How you spend your first $100,000 will determine your financial future

One of the most common responses to saving $100,000 in your 20s (apart from “why so haolian?“) is something along the lines of “$100,000 is not a lot of money, it will be gone after you buy a house, have a wedding and do renovations.” 

My own opinion is that a lot of people out there tend to be incredibly salty/bitter, so they say shit like that to discourage you. (But more on that later.)

To quickly address their point – Yes, $100,000 (or even $200,000) is hardly enough to retire in Singapore, especially if you’re only 30 expecting to live till 90.

However, it all depends how you use this first $100,000.  Whether it evaporates in a single day, or becomes a strong foundation you build the rest of your life on depends on you.

Here are some scenarios:

Scenario 1: You spent most of it on a wedding, HDB and renovations.

This is what some of your more extravagant friends might spend their first $100,000 on.

	If you pay it by yourself	Split with partner
Home costs (appliances, furniture etc)	$30,000	$15,000
Wedding and other costs	$60,000	$30,000
Reno	$60,000	$30,000
Total Cost	$150,000	$75,000

The power of $100,000 here is that you’d emerge from the saga with little or no debt.

If you split with your partner, you’d still have some to use as emergency funds! You could invest whatever salary comes your way from this point onwards.

A 28-year-old who did this with $20,000 savings? They would have incurred between $55,000 and $130,000 in debt. That’s gonna take years to clear, and they’ll miss out on any investment opportunities in between.

That’s not good because we all know that the 20s and 30s is the best time to invest and take risks.

Scenario 2: You spend modestly and invested the rest

Moving on the slightly more woke scenarios.

You decided challenge society’s norms a little. You manage to keep all your (housing, wedding and reno costs) below $50,000.

	If you foot it by yourself	Split with partner
Home stuff	$14,000	$7,000
Wedding and other costs	$6,000	$3,000
Reno	$30,000	$15,000
Total Cost	$50,000	$25,000

You also split this amount with an equally woke spouse. You are left with $75,000.  

PLAN A

Let’s assume you set aside $30,000 as emergency savings, invested the remaining $45,000 and for the rest of your life, decided that your financially woke days were over. 

You say, “fuck it, the Woke Salaryman lifestyle is intolerable. I hate these guys. I’m just going to go back to my old ways of spending every single bit of money I get in the future“

You do that, but let this $45,000 sit in a passive index fund over the next 30 years.

At the S&P500 historical return of 7% return per year, you would have $342,551. Not exactly a millionaire, but it should be enough for your very, very basic needs.

(Hopefully CPF will still be there to supplement your retirement.) 

PLAN B

Now, if you said something like:  ‘I enjoyed the hustle but it’s now time to take it a little slower. I’m burning out and it’s affecting my mental health.” 

If you invested that same $45,000 but now only invested an additional $500 per month, you would have ended up with $927,277 in 30 years.

The power of $100k here is that you are able to immediately put your money to work through investments to earn significant gains., and secure your retirement 30 years down the line.

That way, it’s possible to focus on living life instead of constantly worrying – this will improve your quality of life in huge ways, whether it’s mentally, physically or financially.

This is the scenario many of us are probably leaning towards.

Scenario 3: You use this $100,000 as a safety net to take bigger risks.

Let’s try something different.

Suppose you didn’t get married and didn’t buy a house (which is very normal, btw. So completely realistic). 

You put your first $100,000 into your high interest savings bank account, earning you 3.8% per annum. Or a measly $316 per month.

That might seem un-woke, but there’s also an argument for it. Instead of viewing that initial $100,000 as an investment, it becomes the safety net you can count on for other big and risky investments.

How long could $100,000 last you? Depending on your lifestyle, it could be between three to eight years.  

The power of $100,000 here is to buy time and provide safety.  Because when you are able to think years ahead, it allows one to take bigger risks, and choose delayed gratification over short term wins.

These include:

Invest any additional money you have aggressively.

Want to learn how to trade using leverage and risk your entire salary doing it?

With $100,000,  you can more-than-afford the learning costs. Use the time to master the skill until you can make money from it. As long as you don’t touch your savings, you’d be okay.

Escape a toxic work environment.

With $100,000 you could quit a job you hate and take your time to find a better employer. Conversely, with no safety net, you’ll be at your employer’s mercy.  You might be forced to accept a pay cut because you really, really need the job to make it through the year. 

Buy time for career switch.

Many Singaporeans know that their skills might not be as in demand as before. They want to upgrade themselves but simply lack the time to do so. $50,000-$100,000 is more than enough to tide you through while you pursue qualifications for another career (data analytics, real estate agent, etc).

Start a profitable business.

Running your own business can be a risky endeavour with irregular income. Most people can’t take the irregularity. In this scenario, $100,000 will tide you through until more income comes in.

If you’re reading this and you’re on your own way to saving your first $100,000, ignore the haters

One of the big reasons the average Singaporean is unable to accumulate wealth is really because of their mindset and the people around them who have Crab Mentality.

That’s where stuff like “why save so much for what“, “why you so money minded“, “aiya 100k only is not a lot of money“, or “die also money cannot save you” come from.

These, ladies and gentlemen – are the crab people. They will go all out to belittle your achievements and discourage you from pursuing financial freedom.

I write about them because I know you will encounter them, whether it’s at work, in school, online or even at home.

When their voices get too loud, all you need to remember is this that you need to be different from them to succeed. 

If we keep doing things the way the ‘average person’ does, we can only expect average outcomes.

If we want to spend like the rich while earning average income, you can only expect a slow but sure descent into debt and poverty.

The wealth accumulation journey in the middle class requires a change of mindset, and a disciplined reduction in lifestyle inflation.

You saving $100,000 before 30 is a great start. Don’t let others tell you otherwise, or even worse, what to spend it on.

Only you can decide what is right for you.

There are no wrongs.

There are no rights. 

But there will be consequences.

Stay Woke, Salaryman.

Illustrations by Loo Junyuan. Check out his IG @junyuanloo.

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