Are young people spending more than they can afford, at the expense of their retirement plans?
Ask millennials - those aged between 20 and 37 - about retirement planning and most would say they worry about running out of money and coping with escalating healthcare costs, as they are expected to live longer than earlier generations.
Granted, there are certain challenges that are out of the individual's hands. For example, the overall weaker global economic growth, which has led to concerns that young people will take longer than their parents to achieve goals like buying a house.
But there are other things in their lifestyle that millennials can control, such as by cutting out pricey expenditures from their spending.
Millennials have been loosely identified as a generation with a propensity to "invest" on experiences such as travel and enjoy a hip lifestyle of cafes, music festivals, cocktails and that avocado toast people keep hearing about.
But the cost of these experiences can quickly add up.
The Sunday Times ran a quick calculation of how much people can save by making their own cocktails, coffee, avocado toast and doing their own gel manicures and hair colouring.
Saving $5.90 on that latte each day for 365 days amounts to $2,153.50. But if you cannot give up that daily fix, it costs only $1 at the neighbourhood coffee shop, or $365 a year, which translates to annual savings of $1,788.50.
Assuming you are able to compound this over 40 years at an interest rate of 4 per cent, you could have had about $170,000 if you had downed your coffee at the coffee shop instead of in a cafe.
And if you make your own avocado toast, you save $16.05 a meal. Assuming you do this once a week, compounded over 40 years at 4 per cent, your savings amount to about $79,300.
Add on the annual savings you stand to enjoy by making your own cocktails ($380), perform DIY gel manicure ($857.60) and hair colouring ($1,092.60), and you begin to see that they do add up to a nice, tidy pile of $4,953.30 a year. Compound the annual savings over 40 years at 4 per cent and you get a substantial sum of about $470,700.
The key is to have a handle on your expenses by setting a budget, as opposed to spending blindly and regretting when the monthly bill arrives.
The savings may not be sufficient to buy your dream house in the near future, what with today's prices, but it will certainly go a long way towards the initial down payment.
They could be used to pay for something that will enhance your career prospects, such as that MBA degree you are eyeing. And part of your savings can also be invested for your nest egg.
What is more important is the habit that you cultivate once you consciously ask yourself if the spend is for a need or a want.
There are tremendous benefits in acquiring financial knowledge and accumulating capital early in order to secure a financially stable future.
And if you are a millennial, time is definitely on your side.
With a longer time horizon to set aside money, you will end up with far more than those who start later.
Some of you may be inclined to go an extra step and record your expenses. This helps you consciously question the value of an item. Over time, we learn to distinguish between our needs and wants and take charge of our spending decisions.
For those inclined to start recording their expenses, try some of the financial apps that help to itemise how much you spend, such as Good Budget, Pocket Expense, Toshl and Wally.
Once you have started saving for your financial goals and are on track, go ahead and have that non-DIY cocktail or avocado toast.
You might find they taste even better after a long absence or you might find you have lost your desire for them, which is not a bad thing after all.
