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That $2,500 Salary is substantial. Plan your Human Capital well.

Writing more and talking to more people, I realize some of our problems as human beings is not being able to take the information we experienced daily, reflect and understand them well, and make good decisions.

One information that we tend not to interpreted well is our pay compensation.

We tend to look at our pay compensation on a monthly basis, and as a person that starts working, $2,500 per month doesn’t look like a lot.

We get angry with society for a high cost of living, chiding the government for not keeping things affordable. We chided ourselves for not studying well, or have a great network, good negotiation skills to get a $4,000 per month starting salary.

That sounds like the complaints that I hear often.

Here is an even better one. I heard of folks throwing a less than $100 increment letter in the face of the boss and telling him “I quit!”

If we have filtered out a lot of the noise (our angst, our regret), you will realize that you are in control of how you spend that $2,500.

Effective budgeting and allocating your $2,500 can provide much clarity, purpose and control to your life.

To build wealth, it helps to understand the immutable formula for wealth building. However, if we don’t say this out, some will keep looking to different ways to build wealth without realizing what are their most important asset.

The Human Capital in you

Your most important asset, for much of your life, is not your home.

It is not your CPF either.

Your education, in academics and in life, puts you the most important asset at your disposal.

When I first wrote this article, we have quite a few people start off earning $2,500 a month. Nowadays, it is higher at perhaps $3,000 or even $3,500. But let us stick with $2,500.

$2,500 per month doesn’t seem like a lot. If we add the 12 months we earn + 1-month bonus, the total sum comes up to $32,500.

A 3% increment on that $2,500 is $75. That looks like a sum that is insulting, but essentially percentage-wise, it is not that insulting.

If we project forward your miserable monthly pay with your less than amusing increment for 10 years, and you will earn $372,576.

That’s almost the cost of a build to order flat.

How come we don’t see this amount? That’s because nowadays, we don’t receive this amount in an envelope. You cannot hold this amount in your hands and feel how substantial it is.

If it is tangible, you felt that you have to be responsible for this amount.

Today we live in a cashless society. Your pay gets credited into your bank account.

You don’t see it at all. You just go to an ATM or use NETs to spend it.

Planning is the furthest thing on your mind.

Wonder if you could just, plan well,  you could perhaps just, save 25% of that for $93,000. Channel this amount to building wealth and you can kick start in a small way to planning your financial independence.

It is likely you don’t see this amount, you don’t plan, you don’t have clarity where it went to, and then you reflect one day when you are 45 years old, thinking, where did all this money go to?

You are the most important asset, and it is your job to make sure you enhance and preserve this asset:

  1. Certifications and courses to enhance and retain competency
  2. Get an MBA
  3. Network extensively
  4. Develop a good EQ, maintain good communications with your peers, bosses and customers
  5. Learn to negotiate well

Do it well and you enhance that 3% to 7% or 10%.

If you progress to make $60,000 per year,  the next 10 years you will accumulate $687,000.

If you concentrate on building wealth but failed to progress enhancing your human capital, you lose out on substantial and predictable “capital gains”. Your investments might or might not generate the desired returns, but your pay compensation have a higher degree of predictability.

Build up Your Wealth Assets as a Safety Net, as your Human Capital Goes Down

Your human capital does not go on forever:

  1. After the age of 25, your brain starts slowing down. What becomes easy when you are 24 years old becomes difficult at the age of 40 years old
  2. You become very expensive, and add to that, your health risks, low energy makes you look an attractive retrenchment proposition versus the vibrant 30-year-old
  3. Globalization has made your job harsher, competitive and somewhat unstable

In light of this, it is important to channel adequately to wealth building. Your wealth assets build up while your human capital goes down.

Your wealth assets provide a safety net/contingency plan / alternative income source in case life throws you a curveball.

Hedging your Human Capital with Insurance

You generate such a substantial amount that, the loss of that capability will cause distress in life itself. All your dependents need you to be working.

And thus it becomes important to cover yourself adequately with disability income insurance.

Disability Income insurance typically covers 60-75% of your last drawn income. Depending on the insured amount, they tend to cost $40 per month to insured an income of $2,000 per month to the age of 65 should you not be able to work in your trained profession.

The underwriting for disability income can be very stringent. Do declare any pre-existing conditions well in case, when you need it, they find fault and find you ineligible to claim.


The short-sighted inability to evaluate figures in aggregation results in most of us not being able to realize that we can evaluate whether we want things now or plan for the future. You are your biggest asset, and enhancing it may bring more satisfactory returns versus channelling more efforts to building wealth.

Yet, building wealth is important simply because as time passes, it provides an opportunity for you to step down, take things easier.

Start by learning how to better plan your human capital today.

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Monday 4th of July 2016

It sounds like it makes more sense to go for highest pay offer than personal interest or future prospects. I.e., 10k pay that works 24/7 with no chance to promote vs 3k job with opportunity to be in higher management. Active income for first few years and passive income for the remaining years seem like the best option.


Monday 4th of July 2016

if you work 24/7 somethings got to give. again what is the use of trying so hard and knowing you have to spend the next 30-50 years doing something? if you can earn that 3k, perhaps finding you can build competency in a certain area and grow to love that job and not thinking of retiring. it is not bad as well.


Wednesday 26th of March 2014

Very true about building wealth passively vs actively. You cannot have the opportunity to grow a retirement portfolio without first having substantial savings in the first place, which is then dependent on human capital. There are many ways to build human capital. In a place with high population density like Singapore, you do not just seek a higher education by continually upgrading, because everyone is doing so too. PR skills and social networking are also necessary, if not can be more important.

Kyith, since you mention about disability income, are you insured for this? I personally find disability income insurance too expensive to my liking. If it is difficult for a person to save up money for the future with a $2k income, a $40/mth premium, which amounts to 2% of your income, may be better saved up for wealth building.


Wednesday 26th of March 2014

Hi Jomel, i am not sure if you have mistaken. That is assuring 2k per month up to the age of 65 years old. So it can be rather substantial. I am insured under Aviva Ideal income. Yesterday i had a re-evaluation with my IFA. i think its rather cheap. Strict underwriting.

Richard Ng

Tuesday 25th of March 2014

Very true... as Malay has a saying "sedikit sedikit, lama lama jadu bukit" which briefly translated as "start small, end big" ;-) Great post, by the way!


Monday 24th of March 2014

it boils down to how each individual want to live in the lifestyle they seek.. for singles I think is ok.. but to start a family, it may be not so easy..


Monday 24th of March 2014

hi holy pendant, its not easy. we are not saying having 2,500 is enough. i learn the hard way you got to take care of your human capital so that you can reach the 6k that makes things easier


Monday 24th of March 2014

Agree. The problem is that a lot of pple wants to have passive income without concentrating on their first tranche of money - which is active income. Both are equally important, but I dare say that active income is more crucial during the earlier part of our lives. We have to build the capital before we can deploy them. This simply means concentrating on your career and just plain old savings. The second part of our lives is where we see the results of our capital deployment.

Good article.


Monday 24th of March 2014

hi LP, thanks. i think many, such as myself search hard and gain that competency to carry out active management (lots of work) that somehow you get tricked that this is the holy grail to getting out of the rat race, when for a lot of folks, enhancing human capital reaps much better.

similarly, folks don't develop enough knowledge to build wealth wisely to grow it in subsequent years.

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