Many of our parents achieved comfortable retirement at 65 by steadily saving income earned from their job. It was also common in our parent’s generation to stay for years in one company. They rarely job hopped, seeking career progression and pay increments within the company they joined after graduation.
While job stability/ loyalty and good saving practices remain good virtues, they are no longer sufficient in today’s context. With a brutal job market stagnating pay and unpredictable inflation rate devaluing your savings, it is necessary to look towards additional means to grow your money quickly. After all, financial independence and early retirement is a key goal that many of us have in life. There are 5 essential steps we can take to accelerate our journey to achieving that goal.
Lever 1: Pursue career growth and/ or side hustle
This is particularly important when you are just starting out in your career. Your primary focus should be on growing your initial capital savings. There should be an outsized focus on increasing the inflow of money, rather than reducing the outflow. While prudent spending is important (point 4 below), the real needle mover would be to increase your earning potential at the start of your career. This can be done through 2 means: career progression/ growth, and a side hustle.
Achieving career progression doesn’t necessarily have to be through advancing in a company, both in seniority and pay. In fact, I would say that it’s actually more inefficient to do so. A year on year pay increment within the same company is typically in the range of 3% – 5%. This barely beats inflation and is highly dependent on company’s performance. It is also not uncommon to encounter pay freezes, especially in recent years. Switching jobs conversely gives you a real opportunity to get an increment in the range of 15% – 20%.
I’m not entirely sure about the psychology behind why companies tend to be more generous with pay when it comes to external hires but it is a practice I’ve observed. It could be (crudely put) that a new shiny toy appears more attractive than an existing toy. Or that the constant inject of fresh external perspectives and experiences is what companies require to survive and thrive.
Don’t get me wrong though, I am not advocating frequent job hopping. Job hopping is not a magic pill and is not without its own set of caveats. You must have something valuable to offer your prospective employer, in order to justify such an increment. This could be external industry experience and skills that you have accumulated, which typically requires you to stay in a job long enough to build up your knowledge of company/ industry practices and mature your professional/ thinking ability to give prospective employers the confidence that you would indeed be able to meaningfully contribute if hired.
Another downside of frequent job hopping, especially serial job hopping, is the question of your commitment level. Having been both a job seeker and a hiring manager before, I can see where the discomfort stems. An occasional job misfit/ hopping on your CV is fine, that is after all the purpose of a probation period. Just don’t make that a norm.
If you are not completely exhausted dealing with the demands of your day job, you could also consider a side hustle to grow your money. Pick something that you fundamentally enjoy doing, as you’ll be doing this in your free time. For sustainability, you could consider a side hustle requiring less effort past the initial phase of establishing yourself/ brand.
Or you could be like me, where I didn’t worry too much about sustainability nor longer-term return. My singular focus was on earning as much in the shortest time possible to build up that initial capital. I gave private tuition for a few years on the weekends, which paid great hourly, but was unsustainable as my job started to get more demanding. I eventually stopped it altogether as I started valuing downtime on weekends more than to grow my money.
Lever 2: Make your money work for you
If there is one takeaway from this post, it should be this. Making your money work for you is the most crucial step to take as if your life depended on it. A necessary input to this is having the initial capital to earn compounding interest, and hence there are some dependencies on step 1. I talked about the “rule of 72” in another blog post and really, nothing is as powerful as compound interest. The earlier you recognise this, the faster you can grow your money successfully. I wish I recognised this and took it seriously in my 20s, but it’s better late than never.
Investing should be done in the context of your risk appetite/ profile and understanding of the market. If you are like me, someone with limited knowledge on the market and potential of a company, investing in stocks might give you more heartaches and bring you further away from your goal. My main investments are therefore in safe instruments such as government bonds, lower risk funds, and annuities. This is where time in market is more important than timing the market. I have also invested in a property as part of my longer-term investment. While it is risky by my standards, I have rationalised that in the event of a property market downturn, I have holding power either through renting it out, or staying in it myself.
If however you have a flair for profiling a company and their growth potential, the stock market is an ideal playing field for you, with significant potential upside. A classic example would be the meteoric rise in Nvidia’s stock prices. Here it’s a case of timing the market being more important than time in market. Figure out your risk profile and aptitude for evaluating the market to identify the optimal approach and start investing.
Lever 3: Use credit cards to your advantage
While you should definitely not overspend on your credit card and accumulate bad debt, credit cards are not all bad and often come with their own set of perks. Cash back, minimum spend for higher interest on your bank account, miles. These are some perks of using credit cards that manifest as lower spending and ultimately money growth. If you have to spend the money anyway, why not generate some benefit for yourself while doing so?
The downside is that credit cards often offer a single perk per card, designed to encourage consumers to spend more. Be careful not to overspend in an attempt to enjoy all of their perks, resulting in lifestyle creep without realising. Prioritise what is important to you, whether its cash back or miles, and limit the number of cards you hold to avoid the temptation of overspending. SingSaver does a very comprehensive review of cards for those in Singapore, identifying what each is best for. It’s worth having a read to identify a card that best suits your needs.
Whichever card you choose, remember to never accumulate credit card debts. Credit cards can be insidious, lulling you into a false sense of security of spending beyond your means. Remember, the interest can very quickly rack up if you don’t pay your bills on time.
Lever 4: Keep track of your spending
This sounds tedious I know but it is important to understand how much money you are spending a month. It allows you to identify lifestyle creep, something you want to avoid if your aim is to grow money quickly. If your rate of spending is increasing at pace, or even faster than your rate of earning, there is just no way to grow your wealth.
Imagine filling a barrel with water with a hole at the bottom that is growing in size. If you are unaware of the growing hole, you can’t do anything to stop the growth and at best end up with a stagnant water level. Lifestyle creep can be very subtle e.g., one additional overpriced latte a week, one additional fancy dinners a fortnight. They can go unnoticed unless you’re actively tracking your spending and recognising these patterns.
The second reason is that it allows you to identify your biggest spend, and explore ways to reduce them. If for example you realise that you are spending $500/ month on transport, through calling for a grab more frequently than you hoped, you can replace your grab rides with cheaper public transportation. Or you’re spending $2000/ month on food due to daily takeouts/ deliveries. Understanding your big bucket outflow a month allows you to look for cheaper alternatives and change your spending habits.
Lever 5: Seek discounts/ promotions where possible
This could be in the form of credit card discounts, special occasions (e.g., Black Friday, Single’s Day), platform sale etc. As much as you and I hate email spam, subscribing to your favourite brand’s/ platform’s marketing and promotional content could be useful when it comes to identifying upcoming discounts. For example Zalora runs a decent birthday bash, slashing 55% off their usual price on a wide selection of products. Singapore Airlines is another example, periodically running promotional fares during which you can lock in a good ticket price for a future trip.
While this isn’t as significant as steps 1 and 2, little things add up, especially if you do it consistently.
Growing your money is a consistent process. The earlier you start, the greater the options available to you and the longer your runway. Start small, focusing on the needle movers at the start and continuously expand your levers as you progress. Grow your money today and who knows, you might be able to retire ahead of your goal!