These are the money lessons nobody tells you when you start earning more.
For the most part, earning more money is a good thing. But why do some Singaporeans have less to spend after that? And if rich people are mostly good with money, why does following their advice fail to work for you?
In this article, we cover the money lessons no one seems to talk much about:
You Can Have Less to Spend When You Earn More
This doesn’t make sense, right? The more you earn, the more you should be able to spend. On a practical basis, we usually take on more obligations as we make more money.
Say you used to make S$4,000 a month, and had overheads of S$1,000 (so you can spend about S$3,000 a month). One day you get promoted and start earning S$5000 a month.
As a result, you decide you can afford to provide your elderly parents with money and upgrade to a bigger house. Suddenly, your overheads more than double from S$1,000 a month to S$2,500 a month. Deducted from your new salary, you now have only S$2,500 a month to spare.
Due to your obligations, you have less to spend. But you initially took on those obligations because you started to earn more.
You may think this is common sense, but it’s really not. For example, a lot of Singaporeans are caught off guard when they get a substantial pay raise and upgrade to private housing. Suddenly, the S$900 monthly repayment on the flat turns into a S$2,500 monthly repayment on the condo.
Earning more doesn’t always translate to more luxuries. As your income grows, things you never had to deal with before will fall to you. These are things like the cost of your parents’ and grandparents’ healthcare, or the educational costs of your younger siblings.
As such, it’s quite possible to find yourself earning triple or quadruple your salary, but working on an even tighter budget than before.
Rich People Can Be a Source of Terrible Financial Advice
There are plenty of financial methods you should learn from the rich – provided you’re referring to a rich person who worked their way there. For all you know, you could be talking to a lucky lottery winner, or someone who was born rich. Both may give you terrible advice.
Even the ones who got rich through their own effort can dispense bad advice. This is because people can get rich by doing something incredibly risky, and find out it paid off…for them.
An example is an entrepreneur who tells you to quit your job and follow your passions. After all, it certainly worked for him. But statistically, nearly 50% of startups fail within the first three years – and only one in 10 go beyond the fifth year.
Now the entrepreneur you’re talking to is not trying to deceive you. A startup really is how he made his money, and he may truly believe it works because it paid off for him. But this is a little like a lottery winner telling you it’s worth buying a Toto ticket every week: he only thinks it works because he’s one among millions of lottery buyers who got rich.
The message here is to not emulate or imitate another rich person too closely. Some elements of success are common ones (e.g. persistence, clever savings, learning to negotiate).
Just because something made one person rich, that doesn’t mean it will do the same for you. Warren Buffet can get rich trading stocks, but for many people that won’t work.
Work on finding your own way too, don’t rigidly imitate another’s path to wealth.
Most People Get Rich From Their Investments, Not Their Jobs
When was the last time a newspaper published a headline that read “Singaporean gets rich from working regular, full-time job”?
The vast majority of rich people did not get there by worrying about S$1,000 raises, or what degree or diplomas they have. Some jobs are more lucrative than others, that’s true. But you’ll notice that even among lawyers earning S$15,000 a month, some seem to be dead broke all the time.
Now look at Singapore’s 50 wealthiest people. The overwhelming majority made it there by clever investments or running their own business (which counts as an investment, since you put time and money into it).
Most of them got there by understanding markets or astute money management, not by sitting in an office doing the same thing for 30 years.
That’s a lesson for anyone aspiring to be rich. Working nine-to-five and saving money is a first step, but staying on that path will almost never bring you financial freedom.
If you want more than a humble existence, you need to learn other options, find alternative income sources, and take risks. Your job alone won’t take you that far.
And while you’re at it, stop moaning about what course you “should have done” in university.
The Amount of Money You Make Corresponds to the Number of Awkward Conversations You’re Willing to Have
People who make more money are, quite simply, the ones who have a thicker skin. They are willing to negotiate with the boss for a pay raise, and they don’t budge when clients ask for a discount. They are also brazen about approaching complete strangers, and pushing their side-income.
They face a lot of disputes and rejections over it, but they have a chance. The quiet people don’t.
So while it hasn’t been made clear in many business textbooks, we’re giving you the blunt truth right now: the more awkward conversations you are ready to have, the more money you will potentially make.
If you want to be shy and not rock the boat, don’t be surprised if you’re the one passed up for raises and promotions. Stewing about it silently will not magically make your boss notice either.
New Levels Bring New Devils
This is somewhat similar to point 1, but we’re also talking about the frustration that comes with each level of financial attainment.
Every time you think you finally understand how this money thing works, the challenge will change.
By the time you understand how to balance your pay cheque, you’ll end up saddled with having to buy a house. Everything changes, as now you have a 25 to 30-year mortgage.
By the time you get the hang of living with a mortgage, your children get older and go to school. Everything changes again, as now you need to pay for their education, plan for university tuition fees, etc.
By the time your child is in university, you think you understand how to balance your finances. But then it’s time to look after your aging parents, deal with your mounting healthcare costs, and look at deficiencies in your retirement fund. Again, everything changes.
Every time you reach a new level of wealth, you will be faced with new lessons and be forced to discard previous ones. Even new billionaires face money challenges they’ve never dealt with before.
Hence the old saying that “new levels bring new devils”. Whenever you are about to attain a new level in personal finance – be it through higher pay or inheriting a house – the appropriate response is to start studying or consulting experts.
Do not assume your previously acquired knowledge will suffice.
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By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.