Millennials draw a lot of flak for the idiotic things that they come up with.
And for some these are grossly misunderstood.
They create a lot of trends that the Gen X will face palm and wonder why things are so different for how they used to do things.
Well things are different but it is not because the millennials are very special. We just grow up in a period where social marketing happens to be ubiquitous and more often because touch points are higher, more ideas flow better.
One of the urban code that seems popular nowadays is Adulting.
When I first get to know this term, I thought that the younglings nowadays want to get married early and practice extra marital affairs on a very recurring basis.
Then I realize I was slightly wrong. Adulting refers to the act of being more an adult than not being one. It is also the apprenticeship to acquire the skills that you require to become a better adult.
Is Adulting a new concept? Of course not!
Your parents and grandparents apprentice to acquire this skills at a much earlier age.
Adulting gets later and later as we progressed
Adulting is an apprenticeship in doing the things an adult would do for the first time. Your grandparents were forced to do adult things due to circumstances.
So many of them started at age of 14, coming to work, cooking taking care of their siblings.
As we get affluent, somehow, these grandparents felt that they should not “let us suffer” so much with these stuff.
And they take it upon themselves to do all these things.
I think they got it wrong there. There is no harm being an apprentice and learning these skills at an early age.
More so when the cognitive brain is at its most powerful.
The teenagers or even kids who learn to cook at an early age, developed better nutrition habits. The kids who fold their clothes at a young age becomes more organize with the way the carry out their lives.
And these are not mammoth tasks that are difficult to carry out (most often is because the parents did not have these adult skills to mentor the children)
Adulting is Absolutely Important
There are a lot of reasons I could go on to justify why we need to be an adult.
I will just give one main reason.
Your life is immensely better if you do the right thing. Your life will be measurably worse off if you screw it up.
I believe why adulting became an urban word is because many adults are not doing adult things or taking on adult responsibilities.
How can this be the case? It should.
Because the Millennials came up with it themselves. Meaning they observe a subset of themselves that lack adult responsibility.
The failure repurcussion:
- You cannot turn back time
- Your young working adult years is when your brain remains sharpest and you have the strongest vitality
- In terms of salary growth it is also the fastest when we compare to other decades
- You have the biggest bandwidth to learn things due to the lower level of responsibility at work, vitality, cognitive ability to learn
- If you fail to make use of this opportunity, you set up for a more challenging third part of your life where all these things are harder
The most enlightening and persuasive argument for me, comes from listening to those that fails to take advantage of this opportunity of theirs.
How we failed in Adulting
1. Failing to be informed about CPF and how it will affect our lives
When I was starting out to work, it was not long after the government introduced this thing called the CPF Life.
Now back then, I was not as financially savvy but the fundamentals are not too bad.
But the CPF Life in their early days is a communication nightmare. There are like 6 different schemes to choose from.
However, most people focus on one single aspect: You are not going to get your money back!
I got so turn off by this that I started treating the CPF like my stocks speculation sweatshop, which is to try the things that I do not dare to try with my real cash.
Luckily the things that I tried, were still based on relatively good principal and I still have them intact and worth more. But I can see how this could unravel for many.
CPF has the reputation that you only look at it when you are “older” , closer to your retirement. I think that is misplaced.
As a 30++ year old looking back, it’s astounding how small amounts can snow ball to big amounts.
And this is missed by many.
With the greater bandwidth you have, you should
- identify what you can do with your CPF
- identify the opportunities available to you
As a finance blogger, I do need to make a reference to articles from CPF publications on the nuances of various aspects. I cannot be sure about everything and this is where their articles have been helpful.
This is because the information provided is well vetted. One good example is whether your home loan is subjected to the valuation limits or not.
As a young worker that may be buying your first property soon, AreYouReady’s #ICanAdult 101 How to own your first home gives you a check list of what you should be thinking about when you are prepping to purchase your first home.
2. Failure to do a Proper CPF Nomination
CPF nomination is something that is not easily weaved into your daily conversation but it could make a lot of difference to your loved ones.
One of my peer’s sister’s husband nearly got into trouble with this.
A CPF nomination allows you to distribute the CPF portion of your wealth in a way you prefer. If you do not make that decision, your CPF savings will be transferred to the Public Trustee’s Office and distributed to the family members via Intestate Succession Act.
The lady’s husband didn’t make such a nomination, and his intention was to distribute more to his aged parents, since the wife will be covered by life insurance and also her family is in a better financial position.
The husband passed away and according to Intestate Succession Act, a lot of the CPF by default will fall to the wife and the child, leaving little for the parents.
While the Intestate Succession Act tries to be as logical as possible, some of our wishes are unique.
3. Saving up and Planning for their First Home
2 things that will greet you as a couple as you transition from young graduate to young working adult is plonking down a lot of money on your first home.
And this is where I see many adulting fails.
