Q.
A 32-year-old office worker, A, who moved out to live independently a year ago, used to save 1 million won every month while living with their parents and even traveled with the remaining funds. However, since moving out, a deficit occurs every month after deducting savings, forcing them to draw money from other accounts.

Although their parental home was not so far that commuting was difficult, A chose independence to have their own private space. While they knew monthly rent and utility fees would be added, they failed to grasp the exact scale of the deficit. A is also concerned about their appropriate savings amount, whether to maintain the housing subscription savings (Cheongyak), and how to prepare for retirement through pension savings and Personal Retirement Pensions (IRP).

A's net monthly salary is 3.58 million won, and the annual bonus is 3 million won. Fixed expenses total 900,000 won, consisting of 500,000 won for monthly rent, 190,000 won for maintenance fees, 120,000 won for insurance, and 90,000 won for communication costs. A spends 500,000 won on variable living expenses and 1.44 million won on personal pocket money. Savings include an 800,000-won installment savings account and a 250,000-won housing subscription savings account, totaling 1.05 million won saved per month, alongside annual irregular expenses of 9 million won.

Assets amount to 4.6 million won in a demand deposit account, 14 million won in a time deposit, 19.5 million won in investment assets, 9.4 million won in housing subscription savings, 18.6 million won in installment savings and other reserves, a 10-million-won lease deposit, and 21 million won in retirement pensions, bringing total assets to 97.1 million won. There are no liabilities.

A.
According to the Financial Supervisory Service (FSS), the most urgent task for A is to identify the scale of the deficit. While the monthly average income—combining salary and bonuses—is 3.83 million won, the monthly average expenditure including savings is 4.64 million won. This results in a monthly deficit of 810,000 won and an annual deficit of 9.72 million won.

Although A saves 1.05 million won each month, they are drawing from existing assets to cover insufficient living expenses. Consequently, A's actual net savings amount to only 240,000 won per month (1.05 million won minus the 810,000-won deficit).

Costs that increased due to independence were estimated at 1.09 million won per month and 13.08 million won per year. New expenses included 500,000 won for monthly rent, 190,000 won for maintenance and utility fees, and 200,000 won for groceries and daily necessities, while delivery and dining-out expenses also increased by 200,000 won compared to living with parents. The cause of the deficit is that A maintained their existing spending habits even though living expenses increased while income remained unchanged.

The FSS suggested reducing A's personal pocket money from 1.44 million won to 900,000 won per month. Hobby and social networking expenses should be cut from 400,000 won to 100,000 won, while lunch/coffee costs and dating expenses should each be lowered from 300,000 won to 200,000 won. Beauty and clothing expenses should be reduced from 20,000 won to 100,000 won, and a new emergency reserve of 100,000 won should be allocated to prepare for unexpected expenditures.

Annual irregular expenses should also be downsized from 9 million won to 3.9 million won. Exercise lesson fees should be reduced from 4 million won per year to 400,000 won, and travel expenses from 3 million won to 500,000 won, while condolence/congratulatory money and holiday-related expenses are maintained at 1 million won each. Seasonal clothing costs (400,000 won) and reserves (600,000 won) should also be budgeted separately. A dedicated account for irregular expenses should accumulate 325,000 won every month.

Variable living expenses and pocket money accounts should also be separated and used within budgets of 350,000 won and 900,000 won per month, respectively. Using check cards instead of credit cards will ensure that no additional spending occurs once the account balance is depleted. Communication costs should be lowered from 90,000 won to 40,000 won by switching to a budget mobile carrier (MVNO), and delivery expenses should be cut from 300,000 won to 100,000 won.

The monthly equivalent savings amount should be increased from 1.05 million won to 1.4 million won. Installment savings (800,000 won), housing subscription savings (250,000 won), and an Individual Comprehensive Asset Management Account (ISA, 100,000 won) should be deposited monthly. Pension savings of 3 million won should be deposited all at once when the annual bonus is received. The youth housing subscription account should be maintained as long as there are plans to move into public rental housing or purchase a home.

By adjusting expenditures this way, monthly average spending will decrease from 4.64 million won to 3.825 million won, resolving the deficit structure. Annual savings will also increase from 12.6 million won to 16.8 million won.

Housing costs must be reduced in the medium to long term. When the lease contract expires in a year, A should consider eliminating or reducing the 500,000-won monthly rent by transitioning to a Jeonse (lump-sum deposit) or semi-Jeonse structure. Current assets and additional savings can be utilized, and any shortfall can be covered with a Jeonse loan. Checking the income and asset requirements for public rental housing and applying if an appropriate property becomes available was also suggested.

An FSS official advised, "A's deficit is not due to insufficient income, but rather the result of maintaining existing spending habits while choosing independence. By cutting down on limitless spending and managing finances within account-specific budgets while maintaining independence, A can steadily save 1.4 million won per month."

You can receive free customized financial consumer consultation by typing the Financial Supervisory Service's consumer portal 'Fine' into an internet search bar or by calling the FSS Call Center at 1332 (▶7 for Financial Advisory Services).

[ⓒ Global Economic Times. 무단전재-재배포 금지]