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4 Reasons You Need to Be Financially Prudent Despite a Steady Paycheck

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Joanne Poh

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On the surface, Singaporeans don’t look like glass-is-half-full, optimistic rays of sunshine. We’ve gained a reputation for being kiasee worriers who always anticipate the worst.

But is that reputation really deserved? I don’t think so. In fact, when it comes to spending money and lifestyle-upgrading, Singaporeans can sometimes be stupidly optimistic.

It’s not uncommon for high-earning PMETs to live from paycheck to paycheck because they want to live the high life, and they think they’ll always be able to rely on their hefty salaries to keep going. Singaporeans are failing miserably at preparing for retirement, while young Singaporeans prefer to spend all their money on $7 coffees at hipster cafes than maintain any savings.

When you think about it, behaving in that way actually requires a huge dose of optimism—about your financial future and your ability to continue bringing in the big bucks. But here’s news for you—unless you’re a civil servant with an iron rice bowl, that steady paycheck you’ve been enjoying may not be as dependable as you think.

Here are four reasons to be on your guard despite that healthy paycheck.

 

You can get retrenched at any stage in your career

Getting fired isn’t something that happens only to obvious slackers and underperformers. Thanks to the lacklustre economy, retrenchments have been on the rise.

The most widely publicised victims of retrenchment have been middle-aged PMETs, who’ve found it very difficult to replace their incomes. The problem is compounded by the fact that some of these workers have often signed themselves up for hefty housing and car loans, while ignoring the need to accumulate savings and investments. For these people, finding another source of income ASAP becomes crucial, even if it means taking on a job they’re terribly overqualified for and that pays them only a fraction of their previous salaries.

But middle aged folks aren’t the only ones facing retrenchment. Layoffs in the banking industry, which look set to rise in 2017, look set to affect scores of younger workers in their 20s and 30s. When banks decide to relocate jobs to cheaper countries, workers at all levels get axed overnight.

It’s quite common for young PMETs to live lavish lifestyles, thinking nothing of spending hundreds of dollars on good food, alcohol and shopping every weekend. The fact that those who aren’t married usually live with their parents adds to the lack of financial prudence. Just be aware that 2017 isn’t going to be the safest year to buy that Chanel handbag or take out a car loan.

 

Your job may be the reason you’re spending more

A higher salary doesn’t always translate to more savings. Certain jobs and career tracks can indirectly lead to your spending more.

Anyone who’s ever taken on a PMET position at Raffles Place should know that it’s not uncommon for people to spend over $20+ on lunch every day with colleagues, knock down $25 cocktails after work and splash out on $3,000 handbags in a bid to look more polished at the office.

For many people, especially fresh grads who are entering the working world for the first time, this lifestyle inflation happens unconsciously. One day they’re broke students surviving on a diet of instant noodles and Subway sandwiches, and the next they’re suddenly able to apply for credit cards and buy a Prada bag with a single paycheck.

Pressure to spend can also come from your colleagues and bosses. It’s not uncommon at all for lady bosses in industries like PR, banking and law to pressure their female subordinates to wear make up and dress well, and leading a more modest lifestyle than colleagues on the same salary can lead to raised eyebrows.

 

Your wages may not rise as fast as you imagine

I can’t tell you how many fresh grads look at their seniors and think, when I’m earning as much as them, I’ll buy that car and live the high life.

They’re missing one thing—you should never assume your wages are going to enjoy a meteoric rise just because there are some people in your industry who’re doing well. Whenever you try to project your future salary based on your current career track, be conservative in your estimations.

Given the fact that the economy is slowing, many Singaporeans are going to be stuck with slower wage growth than their predecessors. Those who are in sales jobs where commission makes up a large part of their take-home pay may also find their takings shrinking thanks to sluggish market conditions and slowing trade.

 

Emergencies can happen to anyone

Many Singaporeans feel secure despite living from paycheck to paycheck because come what may, their next month’s paycheck will definitely come in. You might be surprised, but even decently-paid civil servants sometimes live like this.

The problem with living a lifestyle like this is that you’re totally unprepared for unexpected expenses and emergencies.

For Singaporeans who still live with their parents and don’t have to worry about their fridge breaking down, this can seem like a remote possibility.

But there are still a range of things that could happen. You could suffer from a minor medical emergency like an eye infection and have to go to the hospital, and yet not be able to make an insurance claim due to not getting warded. Your laptop or mobile phone might break down, and we all know that counts as an emergency for most millennials.

That’s why you absolutely need to maintain an emergency fund, no matter how stable your job is. Your emergency fund should be equal to a certain number of months’ worth of spending (between 3 to 6 months for wage earners).

The larger the proportion of your paycheck you spend each month, the larger your emergency fund should be. So, if you spend every cent of your paycheck each month, you actually need a larger emergency fund.

Do you have a stable job and yet feel financially insecure? Tell us why or why not in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.