Why Giving Up Avocado Toast Won't Bring You Financial Freedom

Nitpicking your expenses doesn’t lead to financial freedom; it’s growing your income and investing your money that will. Last month, Australian millionaire Tim Gurner suggested that young people couldn’t afford their houses because of…get this…avocado toast. This is the same kind of advice that’s in line with “don’t buy expensive coffee”, and “never go on vacation”. Now we’re not against saving money (we’re called SingSaver.com.sg for a reason), but this mindset is all wrong:

Crunching The Numbers

Mr. Gurner says: “When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each”. Now we get it, he’s not literally saying saving on coffee and toast will buy you a house. But he’s suggesting (we’re pretty sure) that not saving on the small things is what costs you a house. The problem is, Mr. Gurner isn’t exactly right. Here’s why. Let’s say you want to go on a small budgeting spree, and cut the following luxuries out of your life:

•    No Netflix subscription: save $15 a month

•    No Starbucks once a week: save $60 a month

•    No using Uber or Grab: Most people save $40 a month this way

•    No once-a-month shopping spree: Let’s say you save $150 this way

Total saved every month: $265

Typical price of a four-room flat: $350,000

Amount of time in which your monthly savings will pay off your flat: Approx. 110 years

Now, we’re not saying savings are useless or unimportant; they are. What we’re saying is that trying to save via the small stuff is an ineffective way to buy a house, pay for your education, or find financial freedom.

Let’s put it into perspective:

•    Nitpicking is the wrong mindset for saving

•    You have to be proactive if you want more than just security

•    Small savings have a role, and that’s small luxuries

Nitpicking Is The Wrong Mindset For Saving

Look at the above example of a flat. Considering it’s so expensive, how are over 80 per cent of Singaporeans home owners? The answer is that we don’t try to afford a flat by nitpicking, and buying cheaper socks, single ply toilet paper, etc. Most of us can afford to buy a flat because we set aside a whopping 20 per cent of our monthly income (the CPF makes that mandatory), right when we get paid. So if you want to see a real difference in your life, here’s what we suggest: set aside a sizeable portion (at least 20 per cent) of your income every month, even after CPF contributions. Make sure you do this before you spend a single cent, and put those savings in a separate account. After that, use whatever money remains, however you like. Go ahead and gorge yourself on avocado toast if you want. You’ll find you still have enough for emergencies or financial goals, without getting a daily sense of deprivation.

You Need To Grow And Invest Your Money As Well

Simply stashing your money aside won’t bring financial freedom. If you have big aspirations, like a beach house in California or sending your children to Harvard, then skipping toast is never going to do the job. There’s a limit to how much you can budget. Unless you’re already rich, you’ll never be able to budget enough to retire at 40, own a helicopter, have five houses, etc. If that’s what you want, then your attention shouldn’t be on pinching pennies. You should be focused on starting-up side businesses, investing wisely, and stretching your income. Your response to needing S$100,000 cannot be “what can I cut out from my budget to afford this?” Instead, your response should be “What can I do to try and make an extra S$100,000?” Financial freedom takes a whole different mindset from basic financial security. It requires a proactive, income-seeking mindset, and not just thrift.

Small Savings Are For Small Luxuries

So what’s the role of small time budgeting? Why, small luxuries of course. Hoarding your cashback from credit cards, shaving S$10 off shipping, skipping Starbucks for a week…that all does have a role. It’s role is to afford you the occasional extra trip to Bali, a nicer laptop, or other small (read: non life-changing) luxuries. That has its place in personal finance, as we want to maximise the enjoyment of life. But please don’t fall into the trap of thinking lots of small deprivations (which can snowball into massive misery) is some sort of magic key to your financial woes.

Do What Matters Instead

Save based on a substantial percentage of your income, and work on growing said income. That’s where your attention and willpower should be. Forget about walking two blocks to shave 50 cents off your chicken rice, or feeling guilty that your salad cost S$5 extra for seared tuna; that’s not the stuff that matters.

SingSaver.com.sg, Singapore's #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.

Why Cooking At Home Won't Save You Money (At The Start)

Many personal finance articles talk about how cooking at home in Singapore saves money. While it does in the long run, the initial costs can be high.

By now, you’ve read about a thousand personal finance articles that explain how cooking saves you money. And you’re probably wondering why so many Singaporeans – especially those short on cash – still eat at hawker centres so often. What a lot of these articles don’t talk about is that cooking involves a lot of initial costs, and may not save you money at first.

 

How Much Does It Cost to Cook at Home in Singapore?

