Singapore is a place where about 4% of taxpaying citizen acquire a salary of SGD 100,000 before the age of 25, while 20% of earning people reach the amount during their early thirties. Earning a six-figure salary requires years of diligent work and gaining experience in the line of work that you choose for yourself. Although a majority of high salaried classes don’t face immediate problems in life, just having a six-figure salary doesn’t secure your future or retirement life. So to maintain the same lifestyle for the next 40-50 years of your experience is essential no matter how much salary your employer pays you. At a point in time, the salary that you earn will not be enough for the same comfort because of the growing economy where prices of commodities keep rising. There are a few mistakes made by 6 figure income earners.
Reaching the six-figure salary class does make you feel accomplished in life but only for a brief moment. Soon the taxes take over, and a course of action is needed to make the best out of the salary that you receive. Most of the youth that reaches this level in life become reckless about their future and the savings required to secure it. There are horrendous mistakes that six-figure salary earners make, which compromises future security. Here is a gist of the same.
1. Ignoring Budgeting
Being carefree and being careless are two different things. When money comes in, we believe that we can now have a carefree life where you don’t have to worry about your monthly bills and groceries. But earning a lot of money can also turn you careless towards your own future. Unchecked spending on unnecessary stuff is going to cost you more along the road. In time, the impulses and temptation become a habit, and you burn away your paycheck on paying for fancy gadgets, clothes, and accessories. Doing so does satisfy your whims but harms your long term future finances.
Spend carelessly
A lot of people simply ignore the concept of careful expenditure and budgeting. They spend carelessly on inessential things among which the habit of eating out is the worst. It’s not a felony to be eating out with friends or alone on weekends or special days, but making a habit out of it will surely hurt your purse. Using your money carefully is essential for the big picture. Every time you save a dollar and invest it, you pave a better way of life in your future.
Always keep a check on your expenses by noting down your everyday spending habits. Look for things that have cost you a lot and curb your temptation of buying the things that don’t really matter. Avoid eating out too much and always look for discount shopping on groceries. Cooking your own food at home will save you a lot of dollars compared to eating out, and the food will be healthy and rich in nutrition when you cook it on your own.
2. Not Making a Long-Term Financial Plan
This is another instance where the youth is stupefied by the amount of money they receive in their bank accounts and forget about the reality of life. Which is that the job that is paying you a high salary because of your expertise is not going to be there forever. Every firm requires new blood with updated ideologies. If not that, hang your doubts on being taken over by a robot pal. Some day or the other, you will have to let the job go due to incapability in old age.
Being careless, six number earners often go out of their salary bracket and spend lavishly on things that are not worth their time. Doing so not only washes away the check-in its entirety but it also gradually diminishes the savings that are important for your retirement plan. Having a retirement plan is important and requires little sacrifices on a daily basis to save enough so that you can invest the money and grow your finances further. The lavish lifestyle that your income provides you right now will not be there when you grow older and are relying on just the pension plan you buy. To support the same comfort in life ahead, you must monitor your expenses and try to cut out whatever you think you really don’t need. Invest your savings into several investment features in the market. Growing your wealth with time is the best plan of action for retirement.
3. Not Trying to Minimize Taxes
Taxation theft is a crime, and we all know that, but paying regular taxes without even considering why you’re paying them is foolishness. The government will take no notice of what you’re spending for and where you might need the money. But there are reasons for which you can ask for deductions in your tax.
Since the salary is higher now, you may not think about taxes and pay them without looking at the things that you pay for to earn money. When you’re saving for your future, it is necessary that you consider all your options and taxation is one of the factors in any earning individual’s life which takes away more money than it actually should. People being supported with a high income should always know what to do to save taxes. Having all your salary put into one bank account every month will lead to more taxation. You should look for other financial products that protect your earnings from tax. Such commercial vessels retain your money as an investment and minimum, or no tax is incurred on the money.
4. Not Saving Enough
The high-income salary that you’re receiving now will keep you safe from troubles probably for the first two weeks of the month, and then you have to wary of even catching a cold. Financial and medical emergencies can happen at any time and coming out of such a problem can be very hard to get out of if you don’t have the proper resources. Saving enough to be secure of any unexpected mishaps of life is what you should be using your big fat paycheck for. Medical emergencies may sometimes leave you stranded with worries, and the only thing that can help you out is the money that you have saved or invested in insurance plans. Saving 20-25% of your income, to tackle emergency financial issues is an appropriate plan for an earning individual, no matter the size of the check.
Big money brings big needs. These needs are created by ourselves in our heads when we progress financially. It is okay to have a more comfortable and happiness gaining lifestyle when you have got a promotion or have hit the six-digit salary class, but nothing lasts forever. While enjoying the privileges of high income, you must also think about the frailty of life that can dig a hole in the ground for you while you were trying to reach the skies.
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