Today’s Straits Times featured this. The reporter, Jonathan Kwok, did some back-of-the-envelope calculations that suggested that even for an average income earner, it was possible to have $100,000 in savings by the age of 30. Before skeptics cry foul (as in the case of the taxi driver who said it was possible to earn up to $7,000 a month), let’s examine the assumptions.

100K before 30? Yes you can!

100K before 30? Yes you can!

From the reporter’s calculations, it seems to me that the assumptions are pretty reasonable. While he is referring to university graduates which definitely do not make up a majority of the early 20s age group and I don’t what the earnings power of a polytechnic graduate will be by the time they reach the age that a university graduate starts work. But his assumptions will still hold if the polytechnic graduate starts with a pay of $2,500 and that sum increases by 5% over the next four years (the time it takes to get an honours degree). Is that realistic? Well, it doesn’t sound too far-fetched to me.

Next, before we miss the forest for the trees, the big idea from his calculations show that it is the savings rate that would matter as someone who goes along the ‘pure savings’ route would also hit the same target even if he didn’t invest a portion of his income.

The skeptics will then say, “Ok, in theory, there’s no difference between theory and practice. In practice, there is.” I didn’t actually want to say this now as I considered it to be a personal experiment for the next 10-15 years but since this article came about, I thought it might be a nice real-life example to show that the numbers work.

I’m going to be 30 this year and yes, I have a six-figure portfolio (actually, I already hit this level last year). This excludes CPF and the amount I keep for day-to-day transactions. While I may have been born into better circumstances that most people, I started this portfolio with just $6,000 with no manna from heaven along the way. And before anyone thinks I am an investment genius (I am not!) or work in some high paying job (I don’t.), the thing that did the heavy lifting was my savings rate.

Did I miss out much in life by saving so much? Honestly, I think that these are some of the best years of my life so far. I got married (which doesn’t have to cost a lot if you don’t want to), bought a flat (which is easily covered by CPF. You need help if you bought a million dollar apartment on an average combined income), every week I do things that I like (which happens to be manga, anime, movies, reading, writing and these are cheap to do). Lastly, it wouldn’t be possible if I married someone who thought and acted differently.

I don’t think I’ll be saying much more about my portfolio. Like I said, it was meant to be a 10-15 year experiment so updates will come only at key milestones.

Advertisements