Singapore was ranked as the world’s most expensive country in 2017. Singaporeans generally complain about it over a few months but it becomes an afterthought soon after. You squeeze in the MRT in the morning and give yourself a reason to go to work.
That reason is the Modern Day Poverty Cycle. It was actually brought up by our community who asked a question anonymously on our Facebook group. It further led to thoughts on the idea of the typical Singaporean story of being Asset Rich and Cash Poor.
The Modern Day Poverty Cycle
Upon starting work, you are already in some form of debt. And by the time you reach 30, a typical Singaporean couple would have to work towards paying down over $400k+ of debt if you apply for a public housing option.
The first 15 – 20 years of working life:
- Student, housing loans pile up
- Start to earn Salary
- Increase standard of living, expenses
- Start a family and kids
- Enter into more debt as a family unit increases cost (healthcare included)
Capitalism at its best
This modern day poverty cycle is seen to be an economic driver, and the CPF (central provident fund) was also designed to further aid this system, as many of the forced savings can be used to pay for the larger ticket items. Especially here in Singapore where owning your own home is the norm rather than the exception. Essentially, you remain employed for as long you are paying off that debt. A family unit survives due to some form of debt and work.
Is wealth distributed equally?
Let’s take a look at 4 key statistics from a ChannelNewsAsia Report:
- The top 20% owns 73% of Singapore’s wealth
- The bottom 20% owns 1% of the overall wealth.
- This has not changed much in the last 5 years
- Wealth inequality is rising in Singapore
Considering that Singapore’s wealth has more than doubled in the last 10 years, this means that the wealth owned by the top 20 per cent would be growing more rapidly than the bottom 20 per cent’s. In addition, the top 1% has been owning more wealth over time.
Rich gets richer, Middle & Lower income gets stuck
The gap becomes wider and the easier option is to settle and debate among each other. However, Singapore is noted for having more success stories who climbed up the income ladder. This was mentioned by then-Finance Minister Tharman Shanmugaratnam at the 2015 Budget. There are over 14% of young adults who move from the poorest 10% households into top 20% earners.
How to break out of this cycle?
In Singapore, it is widely known that if you earn a decent living (you should be more than satisfied with your current state) But with any pragmatic country, the common man is always looking to grow beyond just ‘good-enough’.
The obvious and traditional approach: Property
This is not a new phenomenon… In fact, you can read this post here by Vulcan Post on how a large number of Singapore’s wealthly come from Real Estate.
Pros:
- Property market prices here in Singapore has grown over time and is set to double by 2030 based on a report by Morgan Stanley.
- Apart from having a safe and secure space to call your own (here in Singapore) every square foot here on this Island is more valuable than you can imagine.
Cons:
- As the property market gets hotter over time, the government will always look for ways to cool it down with expensive taxes and duties on sales, 2nd property etc.
- Generally increasing prices also means that it can be more difficult as an entry property for younger people to afford or live in a smaller apartment.
- This can also lead to the typical scenario of being Asset rich but Cash poor, as returns do not materialize until you actually sell or rent the property.
The challenging approach: Startups and Entrepreneurship
Pros:
- The returns of investment could be a huge multiple, especially given a more digital savvy nation and governmental efforts pushing the population towards a smarter nation.
- Younger crowds are taking more risk and attempting to build or join smaller tech companies here and scaling regionally.
- The environment here for funding and talent is nurturing in the past 5 years to become a hotbed for innovative setups to seed and thrive.
Cons:
- There is no avoiding this. Over 90% of companies will fail within 2 years.
- The rest will be zombies and only ever 1% will make it into a respectable return on investment and time.
- But as they say, high-intensity entrepreneurship is working hard early in life so that there is a chance you will not have to for the rest of your life.
The long term approach: Knowledge + Network 🙂
To be honest, if it was obvious, everyone would be doing it. Hence it is ultimately up to you and the combination of the following two things:
- Knowledge: Which is where it is commonly advised to be inquisitive and never stop learning about new economies, trends, technologies etc.
- Network: Theory is never enough, get outside to meet people and grow your network and positive influences.
Your network is your net worth. I Always believe in that and I believe investing in oneself throughout the years especially through your working life and beyond is key to living the next half of life with more free time to do what you love and contribute back to society in any way possible! 🙂 By then, we hope you are able to reach out and share your experience on this blog! #giveback #culture #SG
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