Work has been a little stressful and sian recently and since i haven’t write about some personal finance stuff, this article will be it.
I recently linked up my friend Colin with a journalist because they are interested in his dumpster diving story. You can read What Kind of Treasures Can Singaporeans Find in Their Dumpsters? A lot of Stuff! if you are less familiar with my friend Colin.
They want to know how we all can save money by being a cheapskate like Colin.
Cheapskate may sound very degrading for a person but Colin is a self-confessed cheapskate. He has his own definition, which i might share in a future article.
Colin told me he was asked “How much did you spend a month?” and “What is the minimum for you to survive?”
“I answered $190 and $40 per month. Then he asked for a breakdown wahaha.”
I had to remind Colin that mortal Singaporeans cannot quite comprehend that because of their “circumstances”. “They will think you got so much things for free.” I say.
Then he adds: “We were discussing about you Kyith, and I told him your expenses were way higher than mine. You probably more motivated to invest because of that. I told him Kyith and I can probably survive an economic crisis way better than anyone else in Singapore.”
Eh. Almost all of that is true except the motivation to invest part.
So Colin gave me a roughly breakdown of his spending and I push back some parts to him not to frustrate but I think it is healthy that our perspective to be challenged. In this article, I am going to share how I look at his breakdown and my reflection about it mainly if I wear my wealth planning hat.
What Makes up that $190 Monthly Spending?
I tried to arrange the stuff in a table but I think it is still pretty complicated.
For some context, Colin stayed in a 3-room HDB flat that he owns, fully paid off. He rents out one of the room, so he does get rental income and therefore his numbers will include certain expenses shared with his tenant.
His monthly spending works out to be like this:
Colin’s monthly spending makes me look as if I am being irresponsible with my money.
Even if I don’t ask, you probably be able to poke enough holes at this spending given what we have to live with in modern times.
So I asked those questions.
On the $100 Per Month Food Spending
The large part of his expense comes from food and his food makes up of free office food, Cai png and home prep food. Colin says his Cai png is $3 and often consist of one meat and one vegetables. I can see the price of where he lives to be like that.
At my office, the cheapest Cai Png has $0.70 for vegetables and double that ($1.40-$1.50) for the meat. And usually the rice will come up to $0.60. So that is about slightly less than $3.
You can see what his meals consist of. What many younger folks may not realize is that as you get older, you are not the big eater that you once were. The lack of willpower due to work stress might make you crave food that are higher quality, that taste nicer, more sweet, that you cannot prepare yourself, and also more expensive.
Colin eats very little. He noticed that when he eats 3 meals a day like most people, he got very fat and he was sleepy all the time. Then he cut down from 2 to only 1 meal a day. That’s when his body feels the most energetic.
His lunch is heavier and usually dinner is lighter with bread, oats, fruit, cookies.
I suspect that there will be some food politics comments about it later such as “Kyith, you know, eating so much processed carbs, sugars is not going to do his health any good. There is an opportunity cost for eating poor quality food.”
Well there is nothing much I can do there.
I realize that if I look at my food and groceries spend there are a few months it ends up around $70. The more normal months will be around $120 per month for one person. (For those interested, I would regularly post my monthly spending budget on my Instagram here) This is usually aside from the meals that I spend for birthday lunches, welcome lunches, celebrations, food that you treat people with.
Colin’s $40-60 Monthly Bare Survival Minimum Spending
I think the journalist asked but Colin and I shared this kind of two-level spending thinking:
- Level 1: How we normally operate a sensible lifestyle.
- Level 2: The Siege-mode lifestyle. The lifestyle when things are under threat.
I don’t think everyone thinks like that, but I do think prudent people indirectly have a two-level spending mindset, even if they don’t know how to describe it.
A bare minimum spending is one like a caveman spending to stay alive. Just in case anyone says this one is not livable, read that definition again.
Out of all the spending, utilities, phone and broadband will go to zero and he would keep his food to $40. There will still be a $20 Town Council Fee.
