Do poor people make poorer financial decisions?

A few days ago, this article came out which roughly summaries on why poor people tend to make not so smart choices due to tunnel vision or that you need to make short-term decisions rather than to plan for the long term.




I do know that poverty can strip a lot of opportunities and chances for an individual but I never knew that it can affect the cognitive aspect of the individual as mentioned in the article:

"Research from Princeton University has claimed that the dip in cognitive function in a person preoccupied with money problems is similar to a 13-point drop in IQ."

The main thing is that because the individual is so preoccupied with their expenses and financial status that the brain is worn out.



One example mentioned in the video was that of Mdm Mary Yeo, who spend almost all her financial assistance buying $400 worth of packet drinks because her children always walked past the provision store.

I do on a certain degree can understand what she is feeling, because she finally could have th capacity to fulfill her children's wants. Needs and wants are easily mixed up to a person and to successfully differentiate between you wants and needs are not easy.




Also, the habit of saving might not be embedded in their lifestyle and therefore with an excess of cash, they were not sure what to do when an amount of cash is given to them.

Definitely, I feel that there is a difference in decision making between the rich and the poor. As the phrase goes, "The rich get richer and the poor get poorer".

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FIRE in your 30s?

Many of my friends who have not entered the working world or have just started work always talk about retiring and how they hope to be able to retire at a certain age. I am very surprised by the proportion of people around my age who think about retiring because for my parent's generation, retirement wasn't an option until we (kids!) became adults. The environment that surrounds us and the environment that we, millennials grow up in really changes our mindset of working.




Read more: Retiring Early and comfortably?- What is FIRE?

I came across an article recently about FIRE which I have written about before. I found certain snippets of the article very interesting.

"Millennials have embraced this so-called FIRE movement — the acronym stands for financial independence, retire early — seeing it as a way out of soul-sucking, time-stealing work and an economy fueled by consumerism."

 This is really interesting in that a huge number of millenials have embraced FIRE and I think it is partly due to the expansion of technology and accessibility of the world. Travelling was never a frequent thing in my mum's generation but to millenials, travelling is a way of gaining knowledge and relaxing.

I remember when I was young, I was lucky enough to be able to travel to the US, Korea and at least one country each year. My first trip without my parents was when I was in Primary School where a exchange was given to students to travel to China, Shanghai.




After which, graduating from polytechnic made me travel much more with my friends. This I think is one point that makes millennials want to retire early, to be able to explore.

But even though millenials have embraced FIRE, not all of us are aware or are striving for it. A particular group of people especially are aiming towards this and they are mostly engineers and guys who work in the technology sector. I have seen a few engineer who have been able to achieve FIRE.




One example would be BeatTheBush who post videos on Youtube about his life after retirement and how he managed to retire.

"Followers of FIRE tend to be male and work in the tech industry, left-brained engineer-types who geek out on calculating compound interest over 40 years, or the return on investment on low-fee index funds versus real estate rentals."

Of course, many people of the older generation or even of the same age would some times not be able to understand why you would quit a job when you are so young.

"Mr Jason Long, a pharmacist in rural Tennessee who retired last year at the ripe old age of 38, said his father had a hard time understanding why Mr Long couldn’t continue to work and collect his US$150,000 salary. But Mr Long said he was deeply unhappy in his job."

I guess being stress up and having that burden taken off your shoulders is a great feeling and every so often, many people do not enjoy the work that they are doing or that their bosses are not treating them well. Being able to retire and quit is a liberation and even more so, having control over your life and time.

My mum buys TOTO often and she tells me that one day if she ever strikes the big prize, she would resign straight away. For my mum, I know she wants to enjoy the time she has left and that weekdays for her are all burned out at work. So, I guess FIRE is attractive to all but how many can actually achieve it at a young age?

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Graduating from a Polytechnic

In Singapore, when you reach 12 years old, you do PSLE to determine your next place of study and at 16, you take O levels to continue on. O levels is a little more interesting than PSLE as the options get more diverse where you can either choose a junior college route or polytechnic as your next level of study.

For me, I chose polytechnic after O levels as my results restricted only to a few JCs which I felt wasn’t the right choice for me. What also made me chose to go to a polytechnic was that since young, I am a more hands-on person and not really book smart. So when I was making my choice, my mum assisted me in choosing and deciding on what I can consider.

I chose a science course in polytechnic as I was originally interested to working in the hospital as a testing laboratory staff. I chose Biotechnology as my first choice and got into it. I can still vividly recall year 1 of my studies which was the most difficult time in my 3 years because I didn’t take any chemistry in secondary school and the first year modules were mostly chemistry. I struggled really badly and even cried in front of my care teacher. She explained to me how it was and what decisions I could make. In the end, my friends helped me with the basics and I continue improving. After the first year, everything seemed better as it went more into

                                                                                   biology which was what I looked forward to.

In year 3, we all went through a 6 months internship and I think that was what made me think much more about my future and what I wanted to do. The 6 months of being in a laboratory and handling the research project brought me to think that maybe a laboratory job wasn’t what I wanted after all.

Even though I didn’t want to continue doing a laboratory job, my supervisor told me that there are much more different jobs that I could try after graduating. I think the final year was a time when most poly students start thinking about their future and planning their journey. I wasn’t sure if I would like a degree in science so that’s why I took a gap year to work and experience it. I have to say that polytechnic was a time of growing for me. I wasn't taught all the skills in school that I could applied in my first job but it definitely helped me in having the basics and expectations in place.

Being from poly have definitely given me the chance to mature much more and to give a better thought to my future. I believe that if I had gone to JC, I wouldn’t have gotten involved in financial preparation in terms of investing and also wouldn’t think so much about my future. Even though I do not know if I would have maybe turned out better or worse in JC, I benefited from my time in polytechnic and if i was given a choice to choose again, I definitely would choose the same.