Why nearly half of Singaporeans will not achieve financial freedom

In case you haven't heard the news, nearly half of Singaporeans say financial freedom is not possible.

Specifically, four in ten consumers surveyed in Singapore believe that based on their current trajectory, they will never achieve financial freedom.

This is based on Singlife's Financial Freedom Index 2024, which was released just two days ago (August 26, 2024).

The survey was conducted between April and June among 3,000 Singaporeans and permanent residents (PRs) aged between 18 and 65. Those aged 35 to 44 find it most difficult to achieve financial freedom.

Financial freedom in this context refers to several factors, including the ability to quit working or retire at any time, having more than sufficient funds to spend on wants and needs, and being able to maintain your current lifestyle in the event of unexpected circumstances over the next 12 months.

The main obstacles identified by survey respondents are:

• Insufficient income (53%)
• Job insecurity (32%)

Respondents said they were most stressed by inflation, insufficient savings for retirement, and paying medical expenses.

These are all valid arguments, but let's break them down further.

Guilty 1: Insufficient income

The Monetary Authority of Singapore (MAS) reported in April that inflation rose slightly due to the increase in the GST rate, higher electricity and gas tariffs as a result of the carbon tax hike, and increased fees for basic services.

In January this year, The Straits Times reported that headline inflation of 3.6% was still well above the 1.7% average between 2010 and 2019. Core inflation, on the other hand, was 3.2%, much higher than the 1.5% average over the nine-year period.

According to SmartWealth (a Singapore-based financial planning platform), the estimated monthly cost of living in Singapore in March 2024 is S$2,560. If you're married or have kids, the numbers are likely to be much higher. Some people on Reddit even discussed last year that you actually need at least S$3,000 to S$4,000 to live comfortably.

Still, Statistics Singapore reported that the savings rate fell to 28.8% from 36.2% in the previous quarter. Disposable income has also declined at a slower pace since then, suggesting cash is tight.

All these factors taken together seem to indicate that one is not earning enough money, i.e. that the salary is not sufficient to cover daily living expenses.

This is also related to some other key factors mentioned by respondents:

• Unforeseen expenses (38%), for example for personal or health reasons
• Burden of debt repayment (28%)

If you have a sufficient income, it is safe to assume that none of the above will really cause you much concern. This leads us to the next problem…

Culprit 2: Job insecurity

In addition to inadequate income, job security is another concern among Singaporeans.

Such concerns came after the number of layoffs in Singapore rose sharply, more than doubling from 6,440 in 2022 to 14,320 in 2023, according to a report by the Ministry of Manpower.

At the same time, news of layoffs around the world has dampened people's spirits. Even local e-commerce brand Lazada had several waves of layoffs earlier this year.

Based on the data shared on Layoffs.fyi, the trend of companies laying off employees fluctuates throughout 2024.

Economic volatility and rapid technological advances have made workers aware that job security is becoming increasingly unlikely. The National Trades Union Congress (NTUS) found that 47% of 185 workers surveyed believed such trends would lead to more job losses.

And it's not just this year. According to online reports we found, job insecurity has been one of the biggest issues worrying Singaporeans for years.

This wasn't such a big problem before the pandemic. But the economic changes during and after the pandemic have made the feeling of distress much more acute.

So… what do we do about it?

There is no clear answer to the question of how to achieve financial freedom, and I am by no means a financial or economic guru.

However, we have found some tips to eliminate the two biggest “culprits” mentioned by survey respondents.

Some inflation hacks shared by Singlife are:

• Invest your earnings for passive income
• Save money with water and benefit from discounts on utility bills
• Reduce your unnecessary expenses whenever possible
• Before shopping, exchange with family and friends

When it comes to job insecurity, the most important advice is to keep learning. You can do this by taking courses yourself or requesting training from management, the latter of which is highly recommended by the Singapore National Employers Federation (SNEF) to help companies remain competitive even when there are market disruptions.

Will this help Singaporeans achieve financial freedom? Maybe, maybe not.

However, it is better to reach for the stars and land on the moon than to stay as we are without making any effort to change.

• Read other articles we have written about startups from Singapore here.

Photo credit: Fred To The J via Instagram