Every human being needs to have budgeting skills. By responsibly spending money through proper expense allocation, Singaporeans won’t have to contend with huge financial conundrums should emergencies such as sicknesses, accidents, and unemployment happen. However, budgeting requires concentration and a willingness to learn all about setting your personal financial goals.
True enough, Singapore has one of the most formidable annual income values in the world. However, it doesn’t mean Singaporeans can just spend whenever they please. A good budget is an excellent practice that allows you to be financially resilient when you need it the most. Let’s get started on making your very first budget.
The Base Principles of Budgeting
Singapore’s cost of living is truly one of the highest in the world. However, the quality of life and salary is truly adequate as well. Singapore has one of the highest annual salaries in the world amounting up to S$67,152 for an average employee working an average of 45 working hours. While it might sound plenty, big or small expenses can creep and shatter your financial plans. To be organised, you definitely need a good budget.
Below are the basic principles of budgeting. You might have read it in numerous blogs and content you’ve consulted with in the past, but it pays to learn them and refresh yourself with them once again.
Your Net Income After Taxes and Everything Else
Every Singaporean has a regular salary amount employers pay on a monthly or bi-monthly basis. Make sure you take note of all deductions your pre-tax income receives. For example, if you have automated payments for your MOM or CPF retirement, you need to add these. Additionally, you need to deduct your health and life insurance contributions from your final spending budget.
Furthermore, if you’re doing some freelance work outside of work hours, perform the same salary deductions from taxes and business to get the actual total income you can use for your budget. True enough, seeing firsthand how you’re in the red or nearing the red is overwhelming, but the purpose of budgets is to remind you of these consistently to avoid getting yourself in debt.
A Goal-Oriented Budgeting Plan
Budgets work efficiently only if budgeters have an actual goal in mind. Once you’ve determined a goal, make sure you always stick by it. Your goal can be to buy a new house, a downpayment for a new home, a new car, or university or college degree. In doing so, you align all your spending and resources towards maintaining the budget to achieve your objectives.
To help you achieve your goals, you can use the following methods that help you achieve your budget goals precisely and accurately. Take note that your personal initiative to have a financial goal is the key to making all these budgets work.
The 50-30-20 Budget
One of the simplest ways to start any budget, the 50-30-20 budget gives you definite financial spaces for everything vital for your financial needs. For example, 50% will go to your necessities, 30% will go to your wants, and 20% will go straight to your savings or repayment of debt (if you have any debt). If you have existing debt, it’s essential you use the 20% to rid your debt efficiently.
This is effective especially if you’re not one to track every purchase you make. All you need to do is to calculate the percentages of income and deduct them accordingly. Once you’ve finished spending percentage, you can’t spend anymore for that category. Once again, it takes discipline to implement this efficiently.
Imagine you have several envelopes with different names: savings goal, utilities, school spending, miscellaneous spending, and others. You place cash in these envelopes so you can get money out from them later on. The envelope system is a complex 50-30-20 budget because it has more categories you need to monitor, and you’ll have to track every purchase you make.
The only downside of the envelope system is having to track everything and performing more budget adjustments than necessary. In addition, it gets easily inaccurate especially if you can’t keep track of all your spending. However, done right and you can even use data analytics to help optimise your budget.
The Reverse Budget
It’s not the most popular option, but when you “pay yourself first” before you start budgeting, it can somehow help you reach your financial goals faster. True enough, it’s similar to the 50-30-20 budgeting system, but without the accurate percentages. In this reverse budget scheme, it’s important to have savings goals (as we’ve mentioned earlier). In this light, ascertain the right savings and retirement amounts you’ll set aside during your regular salary period.
Once you’ve set this aside, you have all the money to spend for bills, needs, and wants. The order of spending priority is important. Bills will always come first, needs second, and wants the last. If you have spare money left, make sure to send them straight to your savings.
The envelope system allows you to store money so you’ll have enough when the time comes you’ll need them. However, you’re often left with unallocated money, which ends up in your leisure spending because you’ve addressed all your financial responsibilities. If you plan to save more or maximise your monthly spending, it’s best to combine your envelope budgeting system with zero-based budgeting.
The principle behind zero-based budgeting is simple: make sure you place any unallocated money of any amount into any envelope of high priorty repayments. For example, if your priority is debt- bills – needs – wants, then allocate the remaining uncategorised funding using this priority order. Alternatively, you can use another envelope allocated for surprise spending, which is similar to an emergency fund but only handles sudden, once-in-your-life expenses like an unanticipated travel ticket promos, sales, bulk grocery deals, and others.
Thanks to today’s technology, financial technologies are available for monitoring your funding and budgets. True enough, you can still use pens and papers to monitor your expenses. However, modern fintech apps synchronise with your bank accounts, monitor your spending, and advise you on the best steps to reduce spending too.
