The Link Between Financial Security and Wellbeing: A Path Forward in Singapore’s Economic Climate

In Singapore, a city renowned for its economic prosperity, many residents are grappling with rising living costs, inflation, and an ever-widening wealth gap. According to the UBS Wealth Report 2024, Singapore’s Gini coefficient—a measure of inequality—has surged 22.9% since 2008, reaching 70 in 2023. This places Singapore above several regional markets in terms of inequality. For many, this disparity exacerbates financial stress and mental health challenges, making it crucial to explore the relationship between financial security and emotional wellbeing.

The interplay between financial security and wellbeing is complex and multifaceted. Financial stability often serves as a foundation for emotional health, but emotional resilience and mindful habits can help individuals thrive even when resources are limited. Conversely, both financial and emotional wellbeing are interdependent, reinforcing each other in meaningful ways. This article explores these three perspectives—financial security as a foundation, wellbeing independent of wealth, and their interdependence—while offering a practical roadmap tailored to Singapore’s economic realities.

Perspective 1: Financial Security as a Foundation for Wellbeing

"I have no time for wellbeing. I have financial matters to worry about. If I have money, I'll feel good."

Financial security often serves as the bedrock for emotional health. Without it, individuals may experience chronic stress and anxiety, particularly in a high-cost environment like Singapore. While inflationary pressures have eased, according to the Monetary Authority of Singapore, the nation’s high cost of living—from housing and healthcare to daily essentials—continues to weigh heavily on many residents. This is compounded by rising income inequality, as highlighted by the UBS Wealth Report 2024, which underscores the widening gap between those with financial stability and those without.

Actionable Steps

1. Start Small with Savings

   Even with limited discretionary income, setting aside small, consistent amounts can build a financial cushion. Singaporeans can benefit from competitive savings accounts such as:

   
   

   1. OCBC 360: Earn 3.20% p.a. interest by crediting a minimum salary of $1,800 and saving $500 per month, which could yield $1,600 per year on the first $50,000 saved.

      
      

   2. POSB Save-As-You-Earn (SAYE): Offers 3.50% p.a. with no spending or salary requirements but requires funds to remain untouched for 2 years, providing $1,750 per year for the first $50,000 saved. Note: Bank interest rates may vary depending on specific terms, conditions, and promotional periods. The rates provided here are for illustrative purposes and are generally within the typical range offered by financial institutions.

• Outcome: By consistently saving $500 per month, you could build an emergency fund of $6,000 in a year, plus interest, which provides a buffer for unexpected expenses and reduces financial stress.

Wait, what? The interest earned after 12 months of savings is less than one month of my salary?

Facing the Reality of Savings Growth vs. Lifestyle Expenditure

It’s important to recognize that while saving regularly and investing in high-interest accounts like the OCBC 360 can provide tangible growth, the amount earned may feel small compared to your lifestyle expenses. For instance, even if you save consistently and earn $1,600 in interest over a year, this amount is still modest—just slightly under one month’s salary assuming you earn $1,800 per month.

This can feel disheartening when faced with the higher costs of everyday living. However, it’s essential to view these trade-offs as part of a larger financial strategy. While the interest may seem paltry, every dollar saved brings you closer to long-term stability, financial freedom, and the ability to make more significant decisions down the road.

The key is to focus on small, consistent savings, and understand that while immediate gratification might not be achieved, the payoff in the future—whether through savings, investments, or compounding interest—is what will create a more secure and resilient financial foundation over time. The goal isn’t necessarily to match your lifestyle spending but to create a balance where your savings are steadily building, and you can eventually manage or even reduce your reliance on high-expenditure habits.

Adapting Our Mindset: The Key to Breaking the Cycle

Here lies the critical factor: mindset. The difference between those who break free from financial stress and those who remain trapped in it often comes down to how we approach money and savings. Adapting a mindset of delayed gratification, consistency, and discipline is what separates the winners from those who remain stuck in a cycle of immediate spending.

It’s easy to get discouraged when savings seem small relative to our spending habits, but this is where the true change happens. By consistently choosing long-term security over short-term indulgence, you begin to build a solid foundation for the future. This shift in mindset, from focusing on instant satisfaction to focusing on future goals, is what ultimately empowers you to break free from the cycle of the “forever poor” and pave the way toward greater financial freedom.

2. Track and Prioritise Spending:

   Use budgeting tools like My MoneySense’s Expense Manager or free apps such as Spendee to monitor expenses and identify areas to cut back. By reallocating even a small percentage of monthly spending toward savings or debt repayment, individuals can take control of their financial trajectory.

• Outcome: Better control over spending provides a sense of empowerment and allows for incremental progress toward financial goals.

