Myth or Fact? High Income Means You are Smart with Money

Happy Valentine’s Day! This time of the year, we usually find couples fall into two groups – (1) the couple who usually save more on their daily living, then use today as a chance to splurge abit more and pamper themselves to remember this special moment, or (2) the couple who prefers not to get hyped up over the various inflated prices (think flowers!) during V-day “promotion”, spend less today and more on other days. Which group do you belong to? :p

No matter how you choose to show love today, or think about life in general, you will probably realise you can’t run away from money matters, especially on this aspect of budgeting – when do you spend more now because we only live once? When do we save more because we need to take care of our future? How do we find the balance in between? And this brings us to today’s 135th week of our #SundayTimesRecap series, based on this article published in the last Sunday Times Invest section, “Over half of adults here do not watch their spending”. In this article, it says that many of us work hard to excel in our jobs and attract a high income, but delay or even avoid drawing up a household budgets, which leads to overspending as the number one reason why people end up in financial trouble. Today, we want to debunk three popular money myths, so that we can learn not to fall into the same trap:

1. High-income earners are money smart. On the contrary, high income earners may be spending too much time on their careers and so, their retirement planning may fall into two extremes – putting too much in the banks to watch savings grow only to see them lose their value through inflation, or investing too much into the next big thing (eg. crypto) without enough time to understand them. However, this can be overcome with financial literacy – one of the most under-rated yet important life skills because such knowledge can make a difference in whether you will have enough money all your life, or end up short a crucial moments. Just like any specialist skill, such knowledge is not a given and it is not a compulsory subject in schools, so we have to put in the effort to learn it. Highly educated people – professors, scientists, lawyers and doctors are vulnerable to financial scams because it is not easy to tell the difference between fake and genuine deals without financial literacy. People can get fooled because the super high returns promised are simply not achievable in the real world. To make matters worse, the crooks have become smarter too – creating fake websites and trading platforms to lure amateur investors into thinking that they are dealing with genuine companies.

2. It is easy to retire early and enjoy the good life. Many young investors pick up investing strategies and tips from social media on how they can supposedly invest their way to financial freedom, but are now nursing losses on their own portfolios. They were hooked on the euphoria of American tech stocks in the early days of the pandemic, but never expected these to tank in 2022. In reality, the only certain path to comfortable retirement is having a good career and an equally sound budgeting plan. After all, we need to know much we spend first before we can adequately plan for our retirement. It is important to have a budget because those who are clueless about their spending are usually the ones who have insufficient savings to tide them over when bad times hit.

3. High-income earners have no debt. It seems hard to believe, but people usually land themselves deep in debt when they start making more money. This is because they are often lulled into thinking that they can afford to splurge as they have a steady stream of high income. Yet, this income is infinite, and cannot pay for everything if you spend like there is no tomorrow. A recent OCBC survey found that about 40% of those earning $10,000 or more a month had unsecured debt and 20% of them had problems paying off these borrowings. A key reason of why we work so hard is to earn a decent income. Wouldn’t it make sense if we put some effort into managing our money better? After all, having good financial health makes all the effort worthwhile in the long run.

Whether you are a high-income, middle-income, or low-income earner, one thing is certain – financial literacy is a necessity these days if we want to have a better life without working until we grow old and die without having a decent retired life not having to worry so much about money. You can start by simply learning how to budget, or at least read Sunday Times Invest section (or my Telegram weekly summary :p) every week because that was how I started 20 years ago and built my financial literacy. Knowledge compounds and I hope you get to experience the same too. In addition, my teammates and I are running a webinar to pass on financial knowledge on the various strategies of creating lifetime income streams using low-risk methods. The next webinar will take place tomorrow - Wednesday 15th Feb 2023 at 8pm. If you are excited to learn, register for a seat – select “Invited by Victor” here: https://www.thelifetimeincomestreams.com/tlisvip

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