This article was written in collaboration with the Ministry of Finance. All views expressed in the article are the independent opinion of DollarsAndSense.sg
Deciding whether we should spend more today or invest for the future is really a question about balancing various priorities and trade-offs, given available resources.
Intuitively, most of us understand the importance of planning and investing for the long term. However, knowledge doesn’t always translate into action. In many countries, people struggle to save and invest, with many favouring immediate rewards over financial security and long-term interests.
It’s not difficult to see why some may have the tendency to overspend. Consumerism is rife globally. Everywhere we turn, we see things that we desire.
While some of them may be indulgences we can do without, such as a fancy car, expensive holidays or branded goods, others may be much harder to turn down.
For example, parents will want to provide their children with the best education. And some may seek the finest care for their elderly parents. Others just want a comfortable home and life for their family. It’s hard to say no to many of these things.
But whether it’s a luxury item that you’re choosing to splurge on or spending more on a loved one, we all have to find a balance between spending today and investing for the future.
How A National Budget Is Similar To Our Own Personal Budget
Similar to how we manage our personal finances, countries have to manage their own national revenue and expenditure by drawing up an annual budget.
How they choose to spend is based on many criteria, including how much taxes they collect, what the immediate needs of the country are, what citizens expect, and what the future needs would be.
At the risk of over-simplifying how a national budget works, we try to draw some similarities between the two to better understand the relevant considerations.
Balancing Our Immediate Needs At A National Level
Let’s imagine this scenario:
In a family, each member has enough to get just to get by. They are able afford their meals, transportation, telecommunication, and utility needs. They have maybe enough to afford one additional indulgence each month.
But Dad hopes to get a car. This would make it convenient to plan family outings, send the kids to school, and take the grandparents out on weekends.
Mom wishes to hire a domestic helper. She wouldn’t have to spend so much time and energy then on household chores. She will have more time for children and career.
Now, which is more important? We can’t really say, and it depends very much on the family. They have to discuss and agree which is more critical and delivers the best outcome for all. These are compromises that all of us can relate to.
A national budget works in a similar way. There are many things that countries need and want. New infrastructure. Better social welfare. A strengthened defence. At times, many areas may even appear non-negotiable. But unless the government can increase its revenue, priorities have to be made.
For example, some people may consider it important to set aside more for healthcare, given an ageing population. Others may contend that spending more on education and developing the next generation is critical, as a vibrant future economy would provide the higher national income needed to fund better care for the elderly. Neither are wrong, only a difference in perspective.
Tackling Financial Stress Today Or Investing For Our Future?
Most of us understand what it means to face financial stress in our lives. Whether housing or car loans, education expenses, parental allowances, plus other essentials; the list is a long one.
At the same time, most people (we hope) also understand the importance of investing. While having extra money would help us alleviate our immediate financial pressures, we know we can’t afford to spend it all today at the expense of our future financial security.
Being financially responsible doesn’t just equate into knowing how to prioritise our spending today, it also requires us to plan wisely for the future. We allocate money to that not because we have an abundance today, but because we know the future is as important as the present, perhaps more.
In the same way, Singapore needs to strike a national balance between current expenditure while also investing for the future.
For example, while additional subsidies and cash handouts are appreciated as they can ease immediate financial pressure, we need to ensure that it does not come at the expense of investing for our country’s future.
How Do We Invest In Our Country’s Future?
Similar to individual investments, a country’s investment usually takes some time to bear fruit.
Take, for example, transport infrastructure projects such as the building of new roads and train networks. They require large budgets and take years before completion. In the short-term, they cost the state significant amounts as well as inconvenience for the general public. However, it’s in the longer-term that we can enjoy the benefits of these investments, with better connectivity and convenience.
All around Singapore, we see how investments made earlier have contributed to the world-class economy that Singapore has become. Schools, hospitals, airports, parks, and offices are all here today only because past generations of Singaporeans were willing to invest their time, effort, and money.
Beyond physical infrastructure, other investments are important national priorities, including defence, both external and internal; education, to prepare our population for the future economy; and healthcare, to ensure that our population remains healthy and productive.
Working Towards An Optimal Outcome
Most, if not all, important areas that require spending and investments cannot be neglected. With an infinite amount of needs and wants, but given a finite budget, trade-offs need to be considered and compromises eventually made.
Spending our national budget each year requires proper planning, prioritisation of needs over wants, and with critical decisions to be made. It’s only with that approach that we can continue to build a strong, sustainable future for Singapore.