When most people first work out the cost of a meal, the budget plan goes something like this:

•    Mixed vegetables S$5

•    Fish (two fillets) S$9

•    Chicken (whole) S$8

•    Cooking oil (2 litres) S$5

•    Rice (5kg) S$12

All in, you can have enough food for three or four days for S$39, and the rice and oil will last much longer than that. But here’s the thing: that’s the way it works after you’ve been cooking for a while. If you have never cooked before, here’s what the budget really looks like at the start:

•    Mixed vegetables, which your children refuse eat so you have to toss the previous batch, and buy new vegetables that they will eat – S$10

•    Fish, of which you need three fillets, because you burned the previous one – S$27

•    Roasted chicken from the coffee shop, because you gave the previous whole chicken to a neighbour, after realising you have no idea how to use that chopper, and would have just end up with badly shredded chicken due to your cutting skills – S$12

•    Cooking oil price remains the same, but you’ll probably be using more of it due to errors. Also, you never knew a decent non-stick wok really can cost upward of S$30.

•    Rice prices remain the same, but then you realise you’ll need a rice cooker, so you need to fork out an added S$50.

And right when you check the recipe book, you realise you also need six or seven different herbs, a blender, a convection cooker, a toaster-oven, flour, eggs, milk, cut chillies, etc., etc. Now over time, if you keep cooking, this will be less of a shock. You will gradually accumulate the equipment and spice cabinet that every decent cook has. But at the very beginning, the initial setup cost can be much higher than you imagine. It’s not as simple as the cooking shows or recipe books would suggest, especially if you’re cooking for a whole family. Some of the key factors to consider are:

Mistakes Cost Money

If you put sugar instead of salt in the soup, or leave a whole salmon on the pan for too long, you need to start from scratch. That’s an expensive mistake.

Your Family Might Not Like Your Cooking (Especially the Children)

It hurts when you bought and roasted a whole chicken, but your family finds your beginner-level cooking to be, well, inedible. Many people often give up because they get tired of trying to force their cooking on the family, especially the children.

Equipment Can Be Expensive, and Discount Versions are Worse

When it comes to cooking equipment, discounts are for those in the know. A cheap knife or wok can end up costing more money, when you throw them out and replace them. It’s more than likely, however, that an amateur chef will overspend on branded equipment.

The Biggest Cost is Time

Cooking is a skill that takes time to learn. It is not like riding a bicycle, which can be managed in a day or two. This is the number one cost that’s often overlooked. Every dish is different and represents a new learning curve. On top of that, consider that even experienced home cooks can take an hour to prepare a meal. If it’s your first time, you can expect to spend two to three hours on something as simple as lemon chicken and rice. Yes, you can prepare something quicker like sandwiches, but you can’t be having that for dinner all day, every day. And microwaved food doesn’t count as cooking! If you’re working, it may not be an option rush home from the office at 4 or 5 pm, in order to get dinner ready by 7:30 pm sharp. Don’t say you can pre-cook it in the morning, because it’s hard to do that also when you need to be at work by 9 am. Learning to cook also interrupts other opportunities, such as starting a side-business or doing a part-time job.

 

Those Who Need to Cook are Often the Least Inclined to Do So

If you’re financially stable and can afford the “start up costs”, it’s worth learning to cook. The savings will more than make up for the costs in the long run. However, families on a tight budget (e.g.S$1,200 a month) might not be able to afford the initial equipment; and they certainly can’t risk wasting food. When your budget for the day is S$3 a meal, a burned beef patty is something you’ll have to choke down, as you can’t afford to make another. This means that you should learn to cook while you have the time and money. Later on, if you ever get in a dire financial situation, you’ll have the means to save money via home cooked meals.

 

Cashback Credit Cards Can Help You Save on Home Cooking

If you want to save money on cooking, you can put your purchases on a cashback credit card. This way, you can earn back a small percentage of what you spend, especially if it gives rebates for supermarkets. The HSBC Advance Credit Card gives you 2.5% cashback on anything, capped at S$70 per month. Plus, you get a S$150 NTUC voucher when you apply for it through SingSaver.com.sg before 30 June 2017. This goes a long way into helping you offset the initial costs of learning to cook.

SingSaver.com.sg, Singapore's #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.

Why Do Some Companies Like Gong Cha Change Their Name?

It’s often discomforting when companies like Gong Cha change their name, but there are very good business reasons behind it.