The 2 costs of housing comes from the down payment and the renovation. For most first time couple, they pay 10% of the down payment using their CPF. That is less of a problem.
The problem is coughing up $20,000 to $45,000 for the renovation.
You have 2 options, the first one is to opt in as much of the renovation as you can with the HDB. In this way you can use your CPF to pay for this furnishing. The second option is to customized those items yourself.
You cannot run away from this cost. And for a young couple this looks like a very big deal.
I for one think its not.
Here me out.
Many of my prudent peers do not have this problem. Their BTO flat comes in 3 to 5 years. They have ample runway to save for it. Even if you buy resale, they also plan 3 years of saving before acquiring one.
To get $60,000 in 3 years would mean $840/mth in saving for 3 years.
Those who needed a renovation loan or loan from other sources are the ones who earn less and choose a lavish renovation, or young adults who #YOLO and failed to grasp that there are some things you need to save for.
4. Not Building Any Wealth and Getting into Debt
The last failure of choosing to turn your back on adulting is that you never come to terms how dangerous some instruments of adult life are.
The previous failure is partially a result of not able to identify a worthwhile goal and saving for it.
A common adulting failure is arriving at 30 years old with less than $5,000 in your bank account.
It gets worse because the amount of people getting into credit card debt and having to dig their way out of it is more than you think.
A lot do not understand that credit is borrowing from your future self and depriving your future self from something that you cannot determine currently.
Think of how well set up you are if instead of building wealth, you end up having to spend 5-8 years paying off a large loan.
Sometimes being an adult means realizing that despite all the schooling and intellect we build up, there are things in the adult world that we have to learn by ourselves, or from others.
CPF today have various channels of educating us and reaching out to us so that we are aware of its benefits and nuances:
The complexities to adulting is tougher today and there are more things on the line. However, it can also be said we have more resources than we have in the past to make sense of it.
Wednesday 3rd of May 2017
Regarding CPF any thoughts on this hypothetical scenario: Working adult reaching 55years this year. he has spent say 500K of his CPF ( + another 200K in interest " owed" to CPF for using this 500k) on purchase of his condo, which is now fully paid up. He has enough in his SA and OA to fulfill the Retirement sum ( enhanced retirement sum-the max). He has bought some SSB. Now he has a sum of $$ sitting in his bank earning close to zero interest. He is thinking out " returning" the sum of $$ taken out for purchase and servicing of his (now fully paid up) mortgage; he believes this will be like a FD at 2.5% p.a ( which is way more than any interest from any bank currently) plus he can withdraw this money if needed after he turns 55years old .He currently has an emergency fund covering 1 year of expenses, no other debts/loans.His children are all grown up and self supporting. Can you think of any negatives to this plan?
Wednesday 3rd of May 2017
Hi Cecilia, if I were this guy, he could see his money in 10 years time. If he fulfills the minimum sum, he can only do a voluntary top up to CPF OA account. I believe this can be done before 55 years old. I cannot top up the CPF SA and RA since he has top it up in full.
I can earn the CPF OA rate at 2.5%. If my fund is large enough, I can afford to withdraw only the 2.5% interest or a particular part of the principal if you want a larger sum.
The annuity from enhanced income, and this 2.5% + principal should cover your annual expense.
After age 55 you do not have to worry about paying back that accrued interest used in paying your home. This is because you have already meet the minimum sum and reach that age.
You have not explain what are the lifestyle parameters and therefore I cannot think of flaws except change in government policies. Cheers.
Wednesday 3rd of May 2017
Just wondering, it is feasible to buy a BTO and stay in it with zero renovation? As in, just furnish with the furniture/appliances you need, and leave it totally in the original form. I am not very particular about the appearance of the place.
Sorry for dumb question. I have not stayed in HDB before.
Wednesday 3rd of May 2017
Hi Goh, I think Sinkie gave a very good breakdown of what you need to provide at the bare minimum. You might not want to do the air conditioner.
However, it is usually what you save on renovation, you make it up from furnishing. There are some things you cant run away. Beds, tables. If you can bring from your old home.
Wednesday 3rd of May 2017
You planning to rent out eventually?? Heheh.
New HDB comes with flooring & internal doors (if you opt for both of them), also tiling for bathrooms & kitchen, basic bathroom fittings, cheapo white Matex paint for all walls & ceiling.
Stuff you'll probably need to hire people for:- Mainly for kitchen stuff --- cabinets, sink, cooker hob, hood. Water heaters. Air-con, ceiling lights/fans.
The rest like furniture & appliances can ala carte from various suppliers.
For painting, if you're really cheap you can just live with the cheapo original painting, or you can paint the walls yourself (ceiling is harder to paint so you can just leave it as original).
If you have drill & some DIY supplies can easily fixup curtains, shelves, simple hanging cabinets, etc.
All easily within $15K --- can be below $10K if you go for the really cheap stuff.