How 32-year-old woman saved for 2 condos in China

The couple were able to own two apartments in Nanjing, the capital of the eastern province of Jiangsu.

Tan Ooi Boon
Invest Editor

21 November 2021

Can you become richer if you invest most of your salary, by drastically cutting down on daily expenses?

The answer is a resounding "yes", if you stick to the frugal measures practised by a young couple in China.

Advertising executive Wang Shenai and her husband have one child. They saved almost 90 per cent of their combined salary every month, although they did not disclose how much they earned.

But Ms Wang's lifestyle set tongues wagging among half a billion viewers of a recent talk show in China because the couple were able to own two apartments in Nanjing, the capital of the eastern province of Jiangsu, at their age.

A 1,000 sq ft apartment there would cost about 1.5 million yuan (S$319,000) on average.

Ms Wang, 32, could manage to own two properties because unlike many of her friends, she does not believe in spending money on luxurious products and gadgets.

For instance, she will not spend a cent on a new phone till her current one dies on her. Her phone is so outdated it has only enough memory to run WeChat, an app needed for making cashless payments and communication.

Her husband also owns an old phone because her frugality has rubbed off on him.

Ms Wang does not buy clothes - her idea of "new clothes" is to inherit hand-me-downs from friends. "I spend less than 100 yuan a year to buy underwear because it is not a good idea to wear other people's used undergarments. But I have a friend who likes to buy clothes, and she will give them away even if she does not wear them that much. She will ask me to select whatever I want from among her used clothes."

She won't dine out with friends because she says such meals can be expensive. She uses only public transport and tries as much as possible to pay for it using promotional codes found online.

Of course, such a frugal lifestyle is not suitable for most people and it is no wonder that she has attracted her fair share of flak online.

But these critics fail to notice the biggest advantage of leading a frugal lifestyle at a young age - by putting most of her money into property, Ms Wang stands a good chance of being able to retire from work early.

Those who buy more than one property usually do so with the intention of collecting rent, which is a viable retirement income.

What you can do

If there is one lesson that you can learn from Ms Wang, it is that your daily expenses can add up to quite a lot if you do not watch your spending.

Overspending in such a manner is the No. 1 reason that many people here end up in serious debt. It is also the biggest obstacle to those who desire to have a comfortable retirement; how can you ever save if you always spend most, if not all the money that you earn every month?

So if you aspire to retire early and comfortably, you can adapt Ms Wang's twin strategies to achieve the following:

1. Save and invest early

Saving does not mean leaving your money untouched in your bank account because it earns practically nothing there.

If you are employed, your company would already be contributing to your Central Provident Fund, which earns 2.5 and 4 per cent interest on the various accounts.

If you are self-employed, you should make a voluntary contribution because the CPF's high interest rate enables you to have a good, safe and free retirement plan that acts as a solid back-up to your other investments.

If you plan to invest for your retirement, do so conservatively like Ms Wang, who chooses property because it offers two possible streams of returns - rental and capital appreciation.

It is not easy to own more than one property here but where possible, you should consider investing in at least one property, which is the home you live in.

For other investments, do your homework and choose only those that are suited to your risk appetite. Since you are doing this to retire early, you should not hedge all your bets on very high-risk investments which can make you poorer instead of richer.

Also, plan for calamity - a whole-life policy is worth considering because it offers a good balance of savings and protection against mishaps.

2. Reduce debt and non-essential expenses

Unless your work evolves around the use of technology, there is really no need to upgrade your mobile phone whenever a new model is out. Most devices can last a good number of years and missing out on the "new releases" in those years means saving quite a decent sum.

The same applies to designer labels and other luxurious goods because salaried workers who indulge in such things usually end up short and have to rely on credit cards, which will hurt their finances further.

Next on your watch-list should be entertainment and vacations. If you plan to charge these to your credit cards, even though you know you won't be able to settle the bill in full by the end of the month, you should really look for cheaper ways to have fun.

Ultimately it is about choosing the life that you want. Live it up now and risk working through old age or live frugally and below your means now and look forward to a better and earlier retirement.

https://www.straitstimes.com/busines...ondos-in-china