  
  

When others appear to have a higher capacity for discretionary spending…

A Realistic Perspective on Financial Trade-offs

While saving consistently might feel slow, consider the alternative: many who appear to afford luxurious lifestyles may be doing so by living on credit. Debt often enables the illusion of financial freedom, but it comes with long-term consequences. As financial advisor Rachel Cruze puts it, “Debt basically enables people to live a lie” . Similarly, Warren Buffett reminds us, “If you buy things you do not need, soon you will have to sell things you need” .

These statements underscore that choosing debt to maintain appearances is not a path to financial stability but a trap that many find difficult to escape. Instead, embracing a disciplined approach to saving—even if the growth feels modest compared to lifestyle costs—is a step toward true freedom.

Perspective 2: Wellbeing as Independent of Financial Status

"He's got a landed property, a high position in a global firm - why's he depressed? My colleague lives in a HDB with 5 kids on a single income...they seem much happier."

While financial security is a valuable contributor to emotional health, wellbeing doesn’t have to be reserved for the wealthy. Even those on a tight budget can benefit from mental health practices that reduce stress and increase resilience.

Actionable Steps

1. Mindfulness & Stress Management:

   In a city with high demands and inflationary pressures, stress management is key. Practice mindfulness daily using free apps like Headspace or Insight Timer. Even 10 minutes a day can significantly reduce anxiety and improve emotional wellbeing.

• Outcome: A calm mind can help you make better decisions about your finances and avoid stress-driven mistakes like impulse spending or falling into debt.

2. Seek Community Support:

   Joining Well-Being Circles or local community groups like Silver Ribbon Singapore provides peer support and emotional connection. These networks are often free or low-cost, providing a space for vulnerable individuals to share struggles and receive support.

• Outcome: Feeling supported and less isolated can ease the emotional toll of financial stress, giving you the mental clarity to focus on practical solutions.

Perspective 3: Financial Security and Wellbeing as Interdependent

"If you're an emotionally volatile person, you'll be challenged to manage your money properly."

The relationship between financial and emotional health is deeply intertwined. Financial stability provides emotional peace of mind, while a stable mindset is essential for making rational financial decisions. However, when emotional wellbeing is compromised—due to stress, burnout, or feelings of hopelessness—it often leads to impulsive decisions that exacerbate financial difficulties, creating a vicious cycle.

As Rodney Williams, co-founder of SoLo Funds, explains, “When you’re feeling low or depressed, you may lack the motivation to manage your finances—you can feel helpless and resort to believing that it’s not worth trying. You might also make impulsive financial decisions…to experience a brief high”. Financial therapist Sonya Lutter also warns that stress triggers a “fight-or-flight” response, which often results in “short-sighted decisions” that prioritise immediate relief over long-term security.

This highlights the critical role of emotional wellbeing in breaking free from the cycle of poor financial choices. By cultivating mindfulness and resilience, individuals can gain the clarity required to make thoughtful, rational decisions. Simple, consistent actions, such as saving or practising mindful spending, can contribute to both financial and emotional stability, ultimately fostering a more secure future.

Actionable Steps

1. Financial Planning with Mental Health in Mind:

   Use platforms like StashAway or Syfe for low-cost investment options (3 - 5% p.a. returns). If you can allocate $100 or more per month, start with their conservative portfolios, which offer steady returns while managing risk.

• Outcome: Even modest investments in these platforms can build wealth over time, while the ease of automated investing reduces financial stress. If you would like a free MS Excel spreadsheet for you to figure out your savings potential based on your monthly savings capacity, the timeframe and the interest rate, please leave us a message and we will email it to you.

2. Small, Consistent Steps for Both:

   Commit to 10-minute check-ins every week to track both your financial progress and emotional wellbeing. Whether through reviewing your budget or reflecting on your mental health, these regular reviews will help you stay grounded and avoid impulsive financial decisions that stem from stress.

• Outcome: This accountability not only keeps you on track financially but also nurtures your mental health by preventing feelings of overwhelm.

The Path Forward: Mindset and Support for Your Journey

While financial decisions and mental health may seem daunting, the key is to start with small, actionable steps that can lead to long-term growth. At InsideOut Well, we encourage a growth mindset, where the focus is on progress, not perfection.

• Support Systems: If you’re struggling with emotional wellbeing or financial decision-making, consider reaching out for life coaching support to guide you through your roadmap. At InsideOut Well, we offer coaching sessions to help you set goals, stay accountable, and build resilience. Note: We’re not here to be your financial advisor, but we can help you integrate financial planning with mental health strategies to create a holistic path forward.

• Utilise Non-Profit Resources:

  For those with no disposable income, local non-profits like Credit Counselling Singapore (CCS) offer free advice on managing debt and building financial literacy. The National Care Hotline provides free emotional support and can help you connect with resources tailored to your situation.

Conclusion: Small Steps, Big Impact

In Singapore’s challenging economic landscape, financial and emotional wellbeing are often intertwined. By taking small, consistent steps, you can improve both areas simultaneously. Whether you have $100 or more to spare each month, the goal is not immediate wealth accumulation but building a stable foundation for both financial and mental health.

