Wednesday, 18 March 2015

Making your first few years out of college count as a [Banker] (Part III)

Managing lifestyle inflation

Perhaps this topic could have been tied into the subject of managing your personal finances, but I thought of taking this out for some much needed emphasis. 

Think back to when you were just a mere student. What made you happy and content?

Hmmm maybe it's unwise to frame this within an existential and philosophical structure. I guess the best way would be to focus on a certain material aspects for illustration. 

Let's take food for example. Say, when I was 17 years old, having restaurant food for dinner would be considered luxurious and perhaps only warranted on special occasions. An all you could eat Japanese buffet that costs S$38++ per pax (say Hanabi, I recall that to be super popular at that time) would be a once in a year affair for birthdays, if we got lucky. Fast forward to 27 years old, a couple of years just right out of college, having restaurant meals for dinner (thanks to the dinner allowance =p) would be the normal standard, and for special occasions, it would warrant even higher spending of up to S$100 per pax.

Another example for the 'fun' folks who would be able to identify. When I was 18 years old and just out of junior college, sharing jugs of long island ice tea at Zouk with a couple of friends would be a considered the top end kind of spending for a great night out. One year out into the workforce and sharing jugs would be considered a farce. We would need nothing but bottle service, and sometimes even bottle trains (think of an entourage delivering [3] [Moet Imperial] bottles in multiples of 3) as a minimum for a fun night out. 

So what happened there? Essentially, the mammal brain, together with the ego, decided that since its host was raking in more money than it used to receive back when it was a mere student, it was time to upgrade its lifestyle for a better experience. 

Well, there's certainly nothing wrong with spending more money, as long as you have good self control and discipline to not spend beyond your means. The issue that I grapple with when thinking about lifestyle inflation is that lifestyles are sticky and people tend to think that when things are going well, they would go on forever (the irony is that the thinking is likewise when things are going badly). 

You might think that you'll just try out that fancy champagne brunch place once, that nice hipster coffee joint for your morning cuppa joe this one time, or even take a taxi to work to escape the morning crowd because you feel like doing so today, Before you realise, it feels so good that it turns into a habit. You can read more about habits in "The Power of Habit" by Charles Duhigg. Pretty solid book. 

For chickenshit like food, drinks, etc., it might not matter much if you're earning a sizable salary that can afford these small luxuries, or if you think that you'll be able to change if something untoward changes in your employment earnings, or if you are like majority of my colleagues who think you'll be working for at least 30 or so years (probably works out to be early than the mandatory retirement age of 65, but I still shudder at the thought of spending more than 10 years in investment banking), but if you're aiming for F.I.R.E, then it becomes quite the impediment. 

The other potential issue that might happen is that you somehow get influenced by your inflated lifestyle choice and move on from the small time luxuries to the big time luxuries, say apartments, cars, boats, watches, business class tickets, luxury hotel stays during your holidays, etc (this list can't be exhaustive :) ). Before you know it, you're trapped by debt to service these big time items and have to be committed to the JOB. You begin to worry when bad times come, create unnecessary stress for yourself, and have limited your options in life. Congratulations, you have sold your freedom and your soul for these items. Now your luxurious items own your candy ass. Cheers bro, nice Porsche 911 btw. Looking sweet. 

So how are some ways to avoid lifestyle inflation? 

1) Pamper thyself, but with limits. 

Sometimes you work hard and you need a break. If you're working 100 hour weeks, you're going to feel like going out to party hard when you have time. Or at least drink and eat good food to reward yourself, or buy some fancy shit. Fine with that, but set your limits. Have a budget for these sessions and stick with it. If necessary, set up an "luxury" bank account that GIRO transfers your budget to that account automatically every payday and only utilise a debit card for that account. Also, when you want to reach out for your credit card to purchase luxury goods such as that iPhone six plus (yes I'm looking at you), back off for two weeks or so first and if you find yourself thinking about that constantly as a need, then so be it, but don't do this too frequently. 

2) Change your mindset 

The best Chinese proverb from secondary school that still resonates with me is "一 寸 光 陰 一 寸 金 , 寸 金 難 買 寸 光 陰". What you are doing by being an employee is essentially a barter of money for time. Think of your indulgences as units of time that you'll have to work for and I trust that you'll start to feel the effects when you further indulge. At least I did. 

Also, instead of pampering yourself with too much when times are good, start using that as a base to save more fuck you money to provide yourself with more optionality. You never know when shit is going to happen. I'll adapt the old adage to "make hay and save for the rainy day when the sun is still shining, because pouring rain is not far away".

Also, the act of self deprivation for a period of time helps to enhance the pleasures of experiencing luxuries. You would only know happiness if you feel sadness. Satisfaction can only be felt if you feel hungry as well. To maximize your utility, consider going cold turkey with regard to luxury spending for awhile and you might just find the experience to be even better the next time you go for it.

For example, I believe it's more enjoyable to have a beer once a week after a hot run in the sun as compared to having a beer every night. Trust me, I've been through both phases and I know what works.

3) Find a support group that aligns with your fundamental values and beliefs

Birds of the same feather flock together. If you work as an investment banker, you'll naturally see a group of colleagues that lead the high life, drinking fancy champagne, dining at the hottest spots, driving the fastest cars and staying at the swankiest places in town. Essentially, living large. I'm sure parts of that are on credit, but whether it's overextended credit I have no idea and honestly don't really give a fuck. 

But the thing is if you're a new guy who doesn't really know why you're doing this job, you'll tend to gravitate to the status quo, even if there's no dick measuring competition going around. Contrary to popular belief, not all investment banks have a materialistic competitive culture going around - I think that's because those guys are too drained from working 100 hour weeks to really care. Perhaps keeping up with the joneses and competing on who has the most branded bags and shoes would be more evident in the private banking sector, which I hear is the case..

Thus it's essential to know why you are doing what you are doing, because that helps with motivation. And if motivation is low, try to find a group of like minded friends in the same industry. If you are a loner and those are lacking, I hear the blogosphere has some interesting personal finance blogs and communities that might be helpful for you to connect with =p 

To summarise the lengthy prose, basically, think of practicing delayed gratification with most wants and desires, combine that with the above advice and who knows, your future self might be thanking you 10 years down the road for the choices you have made today. 


  1. Spot on good advice. Thanks for sharing.

  2. Sharing real stuff that only a segment of people would develope an appreciation/understanding of the stories.

    I mean, I don't think the median? Singaporean can relate to 3 bottle trains.

    Makes it interesting. Thanks for saying it as it is. :)

  3. Nice breath of fresh air! Please keep writing