Wednesday, October 20, 2010

My Reservist and what I have learned

I'm back from reservist. I really can't believe how I survived the past month of busy-ness. But back here I am, still in one piece, fortunately.

I talked to many of my peers while in reservist, and have quite a few interesting insights. Unlike what the newspaper make out what the age group of 20~29 to be (in terms of high debt), none I knew while in reservist were under that category. However, I was rather aghast that while most know that financial planning is important, most do not know how to plan their finances, nor know how to invest their monies.

Some of the financial stats of pple I talked to and asked are below. It was rather interesting and enriching.

Person 1. Masters student with scholarship allowance of $3k/mth
Surprisingly, he has  not much savings. While he's not in debt, he spend quite a bit on travel. However, that's not his main expenditure. Interestingly, he spends nearly $1k a month on insurance and savings plan, all "advised" by his financial advisor. As such, he has not much savings left. He has since graduated from his masters program, and starting on a salaried job soon. Same age as me.

Person 2. First class honours student with salary of about $4k/mth before CPF
He has cleared his CPF education loan (I have 6.6k left to clear) and has about 30k in savings now. No car nor any other assets. Interestingly, he spends about $700 a mont on insurance and savings plan too, again as "advised" by his financial advisor. Same age as me.

Person 3. O levels education. Salesperson with average commission $4k/mth
I did not ask him too much, other than the cost of his car and his average salary (excludes bonus I suppose). His car is a VW that costed him $82k, and the monthly loan repayment is about $800. 2 years older than me, and married with kids.

Person 4. O levels education. Employee of $1.2k/mth turned businessman of 3 businesses
This is the person I'm most impressed with. He's 2 years older than me, and married with kids., complete with his SUV. One of his business has a turnover of 600k annually at the moment. This business was started with only $1k in capital! (FYI, I have watched his business grow since inception 2 years ago.) I talked the most to him, and learned quite a fair bit of things. His monthly expenditure comes close to $5k and he can still afford it easily as his business is still growing.

At the moment, this businessman friend is living mostly on his savings while reinvesting most of his business profits back into his business to grow it further.

What I have gathered is, it appears that at times, higher education is a double edged sword in terms of financial growth. In a way, it ensures that you can live comfortably as a middle class. In another way, it binds one to being employed, and makes one more unwilling to take on risks. This makes it emotionally harder to break out of our comfort zone to move into the unknown.

Face it, how many of us would be able to climb the corporate ladder to become a CEO and earn probably upwards of $30k/mth?

One revelation I had too was that as a business owner, the salary you draw from your business is not the only amount that you have. You are actually paid for growing an asset (your business). Your asset and networth continues to grow even as you pay yourself a salary.

Next year will be the year I'm going to experiment further. Stocks will probably continue to be of lower and lower priority as I attempt to generate funds through other ways.

Afterall, like what my businessman friend said. "What's $10k a month? It's nothing at all! You can't do much with that!"


  1. i think that is very well said. its good that most of your friends earn more than me and probably know how to use their money.

    i wish you best of luck in your business ventures.

  2. Hi JW,

    Hear, hear! I like this post. Indeed, I have tried to impress upon a friend that he should leverage on his connections and start his own business. However, the attached risks and having to leave his comfort zone just hold him back.

  3. Hi momo,

    Huat ah :) I'm starting my own 'shop' too, hopefully next year. Once started running it for a few years on my own, I'll see if I can branch it out so that I don't have to run it anymore :)

    Like you, less on stocks. Really no time turning up a few ks here and there sporadically.

  4. Hi fellow JW.

    It's surprisingly common and disturbing about the insurance part. I know a few of my friends (i'd say about 40%) who are "indulged" in paying huge premium sums ang0401
    monthly on insurance as well. For me, I opted for the most direct insurance - term insurance for the basic coverage of death, TPD and CI, coupled with hospitalisation insurance.

    Perhaps these grp of ppl dun have time to manage their finance themselves.

    But i beg to differ slightly. Different ppl have different pursuits in life. As long as the person is happy (traveling, buying cars etc), so be it lor.

    On a side note, no offense to anyone, I realise a couple of my friends who lost their parents (they passed away in the 40s and 50s) are more willing to spend (to a certain extent splurge) money. Just an observation.

  5. This is an interesting post. Ya I agree that generally the more educated one is, the more unwilling is one to take risk. Also perhaps after studying and putting so much effort into one field, one is more unwilling to venture into something else.

    May I ask what good-earning business is it that your friend does, which could be started with 1k capital? Quite impressive indeed.

  6. Hi Drizzt,

    thanks for your well wishes! Actually I just have some ideas in head, but I'm still not sure how to really implement it yet. Will see as it goes.

  7. Hi AK,

    indeed, it's not easy to leave one's comfort zone.

  8. Hi LP,

    congrats on setting up your own shop! Which location are you planning?

    I thought of it, but that would have to wait a year more.

  9. Hi JWT,

    yup you are right. The most important thing is to be happy :)

  10. Hi Shine in Rain,

    I'm afraid I can't say much as it will reveal his identity too much.

  11. Yeah... I agree.. the higher educated u are, the more risk adverse one is... I am such of them..

    I am holding a bachelor degree and drawing 4k salary, 29 this year...

    The only way for me to grow my investment is mainly through equities...

    I dreamt of starting a biz but i do not know what i want to do... Kept thinking that the startup cost in SG is high and also nothing caught my fancy yet...

    Guess I am a pretty lost soul in SG..


  12. Hi Zelphon,

    I'm afraid I'm a little risk adverse as well with my degree.

    But I know one thing. Even if I quit my job, I can still survive. And with my dividend portfolio intact, I was thinking of leveraging on this dividend income source to take some risks...

  13. Hey I just want to say that you're kick-ass amazing. I'm an engineer as well and I write finance books as a hobby, I dabble in dividend investing but I'm amazed at what having two jobs can do for this strategy and really want to showcase your story in my fourth book.

    I want to get you a drink and pass you copies of my book ( FOC, of course ).

    Email me at waichung.ng@gmail.com.

  14. Hi Christopher,

    I prefer to remain in lower profile at the moment as I'm still on the networth-growing phase of my life. :)

    Thanks for your invitation though. I will still email you to keep in contact.

  15. Interesting finding - the more educated, the more well paid for a start, the more risk adverse. After all, why take the risk when the opportunity cost is so much higher?

    I suppose the collorary is "High risk, high return; Low risk, low return".

  16. Hi Lizardo,

    I would say that high risks high returns does not really apply here.

    As you mentioned, the higher your education, the higher your opportunity cost, and hence your risks. Hence, risk is relative, and would likely depend on a person's education level.


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