You have to be careful when you walk into one
of those bars where there’s no menu and they create a cocktail
based on your personality. Because there’s always the chance the
bartender will read your personality as being “high maintenance”,
and you’ll get slapped with a three figure bill for those three
cocktails you gulped down.
Too bad you assumed you’d be able to foot the
bill without getting a heart attack. Instead of swallowing your
pride and asking about the price (or discreetly checking
Hungrygowhere before stepping into the bar), you’re now stuck,
well, getting a heart attack.
Here are four other money assumptions you
should never make.
A bonus is supposed to be like that star your
primary school teachers used to draw on your homework assignments
to show you had done a good job. Just because you thought you had
drawn those bar diagrams really nicely didn’t mean you got to march
up to the teacher and demand why you didn’t get the star you were
“entitled” to.
The same goes for bonuses. Unless it’s
explicitly stated in your contract that you receive a 13th month bonus, it’s entirely
discretionary. If your boss withholds your bonus because you don’t
sit at the office till 9pm every day despite producing as much as
the next guy, that makes him an asshole, but he has every right to
do so.
The worst thing you can do is to assume you’ll
get a bonus or increment, and then start spending more in
anticipation. For instance, if your bonus is given out in March,
don’t go and book a lavish holiday to Paris in February thinking
you can pay off your credit card bills with your bonus money.
The same goes for annual increments. In these
tough economic times, employers may be stingier with their annual
increments, and let’s not forget that many
local companies don’t even give their employees a pay rise after
promoting them. So try to refrain from signing up for that
year-long membership at the pole dancing studio or scheduling that
LASIK surgery until you’re sure you can afford them.
Fresh-faced rookie employees and fresh grads
are the most likely to assume they’ll get nice bonuses. It takes
just a few years in the workforce to discover the cruel truth.
You often see young couples signing up to buy
5-room flats when they don’t plan to have kids, or PMETs in their
late 20s or early 30s bravely applying for a huge mortgage they
barely qualify for, to buy a condo they’ll spend the rest of their
lives paying for.
People already complain about the high cost of
living, so why do they voluntarily opt to place such a huge
financial burden on themselves?
That’s because in the back of many people’s
minds, their property is going to triple in value in ten years, and
they’re going to become overnight millionaires.
Yes, there are still people who think that,
despite the fact that the property cooling measures have put a
serious dent in the property market for the better half of this
decade.
The government has expressly stated that
the cooling
measures aren’t ready to come off yet. It’s a bit like how your
parents would tell you they you would get you a pony “next time”.
There is the possibility the cooling measures will be permanent,
and even if they do come off someday, there is no guarantee you’ll
make much money on your property, especially if it’s leasehold and
lots of time has elapsed.
The retirement-readiness of Singaporeans is a
huge national issue right now. It’s always a little sad getting
served at McDonald’s by someone your grandparents’ age.
It’s fine to factor in your CPF savings as
part of your retirement plan. In fact, if you hit the minimum sum
by the time you’re ready to retire, the payouts aren’t exactly
going to be impressive, but they’ll be a significant amount for
someone who’s living simply.
The problem is when you don’t even bother
planning for retirement and have no idea how much you have in your
CPF account, but assume that like Cinderella’s fairy godmother,
your CPF savings will step in and save the day once you decide
you’re done with work.
This is especially so if you’ve used your CPF
savings to buy property. It’s quite common to totally drain your
account to make your downpayment, and then continue to rely on CPF
to make your monthly loan repayments.
This is going to dramatically reduce the
amount you have in your account when you retire, and it’s possible
to have close to nothing if you really go all out with your home
purchase.
What financial assumptions have you
made and then later regretted making? Tell us in the
comments!
The post 3 Assumptions About Money
Many Singaporeans Make and Later Regret appeared first on
the MoneySmart blog.