What Would It Mean For You To Make S$535 More Per Month?

While money doesn't bring happiness, it does help relieve some of the biggest stressors in our lives. Unfortunately, many Singaporeans either spend more than they earn or live paycheck to paycheck, barely being able to enjoy the money they spend so hard earning. So what would it mean for those families if they were given a raise that would bump them up an income quintile? We look at what you could potentially do with the extra money if your income went up by an extra S$535 per year (the increase between the 41st-50th income percentile to the 51st-60th income percentile).

Change in Income per Household Member (Excluding CPF Contributions)

Pay Off Your Credit Card Debt Years Faster

We are all aware of the trap of paying just the monthly minimum payments on your credit card. With the average credit card interest rate of 25%, you would be charged S$7,250 in interest on a S$10,000 credit card bill if you pay the minimum payment of 3% of balance per month. It would also take you a total 4 years and 10 months to pay off your card debt. If you were to start making an extra S$535 per month and move those extra funds into paying off your debt, you would be able to pay off a S$10,000 credit card bill in just over a year, while saving S$5,627 in total interest. Similarly, if your credit card debt is S$5,000 and you went from paying the monthly minimum (S$150) to S$685, you'd be able to pay off your credit card debt in just 9 months and save S$3,145 in total interest.

Increase Your Investment Returns by 116% Over 10 Years

An additional S$535 is not a small sum when you consider the power of compound interest. Provided you're in the 41st to 50th income decile and you save at the average rate of 20% of your monthly income, you will be putting aside approximately S$461 per month into your savings or investments. In this case, your investments would be worth S$83,037 after 10 years—given the stock market's long-term average return of 8% p.a. If you add in the extra S$535 per month to your investment portfolio for a total of S$996 per month, you would increase your total 10 year returns to S$179,404 (before accounting for any fees)—a 116% increase. In fact, even if you only invest the additional pay increase of S$535, you could still see a portfolio worth S$96,366 after 10 years, which means you can diversify the rest of your savings into bonds, CDs or savings accounts. That being said, it's important to invest only money you can afford to lose, since investing in the stock market is subject to risk and financial loss.

If you can consider depositing the extra funds into a savings account if you are risk-averse. With the extra S$535 and an interest rate as high as 2.20% per year, you'll be able to save S$10,000 in about a year and a half.

Fun Stuff: Splurge on High End Holidays, Go Golfing or Buy a Pet

Sure, the responsible thing to do when you have extra cash is to save it, but what if you already have healthy savings habits and minimal debt? With the extra funds, you'd be able to afford travelling more, golfing a couple times per month or finally getting that furry family friend you've been wanting.

Based on the average cost of holidays around the world, the extra S$6,420 you'd have at the end of the year could mean a comfortable one-week holiday in Europe or the United States or several luxurious holidays in the ASEAN. Alternatively, you may even be able to take a weekend holiday in ASEAN hotspots like Batam, Bangkok and Kuala Lumpur every month, as the average cost of a weekend trip in that region ranges between S$250 to S$620 per person. If you're not keen on travelling but do enjoy golfing, you'll be able to golf a couple times per month over the weekend, as the average cost of green fees for guests costs S$171 on weekdays and S$262 on weekends.

If you prefer to stay home and enjoy the companionship of a pet, then you'd be able to afford at least 1 dog or cat. The average cost of owning a dog in Singapore is S$3,221 per year, which is roughly half of the increase in funds you'd have by moving up from the lower-middle income decile to the upper-middle income decile. Considering an extra S$535 per year amounts to just over S$6,000 of extra income annually, you'll still have funds left over to go on holidays or get a second companion to your pet.

What You Can Do to Increase Your Income

There are a few tried and true ways of increasing your income. The first is to ask for a raise or make a lateral or upwards move to a new job. While getting a promotion or raise may be limited to the positions available in your company or your boss's discretion, you can improve your chances by learning valuable skills, improving your work relationships with your colleagues or simply sitting down with your boss and discussing any valuable accomplishments over the past year. If raise is out of the question and you are not in the market for a new job, you can consider monetising a side hobby, like video games, art, photography or music. In a parting note, it's important to note these figures are hypothetical. The best way to spend an increase in cash flow is to dedicate it to paying off debt, savings and then setting aside funds for discretionary spending.