I think less than 10% of Singapore households spend above $15,000 in a month. In fact, from this piece of statistic, it seems that even those who stays in landed properties spend only an average of $10,000 a month.
So imagine you have $15,000 of passive income (in the form of dividends/interest from maybe a $5 million portfolio) EVERY MONTH. Basically, after finishing spending $15,000 in September, another $15,000 pops up in your bank account. For most, this is akin to having money raining on us every month.
I thought it would be a useful thought experiment to see how I would allocate $15,000 in a month for our household. It would probably be able to provide some interesting insights on what we are giving up when leading a frugal lifestyle and whether we should continue working for money even after financial independence.
How I Would Spend $15,000 A Month
House ($4,000)
Since we are paying <$1,000 every month for our current place, I really thought allocating $4,000 to the house is bordering on decadence. However, using a mortgage calculator, I realised that at 2.5% interest rate over a loan repayment period of 25 years, it meant we could only take up a $900,000 loan.
With a $1 million budget, we could either buy a three-room Executive Condominium in less central/developed areas like Sengkang/Punggol or Bukit Panjang. That would allow us to enjoy amenities like swimming pools and gyms within the premises.
Alternatively, we could get a very big resale flat (Maisonette/executive flat) in a central area or one that comes with a great view (the Mrs will enjoy the view alot). My only requirement will be that it is a jogging distance to a SAFRA facility so that I can visit less crowded pools and gyms.
Transport/Car ($2,500)
Since even the cheapest car would likely cost at least $2,000 a month, I think I would allocate $2,500 to this category so that I can drive a “nicer” car like maybe a Camry, a Harrier or perhaps even a Merc A Class.
I know taking Grab/Uber makes much more financial sense and it’s probably more convenient since one doesn’t have to think about driving and parking. But if $15,000 of passive income is raining in every month, having a car parked downstairs is definitely a convenient option to have, however marginal it is.
Child ($2,500)
In the past couple of decades, the “typical nuclear family” in Singapore is a couple with two kids. Preferably a boy and a girl. However, judging from my social circle, the “typical nuclear family” for millennials will likely shrink to a family of three.
We don’t have a child yet and the likelihood is that we will either have no children or at most one. $2,500 a month or $30,000 a year or $600,000 over a period of 25 years should more than cover above-average child care, tuition and local university fees and probably even provide him/her with some investment funds when he/she graduates.
Travel ($2,000)
$24,000 a year of travel budget would likely mean we could either take two long haul three week trips to Europe/America, or spend a few months to half a year slow travelling a region or go on a short vacation every other month.
It provides us with a lot of options to inject a bit of luxury and convenience in our trips and possibly visit more places we would otherwise not have gone in our lifetime. Likely no business or first class flights though.
Food ($1,000)
The likelihood is that we would still cook the same number of meals at home every week/month. However, with a $1,000 budget, when we are dining out, it means we can opt for restaurants more often than food courts/hawker centres. It’s without a doubt that restaurants tend to be more hygienic.
Otherwise, we could maintain what we are doing right now and as a treat to ourselves, make a visit to top restaurants like Andre, Waku Ghin, Jaan or Burnt Ends once in a month. The Mrs used to work in an MNC in the food industry and she is quite enamoured by some of these top restaurants.
Basics ($1,000)
Besides groceries, this should include all the conservancy, electricity and water bills, phone and broadband charges and of course, some hospitalisation insurance. With $15,000 of passive income coming in every month, I really don’t see any need to buy any more insurance.
A $1,000 budget should be able to get us fresh meat and seafood from wet markets, the freedom to switch on and enjoy aircon every day, upgrade to the best iPhones when we recontract our plan and an above average broadband plan. Which should be more than enough.
Gifts ($1,000)
The bulk of it would be allowances to the Mrs’ parents. Honestly, I really don’t mind taking $500 from somewhere to increase the budget for this section but I have noticed that most well-to-do folks tend not to provide too much gifts to their family and friends.
As I grow older, I tend to understand and appreciate this mentality better as “gifting” too much tends to cultivate a sense of entitlement and envy among the recipients of such economic outpatient aid. As they become more used to and dependent on these gifts, pulling the plug would often incur outrage, resentment and anger.
But there’s no doubt we can afford to be more generous for weddings, baby showers and such events with a bigger budget.
Others ($1,000)
Any shopping for clothes, accessories, electronics and replacement of household appliances would fall under this category.
Conclusion
Some Marginal Improvements Cost Alot
The house and the car are the biggest culprits. There is no doubt upgrading in these two categories can lead to increase in standard of living for most but because most people feel the same way, there is big competition for these two resources, so improvement it can be marginal even though the outlay is huge.
At least for the house, it is still likely to retain its value and one could always “enjoy” and then sell 10 years later, although it’s a well-acknowledged fact that people do not like to downgrade. Loss aversion is hard to overcome.
