You will be able to adjust today's spending for the costs that rise, fall or appear once you stop full-time work.
Ask someone who has just left full-time work what surprised them about their spending, and the answers rarely match what they expected. The MRT bill vanished, and so did the S$15 lunches near the office. Then the first private medical premium arrived, the weekday afternoons turned out to cost money, and a long trip that was never possible on fourteen days of leave suddenly was.
Your spending base from lessons 1.1 and 1.2 describes your working life. The number you are building has to pay for a different one. This lesson goes through the adjustments, which costs fall, which rise and which appear for the first time, so that the base fits the life you are actually planning for.
Start with the obvious ones. Commuting falls or disappears. Work clothes, office lunches and the steady trickle of collections for colleagues' birthdays and farewells go with it.
Two bigger items fall too, and people often miss them. The first is income tax. In Singapore most employees pay their tax bill out of take-home pay, so it sits in your bank statements and probably in your essential spending from lesson 1.2. Once the salary stops, the tax on it stops. You may still owe some tax later, for example on rental income or on part of your SRS withdrawals, which module 6 covers, but the bill on a full salary goes.
The second is CPF. Your employee contributions never appear in your statements because they are taken before your pay arrives, so there is nothing to remove from your spending base. What you should note is what CPF was paying for. If part of your mortgage comes out of your Ordinary Account today, that part has to come from somewhere else once contributions stop, unless your existing CPF balance can keep covering it. Check how your own loan is paid before you assume the cost falls.
Insurance is usually the biggest riser. Premiums for hospital cover go up with age, and module 7 shows how steeply. Health spending in general tends to climb as you get older, starting with outpatient visits and dental work.
Free time costs money as well. Forty extra hours a week get filled with something: classes, sport, travel, eating out with friends who are also free. Many people who stop work spend more in the first few years, not less, because at last they have the time to do the things they postponed.
Travel deserves its own line. Without leave limits, trips get longer and more frequent. Some people find they travel off-peak and spend less per trip, which helps, but the yearly total usually goes up.
Utilities can rise a little too. A home that sat empty from nine to six now runs fans, lights and a laptop all day.
Some costs do not exist today because your employer pays them. Group insurance is the clearest case. Many employers provide hospital cover, outpatient benefits, dental, and sometimes term life or critical illness cover. All of it ends when you leave. If you want to keep any of that protection, you have to buy it privately, and the premium becomes part of your spending. It is easier to arrange while you are still working and healthy, which lesson 7.1 returns to.
Other employer benefits are smaller but add up: a phone allowance, a laptop you never had to buy, a gym subsidy, a training budget. Write down each one you would replace and what it would cost.
One adjustment can be larger than all the others together. If your home is paid off by the time you stop work, your yearly costs drop by the size of your mortgage repayments. If it is not, the repayments are in the base for every year until the loan ends.
That makes the timing of your mortgage part of the number. Two people with the same lifestyle can have very different bases simply because one finishes her loan at 48 and the other at 62. Paying the loan off earlier, or planning to stop work after it ends, are both ways of shrinking the base. Neither is always right, because money used to repay a loan early cannot also be invested, but you should see the effect before you decide.
Back to Priya from lesson 1.2, with the same made-up figures. Her statements came to S$45,600. She plans to stop full-time work at around 50, and her HDB loan runs until she is 59, so she leaves the mortgage in her base for now and notes that it will fall away later.
Her five falling costs total S$8,300 a year: MRT and taxis to work S$1,800, work clothes S$600, office lunches over what she would spend at home S$2,400, her income tax bill S$3,000, and office collections S$500.
Her five rising or new costs total S$6,700: private hospital and outpatient cover to replace her group plan S$1,500, extra outpatient and dental spending S$800, more travel S$2,500, hobbies and classes S$1,500, and higher utilities S$400.
So her base moves from S$45,600 to S$45,600 minus S$8,300 plus S$6,700, which is S$44,000. The total barely changed. What changed was the mix: less essential spending tied to work, more flexible spending tied to free time, and a new insurance line that she now pays herself.
Your own list will look different. Someone who drives may save more on transport, and someone with generous group cover may face a bigger new insurance bill. Go through your base from lesson 1.2 with your own working life in mind, and look for the five biggest movers in each direction.
List five costs that would fall and five that would rise or appear if you stopped full-time work, with a rough yearly figure for each.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).