Recently, I had the opportunity to have a heart-to-heart talk with a private hire driver. Before he decided to become a private hire driver, he was a civil servant for 18 long years. I was curious why he decided to venture out and do something different after 18 years in civil service?
He told me that he felt stagnant in the service and he did not expect himself to go too far in there. In addition, he would like to take control of his own time and challenge himself to earn more. He said that in life, there are things that money cannot buy, like your own time and freedom.
New Challenges Now
During this conversation, He shared with me on the challenges of being a private hire driver. He has to drive a minimum of 8 hours on the road before he can break even on the car rental and petrol. That again depends on the weather, traffic conditions or even human factors (e.g. passengers vomiting inside the car). Typically, he drives around 10 hours a day or more. If he falls sick, he will still have to pay for the car rental. Sometimes there may not be any profit even after a hard day of driving.
How a small $10 turn his life around?
The 18 years that he was in the civil services, he did not value the virtue of saving money. Since his salary is stable and would come consistent every month, he would spend every single cent of his salary by the month end. He has been living from pay cheque to pay cheque. He did not save much during the 18 years. Most of his money are spent on luxurious or consumer items.
After being a private hire driver, he started to be very conscious of the earnings he get from driving. If not, there will be no profits that day.
Some time ago, he chanced upon my 21 days challenge (savings and running). He was so inspired by the challenge that he decided to start his own savings program. He decided that for every day that he drives, he will make it a point to save $10.
To most people, saving $10 a day may not seem to be a lot. Multiply it by 365 days a year, it is only $3,650. It may not even buy a holiday trip for some people. However, for someone who has never bother to save money in his whole life, this is a big breakthrough for him. Now, he can realise the value of saving for the future. All big things in life started small.
Some people may complain that they are not able to save due to their low salary. However, if you were to just put aside $10 a day, things could be vastly different.
Little drops can make an ocean
Being curious at how far this $10 daily savings can go, I have done a quick calculation on how the savings will look like after 10 years.
Savings of $3650 ($10 a day) at 3% interest:
| Year | Savings | Interest | End of year |
| Year 1 | $3,650.00 | $109.50 | $3,759.50 |
| Year 2 | $7,409.50 | $222.29 | $7,631.79 |
| Year 3 | $11,281.79 | $338.45 | $11,620.24 |
| Year 4 | $15,270.24 | $458.11 | $15,728.35 |
| Year 5 | $19,378.35 | $581.35 | $19,959.70 |
| Year 6 | $23,609.70 | $708.29 | $24,317.99 |
| Year 7 | $27,967.99 | $839.04 | $28,807.03 |
| Year 8 | $32,457.03 | $973.71 | $33,430.74 |
| Year 9 | $37,080.74 | $1,112.42 | $38,193.16 |
| Year 10 | $41,843.16 | $1,255.29 | $43,098.45 |
Yes, he would have saved $43,098 dollars at the end of 10 years. If you are discipline and consistent enough, you would have saved the same amount. What is important here is to start now. No matter what job you are in or how little you earn, you can start saving. That is the first step to accumulate wealth.
Taking on a bigger savings habit
At the time of writing this article, I had tried to challenge him to increase his current savings from $10 a day to $20 a day. To my pleasant surprise, he had already started to save $30 a day.
This make me realise that it is never too late to start a good habit. We never know how a small $10 saving habit can balloon to a big saving habit in the future. If he can keep up this $30 savings a day, He could have saved $129,295.36 by the end of 10 years!
Savings of $10,950 ($30 a day) at 3% interest:
| Year | Savings | Interest | End of year |
| Year 1 | $10,950.00 | $328.50 | $11,278.50 |
| Year 2 | $22,228.50 | $666.86 | $22,895.36 |
| Year 3 | $33,845.36 | $1,015.36 | $34,860.72 |
| Year 4 | $45,810.72 | $1,374.32 | $47,185.04 |
| Year 5 | $58,135.04 | $1,744.05 | $59,879.09 |
| Year 6 | $70,829.09 | $2,124.87 | $72,953.96 |
| Year 7 | $83,903.96 | $2,517.12 | $86,421.08 |
| Year 8 | $97,371.08 | $2,921.13 | $100,292.21 |
| Year 9 | $111,242.21 | $3,337.27 | $114,579.48 |
| Year 10 | $125,529.48 | $3,765.88 | $129,295.36 |
Acquiring financial knowledge
The next step that he wanted to do is to work towards his financial freedom. He has started to accumulate financial knowledge and is now actively learning about investments. The regret that he has now is that he should have actively pursue financial knowledge earlier on in his life.
Planning ahead
Motivated by his story, I have committed to help him plan for his property asset. I hope I can give him a hand up on his property asset. Currently, he owns a HDB 4 room flat. He would like to know if he should hold on to the property or sell the property. What is the future expected value of his property?
After discussion, I discover that he has bought this property 5 years ago. Over the period of 5 years, his property price has dropped by 12%. He was very disappointed that the price has dropped and asked me, what is the best option for him going forward. I have given him some suggestions and we explored the different strategies on what he can do to turn his depreciating property assets to one that will increase in value.
In the next article that I will explore more on what you can do if you are holding on to a depreciating property asset. Do look out for it. If you would like an assessment on your property portfolio, you can set up a session with me.