If I make $25,000 per month, I cannot guarantee I will make sound money decisions

There is a recent article on the Straits Times profiling some of the more senior PMETs who earned quite a high salary, unable to find a matching job and have to step down the jobs they are looking for. You can read it here.

A head of Asia sales in an European bank earning $25,000/m will have to step down to a $3,000/m commissioned based property agent job.

A former general manager in an oil and gas  company earning $15,000/m will have to step down to a taxi driver pay.

Some how I felt that the Straits Times like to highlight these bombastic examples. For those who started working in the last 5 years, they should see the newspapers in 1997 to 2002. This, and the TV show this every other day. It really makes the morale low for everyone.

Come to think of it, its been 12 to 13 years since that period. For me, it was one very challenging period. Not just a lot of well earnings 40 to 50 year old folks lost their job, but many businessman saw their business taking a big hit.

Singapore is in an unusual period. For a long while we have exceptional low unemployment rate. The unemployment rate is what ties everything together. The low unemployment, making it a employee’s market, creates much optimism. With that folks are optimistic about their future, optimistic about what they can spend on and optimistic of servicing property.

Take away the employment, and you should see everything unravel.

Nowadays, you do not need just a general manager or a regional head to earn that kind of salary. My friend who sees these stuff tells me there are more 25 to 35 year old earning this salary.

I think they better build some margin of safety in the life that they live. They better not spend every last penny and make some sound decisions with their vast salary.

Its not always easy making sound money choices

There are many folks commenting that, hey they earn so much! If it was me I would be financially secure with that salary!

I would say… its not so simple.

If you were them, you would be too busy. To be such a performer, you would have to immerse yourself in your job. You would have to mingle well with your peers.

When responsibility rises, so does the expenses.

To make up for the hectic life, you need to pay for it through morale boosting entertainment and holidays. You deserve it. In fact, if you do not have enough of it, you will be burnt out pretty fast.

You are also too busy with what you paid for, that you failed to pick up the module of financial responsibility and sound wealth building.

For those who did, they would have bought a property for investment purposes. However, not everyone buys with the most fundamentally sound ideas. They do not observed value, they erred on how much risk they have undertaken, they did not build up contingency.

What was a ‘passive income’ stream became not so passive, fraught  with work of handling tenants, finding tenants and also realizing their rents during bad times cannot cover the mortgage.

Majority makes poor financial judgments

It does not mean that if you do not make that much, you won’t make unsound financial decisions.

From my observation, it is whether:

1. Folks are brought up in an environment or have mentors that inculcate the right monetary values to the person when younger
2. Inquisitive and hardworking to pick up financial knowledge at certain point of their life
3. Learn enough from their money related jobs to do more of the right money stuff than the wrong ones

2 for me is the most important, and for those who have  2 and establish systems/processes and habits, they are the ones who are likely to earn a lot or little, but still do better.

From my observations, once the low unemployment string is cut, these newspaper articles will be more prevalent.

Let this be a warning to self

Many would think that because they are high performers, they won’t get cut. They are in the civil servant industry, they won’t get cut.

Hell, I have heard folks mentioned the reason  why they stay in my company is because we don’t cut people. Sometimes, just because you didn’t hear it doesn’t mean it didn’t happen. You probably didn’t stayed long enough.

Even if you did, you probably didn’t believe it will happen to you.

That is probably when you will get the most horrific surprise.

I am approaching that age of 40. Still 5 years away, the age where I become more expensive then the peers, and if I do not add enough value, the position gets wobbly.

Perhaps its not the time to think about such negative stuff, but to learn to be glad that I have a job, make sure I have portable skill sets and not take over excessive risks with life.

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