What I Would Still Not Spend On
There is no doubt that if a $15,000 monthly passive income materialises, the Mrs will have my full blessings to buy a big diamond ring. =p
But I probably will still not upgrade my $30 Casio watch as there is simply no value-add to me at all. I would probably still shop at Padini across the Causeway and at Uniqlo for my clothing needs.
Semi-Retirement Likely To Work For Me
Increasing our food and travel budget do not cost that much relatively but I believe they could add quite a bit of value to our lives.
Although I wouldn’t exaggerate and say that I tap dance to my lessons everyday, I don’t feel dread on hectic days and most work days are quite neutral for me. Honestly, there’s a chance I might miss quite a few lessons in my upcoming lull period in November.
So yes, I am probably willing and eager to put in at least 20 hours of “work” a week for as long as possible to fund some of our “wants‘ even after all our needs are met.
After two to three years of detox from the corporate world, I can safely say that an early retirement does not appeal to me as much as before.
How About You?
If you were to receive a windfall of $5 million that generates $15,000 of passive monthly income, how would you allocate this $15,000 on your household?
I would definitely be happy to hear from you!
I know people whose rental alone (GCB in district 9) are already way over $15K a month…. -.-
Guess I should find out who are the people renting out their GCBs for $20K or more….
Hi Sinkie,
So I am not “dreaming” big enough then. Maybe need $50k. Lol
How I Spend $15,000 A Month
House
No change. Flat is fully paid up, there is no reason to upgrade or downgrade.
Transport/Car
Upgrade to a bigger Japanese car, so that passengers in the rear are more comfortable. Spare parts and maintenance for Japanese cars are still much cheaper than European cars.
Child
No kid. Period.
Travel
One travel per quarter, regardless of country of destination. Travel business class by utilizing travel hacks.
Food.
Choice of eating one’s fav food. If hawker centre is crowded, just walk into a restaurant without cost consideration. If a fav restaurant is crowded, walk into a food court. Key words: options.
Basics
Medical insurance is still required. In SG, one can die but not be sick. $15k per month can’t pay for a huge medical bill in hundreds of thousands.
Enjoy aircon every day, if nose can take it. Finding myself praying for cool weather so that there is no need to switch on aircon.
Upgrade to the best iPhones / Android phones whenever there is a product launch.
Gifts
Can gift more to parents but usually parents don’t need a lot more, as long as we show up for meals more often.
Can afford to have a bigger budget for events.
Others
Shopping for quality products with reasonable price tags. It is not about getting the most expensive item per se anymore.
A digital watch is for all occasions compared to a Rolex.
Semi retired lifestyle is definitely more fulfilling than a full retirement lifestyle.
Hi BigBoss,
Thanks for your sharing. I reckon what you have mentioned should not cost $10k a month and since you prefer a semi-retired lifestyle, you might need much lesser in terms of passive income to lead your desired lifestyle.
Just curious, are you already semi-retired?
Yes, my conclusion is that one doesn’t need to spend $15k per month. And if one leads a somewhat minimalist lifestyle, it is not necessary to spend so much every month.
I had a full retirement lifestyle for 18 months (at age 34) before I return to the workforce. Now I work only when I want to work, instead of needing to work.
Currently I’m semi retired (I think, since I work only 6 hours a day). Been that, done that. Being fully retired is overrated, in my opinion.
Hi BigBoss,
Thanks for your sharing and it’s definitely insightful to hear from you, someone who has been there and done that.
I’ll take your numbers.
$5m x 3.6% div = $15k/mth ($180k/yr)
Spend $1m to buy the house. Cash.
$4m x 3.6% div = $12k/mth ($144k/yr)
Net I’ve achieved $1k efficiency per mth compared to taking the loan.
LOL just being anal.
But woah, I never realized it’s so easy to spend $15k.
Cos your numbers are pretty reasonable.
It’s like a bit here a bit there and it all adds up so quickly.
A bit of toys here and there…
No wonder so many lottery winners burn thru their winnings in a short period.
Oops calculation error.
By taking $1m to pay for the house straight, I will have $12k forever.
But if you take the loan, you will still have $15k forever.
So going by that, it’s actually better to take the loan. My bad.
3.6% return still beats 2.5% loan
Hi ERSG,
Ya, I really thought it would be super luxurious but it’s just a slightly inflated lifestyle compared to now.
It really costs a lot to make a marginal difference in some components.
For lottery winners, gifting is always the most “dangerous” part as friends and family expects more and more.
Hmm. There is no end to it.
You can safely defer all your thoughts by 10 years once you make a kid. Just go and do it now, the early the better.
Hi Ramesh,
You are right. The conclusion is we definitely would not need or spend that $15k.
On the kids front, it isn’t as easy as what we expected and hopefully we wouldn’t have to wait too long.
Means u may return to corporate world?
Or you will work twenty hours a week?