At InsideOut Well, we’re here to support you in taking ownership of your financial wellbeing, while promoting a balanced approach to emotional health. With the right mindset and resources, anyone can move towards a more secure and fulfilling life, free from the trap of impulsive decisions driven by greed or impatience.

“The individual investor should act consistently as an investor and not as a speculator.” - Benjamin Graham

Free Resource: Can You Afford It? A Reality Check Activity

Objective:

Help you quickly assess your financial health to determine if you can responsibly splurge on a desired item (e.g., a vacation, luxury product, or Michelin fine-dining experience) or if you should prioritise savings or debt repayment instead. By completing this exercise, you should:

• Gain a clear understanding of your financial situation.

• Realise the true cost of splurging versus saving.

• Build confidence in making decisions that align with both your current reality and long-term wellbeing goals.
  

Step 1: Quick Net Worth and Cash Flow Snapshot

Task: Answer the following questions to create a basic financial snapshot:

What is your net worth? (Net Worth = Assets - Liabilities)

• Assets: Include your CPF balances, savings, investments, and property value.

• Liabilities: Include outstanding debt like credit cards, loans, and mortgages.

• Tool: Use online calculators like MoneySense’s Net Worth Calculator.

What is your current cash flow? (Cash Flow = Income - Fixed Expenses)

• Income: Include monthly salary, bonuses, side hustles.

• Fixed Expenses: Include rent, utilities, transport, loan payments, insurance, groceries, etc.

Reflection: If your net worth is positive and your cash flow allows at least 20% of your income to go into savings, you might be in a position to splurge. If not, focus on building financial stability first.

Step 2: Earning Power vs. Lifestyle Goals

Task: Answer these questions to gauge your ability to sustain future expenses:

1. How secure and stable is your income?

• Are you salaried, freelance, or reliant on fluctuating income streams?

• Do you expect a raise, promotion, or windfall in the near future?

2. Does this splurge align with your long-term goals?

• Are you prioritizing experiences (vacation), status (luxury product), or convenience (services)?

• Will this splurge contribute to lasting happiness or lead to financial strain?

Reflection: If your income is stable and you have already met long-term financial goals (emergency fund, retirement savings, insurance), a thoughtful splurge may be justified. If not, re-evaluate the purchase.

Step 3: Debt Reality Check

Task: Assess your debt load with these prompts:

1. What percentage of your monthly income goes toward debt repayment?

2. Are you incurring high-interest debt (e.g., credit card balances) that isn’t tied to necessary expenses (e.g., education or medical bills)?

3. Are there foreseeable debts on the horizon, such as an HDB mortgage or upcoming tuition fees?

Guideline: If more than 35% of your monthly income is going toward debt repayment, focus on reducing debt before considering discretionary spending.

Step 4: Decide Based on the “20-50-30 Rule”

This rule allocates income into three categories:

20% for savings and debt repayment

50% for essentials (housing, food, transport)

30% for discretionary spending (luxuries, vacations, entertainment)

Task: Compare your financial snapshot to this rule:

• If you’re exceeding the 50% for essentials or under-saving in the 20%, reconsider your splurge.

• If your discretionary spending is within 30%, allocate a portion of that budget guilt-free.

Step 5: Visualize the Long-Term Impact

Deciding whether to splurge or save becomes clearer when you visualize the potential impact of your choices. Small, consistent savings can lead to significant growth over time, especially when invested wisely. For example, if you saved $500 every month instead of spending it on a luxury item or experience, here’s what your savings could look like with discipline and patience:

• In 5 years: At an average return of 3.4% per annum (via robo-advisors like StashAway or Syfe), your savings could grow to approximately $32,178.

• In 10 years: That same $500 monthly savings could grow to approximately $71,342.

The Cost of Instant Gratification

Now imagine spending that $500 monthly on discretionary items like luxury dinners or impulse buys instead. While these may provide momentary happiness, the opportunity cost is significant. Over time, the lost potential to build a safety net, invest in your future, or achieve financial independence could weigh on your emotional wellbeing.

A Balanced Approach

This doesn’t mean you can never splurge—it’s about intentionally deciding when and how to treat yourself, based on your financial situation and goals. If you’ve built a solid emergency fund, paid off high-interest debt, and your discretionary spending fits within your budget, a thoughtful splurge can be enjoyable and guilt-free.

Step 6: Support for Clear Thinking

If you’re struggling to make a decision:

1. Talk to a Peer or Mentor: Someone with experience can help provide perspective.

2. Consult Free Resources:

• Visit Credit Counselling Singapore for debt management advice.

• Use MoneySense’s Financial Planning Guides to understand the impact of spending.

3. Reach Out to InsideOut Well:

We offer life coaching to help you reflect on your priorities, align financial decisions with your overall wellbeing, and stay accountable for your goals.