He would still have his smartphone but he can go to the library to use the free WIFI there. Since he would not have a phone subscription, there will be no WhatsApp and only Facebook messenger. There will be no transport, no Malaysia. Recreation will be walking around Singapore.
So all this works out to be $60 monthly.
Some of you might find this incredulous but I would sometimes find it incredulous as well what people add into a spending that is described the same way. Surprise goes both ways.
I think my main push back is most modern Singaporean mortals would expect a higher standard of living even if we are considering bare essential spending.
We don’t want to cut off a basic phone line, utilities, town council charges, be able to take a few transportation rides and have food so that we don’t go hungry. I think it cost much less than many other people think, but it would cost more than this.
Quizzing Colin on Missing Spending on Maintenance & Insurance
I learn over the years, from reviewing reader’s spending/income, and also the experience of my colleagues at work, people easily missed out on lumpy spending that happens in the year, or two years that is not monthly.
What is most glaring omission from Colin’s spending are:
- Health insurance premiums (Shield plans)
- Eldershield or Careshield premiums
- Maintenance of the home
By default, Singaporeans are covered under Medishield Life and Eldershield and we do have to pay premiums with our Medisave. I have not checked how much he has in his Medisave but there should be enough to pay for the premiums.
Colin did share with me that he does pay $700 yearly for some insurance premiums with cash but he treats this as a “birthday gift”.
If you live for 40-50 years, you have to expect that there are things that needs replacing. You might be able to delay replacing or touching them up, but sooner or later, you would need to do something about them.
In this modern times, it is likely you need refrigerators, some sort of computer and mobile phone devices.
Colin shared that he would usually find computer stuff from the trash he rummages through. He doesn’t use a laptop but he has 2. House repairs to him is extremely rare.. but both his toilets cannot flush so they flush with the old school method by using pails.
Once 10 years or so, he would buy a Samsung phone for himself for $100 (I presume this is a second hand phone) as a Christmas gift.
Most likely, I would have missed out things to quiz him, but I wonder if I continue, would there be more things that comes out.
Should You Classify Insurance and Item Spending as Personal Gifts to Oneself?
I flipped when I hear how Colin classify his cash insurance and his phone spending.
I wonder if we classify these spending as gifts to ourselves, what does it mean?
- Do we mean that we will only gift ourselves once in a while and so it should not be in our annual/monthly spending?
- Are these spending not necessary?
I like to think that both are pretty necessary. We could capitalize the insurance and set aside a lumpsum of our savings/investments to fund it (which is what I do for some of my insurance).
But in a way, someone would have to pay the insurance and the phone someday, and so does it make sense for us not to include that?
Meaning of Your Spending Can Be Important, Especially if you are Planning for the Amount of Capital You need for Financial Independence
The reason we are curious about each other’s spending is because we want to appreciate, reflect upon them to see if there is a different perspective that we can eventually consider in our own plans.
Classifying a spending as gift or not is less important to me if we are not considering our planning for our future.
If we are, I think how we frame our spending is pretty critical. And I will explain briefly why.
In our minds, we look at our spending very differently and that is usually where two or a group of people would have disagreements. For example, I cannot understand why folks would separate groceries from food spending because a lot of the groceries end up as food prep. Yes, there are toiletries and the what not but we could just lump them under Basic home spending. if you choose to separate groceries from food, that is not a deal breaker because both still make sense.
The more subjective one is grouping food spending based on basic living and entertainment. From the financial planning perspective, there are critical implications.
Most people would look at food as one spending category and if you are planning for a capital for your portfolio to generate income for it, you have to classify if this food spending category is more inflexible/essential or flexible.
Suppose we are talking about $2000 a year in food spending.
If your food spending is rather inflexible, and you want to last 30 years, we have to be more conservative. And we can use a safe withdrawal rate (SWR) framework to work out the capital you need. Suppose we use 3% which is reasonable.
So the capital you need purely for your food spending is $2000/0.03 = $67,000.
