# Can We Save More To Be Financially Stable?

We all know that the only way to be financially stable is to spend less than we earn. That is, the expenses (outflow) has to be less than the income (inflow). To save more, we either have to increase our income or decrease our expenses.

Curbing on our discretionary spending may be one way to decrease our expenses. Let’s use the example of Mr Tan and find out how curbing on discretionary expenses may help in the long run.

In this exercise, we will assume that Mr Tan stays in Woodlands and has to commute to his workplace in Raffles Place every day for five days a week.

He takes the taxi every morning so that he can wake up slightly later. On the way back from work, he commutes via train. A cab ride from Woodlands to Raffles Place costs around \$28. Comparatively, a train ride costs only \$1.88. The difference amounts to \$26.12 per day. For a 20-day work month, the amount adds up to \$522.40.

For lunch, Mr Tan eats at a food court that costs an average of \$6 per meal. In comparison, hawker centre food costs around \$4. This amounts to a difference of \$2. For a month, he spends \$60 more at a food court than on hawker food.

At 3pm, he goes for a coffee break at Starbucks, spending around \$6 per coffee. If he were to settle for a coffee at the hawker centre, it would cost around \$4.50 less. For a month, he could have saved \$90.

When we add up all the savings he could have done, it comes up to \$672.40. Let’s round it down to \$672. For a year, this amounts to \$8,064.

Now, \$8,064 might sound like a lot to some. The story of Mr Tan might even inspire some to start cutting back on their taxi rides or their daily Starbucks. But the story of Mr Tan doesn’t end here. Saving \$8000 is great, but Mr Tan can actually put his savings to good use to increase his income (inflow).

If Mr Tan were to invest the amount he could have saved in a year in the STI ETF (SGX: ES3), an index tracker mimicking the Straits Times Index (SGX: ^STI), he would amassed slightly above \$19,000 in the span of 10 years. The STI ETF returned 8.97% per annum, inclusive of dividends, since 2004.

We might be like Mr Tan. Cutting down on the daily cab ride and Starbucks coffee might save us a lot, but it won’t help us earn more money. Investing the money will. Learn more about investing through a FREE subscription to our weekly newsletter, Take Stock SingaporeSign up here now. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can grow your wealth in the years ahead.