Tuesday, May 30, 2017

Discourse on Avocado sandwiches betrays Gen-X's own financial insecurity.

Every generation likes to poke fun at the generation which succeeds them.  Baby Boomers were particularly cruel to Gen-X when we were growing up and made fun of the shows we watched ( Friends ) and the music we listened to ( Nirvana ).

As Generation X got older, they started to take on Millennials or Gen-Y and recently came out with a distracting argument proclaiming that Millenials will never retire because they ate hipster food like Avocado Sandwiches. The article was particularly damning last week and featured one special snow flake whose life can only be complete all thanks to a $50 bowl of Negitoro don.

I am less inclined to bash Millenials, having work with them rather closely as peers in the last 3 years and I personally never saw anyone from SMU eat an avocado sandwich. I don't really appreciate folks labelling my classmates as avocado eating hipsters ( although there is a persistent problem with the $7 kebab because the SMU foodcourt has to pay fairly high rents and wages to the disagreeable aunties who work there. )

It's strange to claim that Millenials cannot retire given that they have all that time before retirement age shows up on their doorstep. Even retirement is evolving - I can imagine my friends retiring as a single hermit gamer - forever alone but forever satisfied with imaginary achievements in a virtual world. Furthermore, Gen-X guys are not doing this retirement planning thing particularly well.

I'm going to teach Millenials how to fight back when Gen-X and Boomers start shaming them. Gen-X can also use this framework to audit their own personal finances, it's less distracting than talking about hipster food.

When it comes to an audit, fixating at a person's small expenses is a cheap shot. Retirement viability largely depends on how you manage your large expenses because eat expense item can be worth quite a number of avocado sandwiches.

Start from big to small :

a) Did this Gen-X buy a house which is too large for themselves ?

If your head is not large enough, don't try to wear a large hat.

A general rule of thumb is that a median income person ( Household income of $9,600 per month ) would be able to replace 61% of his earned income if he opts for a low cost 4-room BTO ( Simulation by academics Chia and Tsui 2012 ). A large house means for retirement. For CPF use, it's a trade-off - house or retirement.

Most Gen-X guys tend to over-invest in real estate because of that belief that they can emulate the financial success of the Boomer generation. But we live in different times, real estate prices are determined largely by how much foreign talent we accept and the government does not really want to pay the political price of immigration anymore.

If they are wrong about real estate prices, putting in too much real estate will be the single dumbest move they have ever made in their life.

b) Does Gen-X have a car ?

A car can cost $2,000 per month which, in avocado sandwich terms, could mean serious diarrhea after an avocado sandwich overdose.. Folks with a car have no business really kicking the ass of a hipster.

c) Does Gen-X have recurring expenses which are too large to handle ?

Next a great place to audit is this person's insurance. How much savings in annual premiums can a persona save shifting his protection from whole life to term life ? Does he really need an integrated health plan for a Plan A ward ?

Does he over-invest in his child's enrichment education ? Maybe his child will only provide less than 4% return on human capital and it is better to invest at 8% then give it to the child at a later time than yet another stint in some special tuition agency. ( This is a nice move because it always riles parents when you say that investing in the stock market may be better than investing in their children. )

After that, you can review his telecommunication expenses. Why does he need cable TV when all he needs is broad band plus maybe a Netflix subscription ?

Does he spend time in Geylang with prostitutes, one shot at $150 a week with a PRC freelancer is $600 a month. This is an avocado sandwich every day.

Does he smoke ? Does he drink ?

d) Does this guy have a watch or something he indulges in ? He must have a sin. 

My indulgence is RPG books. I pay for almost every new RPG book which gets out in PDF format. I also hunt ruthlessly for vintage gaming books for nostalgia's sake.

Guys generally do not have permission to indulge in themselves with the exception of a luxury watch. A luxury watch is the Birkin for men, some way of telling himself that he's arrived when an Ah Beng can just get the same thing with the right kind of credit.

Does he really see his watch as an investment ? To look after it for the next generation ? Go to Carousell or Ebay to confirm whether his claims of his watch preserving its value is true.

e) Now look at his daily expenses

It is only at this large stage when we look at his daily expenses. At this step, David Bach's latte factor come into play and you can see if he is spending over-lavishly on Starbucks or expensive meals.

Gen-X should not distract themselves by poking fun and shaming Gen-Y.

Their biggest threat towards their own retirement and financial independence is themselves.

Many of us will spend the rest of our lives working not because we want to but because we have to.


  1. In my experience, most people are rather similar whether boomer, X or Y. Maybe some quirks or idiosyncrasies here & there due to different life experiences while growing up, but overall still with similar perceptions, biases, foibles, desires, expectations, etc. I find more differences between people from different cultures e.g. a local Y will tend to have more similarity with a local X than a Spanish Y.

    I remember reading that Y's in America have actually been found saving more compared to boomers at the same age band e.g. 25-30. From interviews, some have theorized that it is due to the vastly different economic backdrop --- between the booming 50s and 60s compared to the GFC and post-GFC environment.

  2. The tragedy of Gen-Y is that they are saving more but putting it in low yielding instruments like money market and bond funds because they got burned by the Great Recession.

    It's sad because they have the longest time horizon to benefit from investing in equities.

  3. "Even retirement is evolving - I can imagine my friends retiring as a single hermit gamer - forever alone but forever satisfied with imaginary achievements in a virtual world."

    "Single hermit gamer" is only one variant of avoiding balls and chains. So many other "free" lifestyles to choose from if one questions the norm e.g.:

    1. go child-free (and pet-free)
    2. stay with parents, rent, and buy a house only when you are able to afford it more or less in full (unfortunately, van-dwelling not a viable option in Singapore)
    3. polyamory (i.e. build romantic relationships and also social capital with multiple people) or tinder also can
    4. remember that the traditional marriage and love are mutually exclusive
    5. don't buy a car (use public transport or ride PMD, bicycle, etc)
    6. either not care what others think of you or hide as best as your deviance from the norm
    7. practise minimalism, stoicism or whatever philosophy which works to justify your lifestyle in your mind (helps in not caring what others think)

    If you design your lifestyle right by you, you can really "retire" or "semi-retire" (at least in mind and spirit) pretty early on.

  4. Thanks for sharing this list !

    Someone should write a book on lifestyle design that enumerates all these possible choices.

  5. Hi,

    I think that a single hermit is the best approach. Live life to the fullness without bothering what others think.