Or just merely a reflection point?
“After two to three years of detox from the corporate world, I can safely say that an early retirement does not appeal to me as much as before.”
Hi JF,
You are right that it’s more of a reflection point.
It’s unlikely I would return to the corporate world due to my temperament, character and world view. But well, I wouldn’t rule it out totally.
The current pace as a tutor (around 30 hours of lessons) is working rather well and I hope to stick to it for at least one more decade, regardless of finances.
Sounds good.
Always useful to reflect.
It’s your life, so live it the way you want it. Easier said than done but that’s the truth.
Your post on how one might utilize $15,000 of money raining from the sky is pretty insightful.
Coming from someone who has yet to earn that pot of gold, I feel that giving back something to society/people who have helped me in the past would be one of the things on my list if I had that kind of super FU money!
Hi IH,
I am actually surprised that you are the first one to mention donations or giving back.
Giving money away to charity is definitely something on my mind but I guess the purpose of this post is to see how decadent I can be and how close I am to living this “desired” lifestyle.
“After two to three years of detox from the corporate world, I can safely say that an early retirement does not appeal to me as much as before.”
I think this is the case for most people – we want financial freedom so we can do what we enjoy doing. But to achieve financial freedom, many of us need to put off doing what we enjoy, and just slog our lives away at a corporate job that we hate.
If only all of us can earn money doing what we enjoy doing..or at least, not have to do what we hate to do.
Hi F4ff,
I agree that it’s probably hard to find something that one truly enjoys and help to pay the bills. But I think one would always have to try to find something at least more neutral. Otherwise, from my experience, it’s not sustainable and no point living life in “misery”, even if it’s for a few years.
It helps to have family and friends whom you can confide in when you are fed up with work. It’s one of many methods to stay sane. In parallel, make as much as you can, save as much as you can and generate investment returns as much as you can.
Am not there yet but I imagine that once we reach the point when we work cos we have to and not cos we have to, ceteris paribus, we will be happier at work.
I’ve been thinking about the same thing and using the desired monthly spending to work backwards to the capital I need to accumulate for the spending and no. of years to achieve that. The items to spend on are similar to what you have, but i’d also set aside say a couple thousand to fund causes I believe in, like bursary for academic/sport or cancer foundation etc.
Hi Weiz,
Having a foundation that disburses bursaries is a great idea. Imagine a $1 million legacy that can give out $40,000 of aid yearly to maybe 10 needy students.
Yes should be able to do 4% payout comfortably while continuing to grow the foundation to benefit more. And really adds a whole new dimension and purpose to applying ur investing skills. Still a long way to go though.. =P
This is an interesting question. Mr.C and I have always talked about innovative ways to give back to the society and make a difference. We’ve dabbled in sponsoring children, travelling to 3rd world countries to run educational / business workshops to help local businesses. We talk about sustainable ways to make a difference, directly.
One of Mr.C’s ideas was to set up an investment fund for this purpose that generates passive income continuously that we can manage and direct to charitable initiatives that we believe in, say something more structure or even the one-off building of schools and having teachers in rural villages.
I think having a passive income of $15,000 would see a chunk of that being directed towards this charitable investment fund for frugality is now a way of life for us, it’s a mindset and not a ‘diet’ or phase we are waiting for it to end. I don’t see how we can spend $15,000 within our principles on what we actually want to spend on. 1 or 2 expensive holidays now and then perhaps, but that’s about it.
Hi Ms K,
You make a very good point. I think one of the purpose of this thought experiment (on hindsight) is to let people see how “easily” 15k can be spent, and probably how little additional utility it provides for us.
Using it for charitable purposes is definitely much more meaningful and it’s definitely something the Mrs and I will be exploring in future too. Who knows, maybe we can do it together!
That really does sum it up – spending $15,000 can be done but with very little added utility! Is that because most in the FIRE community have somewhat adopted a mindset of ‘less is more’ and a frugal way of life that we feel and think? If we asked a different group of people, we may get different answers! I think Ms.K of the past would have blown through $15,000 easily and happily 🙁
Hi Ms K,
You are too hard on yourself. I really doubt you will spend that kind of money in the past, especially since your are on track to retire in your early thirties.
I guess if one has no desire to own a Patek Phillipe, one would not do it even if he is a millionaire or billionaire. There is likely zero additional utility for me except for the resale value perhaps. The stuff that adds some utility, like maybe housing and cars are just too expensive for the small incremental utility in Singapore. So probably not much “value” to it?
Oh Mr.15HWW, you should see my post on Taming the Lifestyle Inflation Lion / Lioness, when Mr.C read it and it was a very honest post – he was like, gosh you really did spend a lot. 😀 I had my journey of financial and physical possessions maturity along the way!
This is an excellent post Mr.15HWW, very thought provoking. Next Monday’s post will be inspired by this post 🙂
Have a brilliant weekend! 🙂