Financial bloggers are an admired bunch, especially those who showcase their inspiring net worth achievements:
- How I Managed to Amass $750K Before the Age of 35: Real Life Lessons from Brian – YahooFinance
- How We Saved $250,000 By Age 28 – 15HWW
- Hitting $100,000 In Savings by Age 26 – SG Budget Babe
- How to save your first $100,000 in your 20s? – Jeraldine Phneah
Often times readers may place more emphasis on what the financial bloggers are investing in, or their investment approaches.
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But the truth is, these financial bloggers are phenomenal saving creatures.
We all know that capital is crucial to get meaningful returns.
A 5% dividend on $1,000 is only $50 but the same 5% on $1,000,000 is $50,000. Same same but very different. This is capitalism after all.
Capitalism means you have the advantage when you’ve got the capital.
That’s why the rich get richer.
If you are not lucky enough to be born
Growing your money becomes more challenging if you do not have a good-paying job.
Life isn’t fair and I believe those in low paying jobs would find it very challenging to grow their net worth.
Upgrading skills and focus on climbing the income ladder would make more sense than trying to save and invest money for this group of people.T
Financial bloggers are generally smart people and hold decent jobs that pay reasonably well. But we must also give credit to them that they are able to resist consumerism unlike the rest of the mortals who succumb to sacrificing their income to the Church of Apple. Financial bloggers are frugal or at least prudent in their lifestyles.
These values drive their savings rates higher than the averages.
What’s an impressive savings rate?
The wise old Arkad from the book, The Richest Man In Babylon, had an advice for all of us.
“A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford.”
Arkad, The Richest Man
I tried to dig out the average savings rate in Singapore but couldn’t find convincing sources. The closest I could find is through surveys and this one by JobCentral in 2013 gives us some clue:
60% of Singapore workers save less than 20% of their income.
So how impressive are the savings rates of financial bloggers?
- SG Budget Babe made a splash to the financial blogging scene when she achieved S$100,000 net worth (including CPF) at age 26 by having a savings rate of 70% – 75%. Another female blogger, Jeraldine Phneah, has also reached the S$100,000 mark around the same time. This shows that it is achievable but it doesn’t mean it is easy for most people.
- Brian Halim, the blogger behind Forever Financial Freedom, also shared that savings were one of the three factors for accumulating S$750,000 by age 35. He said, “[i]n my case, I managed to achieve a very high savings rate of almost 80% when I was single, but it slowly dropped to 40% after getting married and having kids.”
- Thomas Zhuo who blogs at 15 Hour Work Week used to save about 70% when he was single and 50% after he was married. Pretty similar figures as Brian’s.
- Chris Ng, our Early Retirement Masterclass trainer, is also a great saver. Before he gained his financial independence he was saving about 70%. After which he was saving 100% of his take home pay (excluding CPF contribution) at 33, funding his living with dividends from stocks. A feat that most people could only be envious of. Some would argue that he was single. But he was still able to edge out an impressive 80% savings rate after getting married. He proudly said that he had not spent his earned income for the last 8 years and counting.
Maybe you don’t strive to beat the savings rate of financial bloggers. But many financial bloggers would agree with me that at least 50% savings rate would be considered impressive.
When Would Investments Matter More Than Savings?
Savings means capital for most people. But you can’t be
Luckily I did not need to do the sums as Zach from Four Pillar Freedom has written a good article on this. The answer depends on your investment returns. Below is the data that’s taken from the article.
You can see that even at 8% returns, it would take you 10 years to have your investments do most of the heavy lifting. The truth is that you will take longer than 10 years because markets do not give consistent returns every year. Your portfolio will take drawdowns in some years and that would push back the savings-investments breakeven point further. This again emphasised the importance of savings especially in the initial years.
In case you didn’t get it, let me be explicit – I’m not doubting the financial bloggers’ ability to invest. I’m saying the key contributor to their initial capital and wealth is their propensity to save. High investment returns cannot make up for a tiny amount of capital.
I give you an example from Kyith’s earlier article:
He gave a hypothetical case of two investors each earning $45,000.
- Investor A saves 10% of the salary and invests for 15% returns. He will end up with about $110,000 after 10 years.
- Investor B saves 20% of the salary and invests for 2% returns. He will end up with the same amount of $110,000 after 10 years.
Let me ask you which is easier?
To save 20% of your salary OR invest for 15% returns?
Of course saving is easier! If you think investing alone can get you out of your miserable wealth, think again.
I say again, if you are not from a rich family where money drops on your lap, you have to work and save for your initial capital to invest. You cannot have your cake and eat it (or deciphered as you want to be rich and spend a lavish lifestyle before getting there). I previously said financial bloggers are good at suffering simply because they are willing to pay the price – a scaled-back lifestyle for a better financial future.
As this guy says…
“Great investing requires a lot of delayed gratification.”
Charlie Munger, Vice Chairman of Berkshire Hathaway
The big question is… are you willing to pay the price?
Brilliant reminder that we all need from time to time to avoid getting sucked in by strong lure of consumerism!
Saving money is tough because of our inherent loss aversion.
When people were asked whether they could save 20% of their income. Only 50% said yes. But when people were asked whether they could live on 80% of their income, 80% said yes. To save 20% is to lose that amount from your disposal income. But to live on 80% of your income is to do without what you would gain from that last 20%.
A bit of re-phrasing and a change of mental perspective could make building up that desirable nest-egg a tiny bit easier.
Thanks for the tip! Seeing the glass half filled is better than looking at it half empty!