You will be able to find the changes that raise your savings rate most for the least loss of enjoyment.
The usual advice for saving more sounds like a punishment. Skip the coffee, bring lunch from home, cancel the streaming service, never take a taxi. Some people do all of it for a few months, feel miserable, and then give up and spend more than before. The savings rate barely moved, and they decide financial independence is only for people who enjoy deprivation.
There is a better way to look at it. Lesson 4.1, Savings rate works twice, showed that savings rate is the main lever on your date. This lesson is about pulling it where it gives the most and costs you the least.
Daily small savings feel productive because you do them often. But they rarely add up to much. Cutting a S$6 coffee on workdays saves roughly S$1,500 a year in a made-up example. On a take-home income of S$96,000, that is about 1.5 points of savings rate.
Large fixed costs are different. A decision you make once, about housing, a car or insurance, keeps paying back every month without any further effort. In Singapore the two biggest are usually housing and cars. A car can easily cost more each year than all the coffees, lunches and taxis together, once you count the loan, insurance, petrol, parking, road tax and the cost of the COE spread over its life.
So the place to start is a list of your largest yearly costs, not a list of small pleasures.
The second lever does not require cutting anything. When your pay rises, you choose how much of the increase to spend.
If you save all of a pay rise, your spending stays the same and your savings rate goes up. Using lesson 4.1's example of Jun, who takes home S$96,000 and saves S$19,200, a 4% rise adds S$3,840 a year. Saved in full, it lifts his savings rate from 20% to about 23%, and he has given up nothing he had before.
Most people let spending drift up with income, often without noticing. A bigger flat, a nicer car, more expensive holidays. Each feels earned. Deciding in advance what share of each raise goes to savings, half or all of it, is one of the least painful ways to raise the rate over a career.
Not all spending is equal. Some of it brings you real enjoyment or meaning. Some of it happens out of habit, convenience or because everyone around you does it.
A useful test is to ask, line by line, how much you would miss it if it disappeared. Spending you would miss a lot is worth keeping, even if it is large. Spending you would barely notice is the first to go, even if it is small.
This matters for more than comfort. Lesson 1.2, Essential and flexible spending, showed that flexible spending is a safety valve in bad years. If you cut every pleasure now, you lose the ability to cut later, and you have made a plan that is miserable and fragile at once.
Jun, 33, takes home S$96,000 a year and spends S$76,800, a savings rate of 20%. All figures are made up. His five largest yearly costs are rent on a one-bedroom flat at S$30,000, his car at S$18,000 all in, food at S$12,000, travel at S$6,000 and insurance premiums at S$4,800.
He goes through each one. Selling the car and using the MRT and ride-hailing instead would cost him about S$6,000, a saving of S$12,000, or 12.5 points. He would miss it somewhat on weekends. A smaller flat further out could save S$4,800, or 5 points, and he would miss it a little. Cooking at home three more nights a week saves about S$3,000, a little over 3 points, and he would not miss it much. A review of his insurance finds overlapping riders worth S$1,200, about 1.25 points, which he would not miss at all. Travel he values highly, so he leaves it alone.
If he made all four changes, he would save S$21,000 more, lifting his savings rate from 20% to about 42%. On the simple model from lesson 4.2, at an assumed 4% real return, that moves his years to independence from about 42 to about 23. If he only sold the car, his savings rate would be 32.5% and the model gives about 29 years. He keeps every trip.
The last point is the most important. Reaching financial independence takes many years for almost everyone. A savings rate you can hold for ten or fifteen years beats a higher one you abandon after eighteen months.
Plans fail when they feel like a diet. They last when the changes fit the life you want, and when what you keep is what you care about. If a change makes you resent the plan, it is probably the wrong change, even if the maths says otherwise. A slower plan you can keep will get you further than a faster one you quit.
For the activity, you need your five largest yearly costs, which your spending base from lesson 1.4 already shows. Look at each with fresh eyes, and be honest about which ones you would barely miss.
List your five largest yearly costs and write one change for each, with the savings rate it would add and how much you would miss it.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).