be for the long run instead of just 6 years. But that defeats the point of this scenario since it might end up lower than SGD100k.
This doesn't change by much if the person wants to get married and get a HDB.
The HDB usually pays for itself using the CPF funds.
Leaving the marriage costs.
Now there's no way you can win them all. Meaning you won't be able to save up SGD100k by 30 and have a fairy tale wedding without any sacrifices. So you'll have to keep the wedding costs low and work out of the budget above. There's going to be a lot of reallocation and roll over to save up for the wedding and keep to the target of SGD100k by 30. But it IS highly possible.
Does this make you more optimistic about saving up SGD100k before 30? Do you think you can do it?
Remember, the journey of a 1000miles begins with the first step. If you don't save SGD10, you won't save SGD20, you'll never reach SGD100 and SGD1000 and so on. Don't underestimate the first SGD10. Many people think that it's only SGD10 and don't make the first move. They're waiting for a lump sum of SGD1000 before they start saving. This should not be the case. Every dollar counts. Waiting just wastes all those SGD10 which could have added to become SGD1000 if you had started already.
To end off,
"Whether you think you can, or you think you can't--you're right.”
― Henry Ford