You might think it’s a terrible idea for a company like Gong Cha to change their name. They’ve been in business for a few years and developed a cult following in Singapore. To change their name would be a waste of all the marketing and branding they’ve spent on. Sometimes however, there’s a good reason for businesses to change their name.

Companies Change Their Names More Often Than You Think

It’s an exercise called re-branding. It happens quite often, and sometimes it’s so subtle you don’t notice it. For example, not a lot of people noticed that, back in 2011, Starbucks changed its name. It’s no longer Starbucks Coffee, but Starbucks Corp. At present, the local Gong Cha (bubble tea makers) is planning to change its name to LiHO starting in June.

But Why?

Gong Cha is a franchise, and the Singaporean owner of the franchise is RTG Holdings. Recently however, the parent company of Gong Cha (called Royal Tea Taiwan) was bought by Gong Cha Korea. The new owners of the Gong Cha name are imposing new restrictions on franchise owners. We don’t know what these are, but we do know that some companies forbid franchise holders from operating other types of businesses. For example, if you buy the franchise for a famous chain of pizza restaurants. The parent company of said restaurant may not want you owning other fast food franchises. Regardless, RTG Holdings seems to be splitting from the Gong Cha franchise and going their own way. As such, they need a new name, and the Hokkien name “Li Ho” is meant to sound more Singaporean. Some other reasons companies change their names are:

•    Name no longer represents the company

•    Corporate mergers and acquisitions

•    Copyright reasons, or overly generic names

•    Negative publicity

•    Tax reasons

Name No Longer Represents the Company

Starbucks dropped the “coffee” from its name because it’s no longer just a coffee company. Starbucks long ago started to sell pastries, tea, chocolate, and countless other non-coffee related products. Another example would be Sony, which up to 1958 was called the Tokyo Telecommunications Engineering Corporation. It wouldn’t have made sense for Sony to retain the name, as by that point it was no longer just operating in Tokyo, nor was it focused on telecommunications anymore. Sometimes, the company takes on the name of its most famous product. For example, recruitment firm TMP Worldwide changed its name to Monster Worldwide, as they are best known for running the jobs portal Monster.com.

Corporate Mergers and Acquisitions

Sometimes, companies merge or are bought over. This can result in a name change. When AXA became the majority shareholder in National Mutual (a major insurer) in 1999, National Mutual simply took the name of its parent company. McAfee Associates and Network General merged in 1997, and the new company was called Network Associates International. However, the name changed back to McAfee in around 2004, as the anti-virus software remains their best-known product.

Copyright Reasons or Overly Generic Names

Some names are so generic, they are impossible to copyright. For example, petrol giant Amoco Corp. used to be called Standard Oil Company. Sometimes, the name is so generic that customers can’t tell if it refers to a specific company, or to an entire industry. United Parcel Service (UPS) for example, used to be called American Messenger Company. It also causes problems with regard to online marketing. If you call your education company “Singapore Tuition Agency”, you can bet it’ll get lost in a sea of similar terms during a Google search.

Negative Publicity

Some companies change their name because they’ve acquired a bad reputation, and they don’t feel the name is salvageable. For example, Philip Morris (a tobacco company) caused controversy when it changed its name to Altria – many protested that it was trying to hide tobacco industry involvement in different areas, such as when it donated to political campaigns. Notably, the name change helped to protect companies like Kraft, of which Philip Mor…oops, Altria, is a major shareholder. (Yes, the same Kraft you find in supermarkets). Kentucky Fried Chicken changed its official name to KFC not just for convenience; they wanted to avoid mention of the word “fried”. In Sim Lim Square, many of the blacklisted scam stores repeatedly changed their name, to avoid being identified after their name popped up in the news.

Tax Reasons

We absolutely don’t condone any sort of tax evasion or avoidance. But that being said, some companies repeatedly close down and re-open under a slightly different name, to get tax benefits. It’s common, in most countries, for new companies to get lower taxes in the first few years of business. This is to give them time to get on their feet (most new businesses run at a loss for the first year). Some small companies decide to “extend” these tax breaks, by repeatedly closing and re-opening with a variant name. For example, a restaurant named River Valley might close down after two years, and then re-open as New River Valley. Two years later, they close down and re-open as River Valley Restaurant, and then later as River Valley Family Restaurant, and so on. Besides getting tax breaks, this might also qualify the business for repeated grants and lower interest loans. (Until the authorities notice, and decide to make an example of the owners). What do you think about Gong Cha rebranding to LiHO? Are you looking forward to it, or would you rather Gong Cha stay the same? Tell us in the comments!


SingSaver.com.sg, Singapore's #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.