We plan this way with $67,000 if we want an inflation adjusted income on a spending that we cannot easily cut down.
But most likely, that is not how a lot of you look at your food spending.
There is a part to make your family happy and part that is really needed for basic living. If the portfolio is not doing well, most of you say you can cut your food right?
So not all the spending is inflexible but how much is inflexible? Would you know that? Suppose 50% of the $2000 is something you can cut down and you can spend $1000 in inflation adjusted terms, for 30 years if your portfolio is so unlucky.
We could use a more flexible SWR income strategy starting with 5%, so the capital you need for your food spending is $2000/0.05 = $40,000.
The amount is so much lower. But the most important thing is that it may match the lifestyle that you have in mind better.
If the gifts (Christmas, and Birthday) are something closer to good-to-have, more flexible, then well and good but I think a lot of us would struggle to accept a mobile phone and shield plan to be something that is good-to-have.
How Much Of Our Current Situation Would Change in The Future? Shouldn’t We Plan with More Conservatism?
There is a difference between sharing how I (or Colin) spend versus my advise how you should plan for your current budget or your income needs in retirement.
This might be something that some don’t readily get.
We share our current experience but our experience might not always fit the future.
If we look at the spending, vouchers like U-Save, Rebates on Town Council fees are contingent on the government.
We can only find things for free if we are able body but if we are not, we will have to depend on our network.
These might be rather glaring from Colin’s sharing but my challenge to readers is whether you have some spending that you plan into your current F.I. Income that is based on a current situation, which might change in the future?
Instead of being critical, we should self-reflect if we treat some of our spending the same way Colin treats it.
My experience is that some of the spending is clearer to many such as our income tax, work expenses, and perhaps our mortgages. However, many still missed out certain things such as the amount of gifts we set aside for Weddings of our coworkers as an example.
You should enjoy a cup of coffee and think through the line items and see if we should be more conservative with your spending. One line item that folks think about less is about their future healthcare spending potentially.
Sometimes You Need to be Microscopic With Our Spending.
And in other times, we don’t have to be so detail and look at it. Some readers might ask: Kyith, does your colleague go down to such a detail when planning for their clients?
The short answer is that we will go deep enough but likely not to this level. Firstly, I think there are more looking for a desired lifestyle, not to Colin and my degree but something more richer. After all, why would you plan to live a life that you need to visit the dumpster so much?
My colleagues have to go in and adjust for sensibilities that the prospect/client missed out but I doubt that we will go into this detail.
If they need to, it means that you likely don’t have enough resources.
And I hope the prospect/client realize that they need to make tradeoffs.
When my colleague Joyce’s client got retrenched, she have to go through their spending again line by line, categorizing the spending, grouping the categories by essential and discretionary expenses because it is a situation where the client needs clarity about their current situation. ( You can read Retirement Planning After Retrenchment: A Real-Life Case Study)
I grow to learn that not everyone can, and are willing to know how much they spend on each spending line-items.
Those who do not have enough resources would need to optimize and need to be able to do what Colin did and those who have enough do not necessary need to.
I do think that those who truly understand their desired lifestyle, and how much it cost them, are in the best position to figure out how much they need. Those who understood are less common than we think.
Last Thoughts on This
I would know the push-back by putting Colin’s spending out there and they should come as no surprise.
But if you often wonder what is the floor spending for a single person, this is probably it. You can then say “I need X, Y, Z more and they cost this much and I will add on to this.”
If you always thought your spending is low, well there is a new benchmark. Putting his spending out may make you question if you could do the same in his position. It makes you question if the insurance plans you have is necessary. It makes you question if he is less responsible or are you overplanning the amount you set aside for maintenance.
There is a difference between reviewing someone’s sharing compare to a plan that is sensible and it requires some reflection, introspection, before adding to your plan. And your sound income plan should be based on a desired lifestyle that may look like your current lifestyle but with sensible adjustment for the future you.
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Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.
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