You have to be careful when you walk into one of those bars where there’s no menu and they create a cocktail based on your personality. Because there’s always the chance the bartender will read your personality as being “high maintenance”, and you’ll get slapped with a three figure bill for those three cocktails you gulped down.
Too bad you assumed you’d be able to foot the bill without getting a heart attack. Instead of swallowing your pride and asking about the price (or discreetly checking Hungrygowhere before stepping into the bar), you’re now stuck, well, getting a heart attack.
Here are four other money assumptions you should never make.
That you will receive a bonus/increment
A bonus is supposed to be like that star your primary school teachers used to draw on your homework assignments to show you had done a good job. Just because you thought you had drawn those bar diagrams really nicely didn’t mean you got to march up to the teacher and demand why you didn’t get the star you were “entitled” to.
The same goes for bonuses. Unless it’s explicitly stated in your contract that you receive a 13th month bonus, it’s entirely discretionary. If your boss withholds your bonus because you don’t sit at the office till 9pm every day despite producing as much as the next guy, that makes him an asshole, but he has every right to do so.
The worst thing you can do is to assume you’ll get a bonus or increment, and then start spending more in anticipation. For instance, if your bonus is given out in March, don’t go and book a lavish holiday to Paris in February thinking you can pay off your credit card bills with your bonus money.
The same goes for annual increments. In these tough economic times, employers may be stingier with their annual increments, and let’s not forget that many local companies don’t even give their employees a pay rise after promoting them. So try to refrain from signing up for that year-long membership at the pole dancing studio or scheduling that LASIK surgery until you’re sure you can afford them.
Fresh-faced rookie employees and fresh grads are the most likely to assume they’ll get nice bonuses. It takes just a few years in the workforce to discover the cruel truth.
That your home is going to be a great investment
You often see young couples signing up to buy 5-room flats when they don’t plan to have kids, or PMETs in their late 20s or early 30s bravely applying for a huge mortgage they barely qualify for, to buy a condo they’ll spend the rest of their lives paying for.
People already complain about the high cost of living, so why do they voluntarily opt to place such a huge financial burden on themselves?
That’s because in the back of many people’s minds, their property is going to triple in value in ten years, and they’re going to become overnight millionaires.
Yes, there are still people who think that, despite the fact that the property cooling measures have put a serious dent in the property market for the better half of this decade.
The government has expressly stated that the cooling measures aren’t ready to come off yet. It’s a bit like how your parents would tell you they you would get you a pony “next time”. There is the possibility the cooling measures will be permanent, and even if they do come off someday, there is no guarantee you’ll make much money on your property, especially if it’s leasehold and lots of time has elapsed.
That your CPF savings will be enough for retirement
The retirement-readiness of Singaporeans is a huge national issue right now. It’s always a little sad getting served at McDonald’s by someone your grandparents’ age.
It’s fine to factor in your CPF savings as part of your retirement plan. In fact, if you hit the minimum sum by the time you’re ready to retire, the payouts aren’t exactly going to be impressive, but they’ll be a significant amount for someone who’s living simply.
The problem is when you don’t even bother planning for retirement and have no idea how much you have in your CPF account, but assume that like Cinderella’s fairy godmother, your CPF savings will step in and save the day once you decide you’re done with work.
This is especially so if you’ve used your CPF savings to buy property. It’s quite common to totally drain your account to make your downpayment, and then continue to rely on CPF to make your monthly loan repayments.
This is going to dramatically reduce the amount you have in your account when you retire, and it’s possible to have close to nothing if you really go all out with your home purchase.
What financial assumptions have you made and then later regretted making? Tell us in the comments!