However, you won’t need to reduce spending if you’re still spending within your budget. Seeing everything in one place is assurance that you’re still acting or spending according to your financial capabilities while still meeting your financial goals.
Don’t Do Everything Manually
You’re likely to miss bill and utility payments if you’re relying too much on manual line-up-and-pay methods. Nowadays, most Singaporean utility companies and institutions use applications or web facilities that allow you to pay from the comfort of your home or office. In fact, most of them offer payment scheduling or auto-debit features that pay immediately and informing you thereafter.
By using these advanced automation features, you won’t need to spend so much time lined up to resolve your billing and utility statements. In doing so, you avoid huge interest rate issues and sudden power and gas cutoffs and warnings thanks to automating your payments.
Always Adjust Budgets For Margins of Error
Lastly, budget applications and spending without hesitation because you’ve everything accounted for isn’t a foolproof scenario. Take time every week to check whether your spending is still within the amounts you’ve permitted yourself depending on the category you’ve assigned a particular amount to. Make sure to always adjust your amounts to minimise margins of error.
It is most important to do this because it’s possible that you might have overspent or overlooked a certain expense. This is crucial especially if you’re taking down each financial detail when using the envelope or zero-budget systems.
Don’t Make Things Too Complicated
Almost automatically, we think of the subject of money as difficult. After all, it is one of the most important parts of life we spent a huge amount of time dealing with. However, money shouldn’t be too difficult, and you have all the right to think it’s easy to manage your budgets especially when you’re seeing spending progress at a surprisingly stable rate.
Overcomplication — such as advanced segregation of funding to the point you’re micro-managing yourself — isn’t the best way to go about your finances. Here are some great ways to prevent you from overcomplicating your budgets.
Make Fewer Categories
The envelope system works, but it doesn’t work for everyone. Sometimes, taking note of each and every purchase isn’t exactly encouraging especially when you can’t remember all the spending you’ve performed. While it’s true some apps can sync with your bank account and do this on your behalf, they won’t capture every offline cash transaction you’ve made.
Therefore, if the envelope system is too meticulous for you, switch to the 50-30-20 or Reverse Budgeting system. In doing so, you might find it easier to manage your finances and save money. The goal of budgeting is to partition your funds to have enough for your debts, bills, and needs.
Use Online Payment Facilities
Earlier, we mentioned about automating everything using bank applications and online automated payment facilities to make sure you don’t forget to pay your bills and incur additional penalties. True enough, the best way to always achieve your budget goals is to use online payment facilities. In doing so, you can pay quickly for your bills whenever you remember or finally receive your monthly income.
In addition, you can pay for all your utilities, bills, and other fiscal responsibilities without spending more than 5-6 minutes for each process. Furthemore, you can do it from anywhere too! It’s a truly great convenience!
Pay Using Cash and Not Cards For Everything Else
The best way to manage your money is to know how much money you can actually spend and only use that amount. Banks make it tempting to pay conveniently using credit cards but also overcomplicate your financial situation by introducing interest rates, amortisations, and additional confusing fees and insurance policies where possible.
If you pay for cash, you will take out an amount from your budget and not have to worry about increasing interest rates, payment deadlines, and others. Lastly, you learn how to be patient and save up for items instead of conveniently owning them.
Cut Spending Where You Can
Your wants have a space in your budget. Never ever cut them off — a sustainable budget is one where you can enjoy the money you earn and have enough to spend for your needs. However, our spending for wants go through the roof oftentimes because of repression. It takes a bit of self-control and contentment to control your spending for wants. Lastly, you’ll want to be introduced to the following alternatives too.
Singapore has many picnic places, and a picnic is one of the most romantic yet simple dates you can give. In addition, Singapore’s beaches and trails are excellent places to enjoy beer or wine together while watching the night sky for shooting stars and nightlight.
Moonlight beach walking is another beautiful alternative. Watch the waves crash together as you hold hands together walking around the beach. Rooftop dinners (if you have a flat-roofed property or live in a condo that allows you to head up the rooftop) are excellent moments too. Remember, what matters in a relationship isn’t what you’re doing, but the two of you enjoying each other’s company.
Singapore’s Botanical Gardens are affordable yet enjoyable paths for walking and appreciating nature. In addition, there are music events held during weekends too — and it’s completely free to do. If you’re into nature, then head right to the supertrees in Singapore’s Gardens By the Bay.
The country has plenty of trails such as the MacRitchie Trail, Bukit Timah Nature Reserve, and safaris, which are affordably-priced and easy to reach thanks to Singapore’s affordable but efficient public commuting system. Your entertainment doesn’t have to be an expensive theater show or go-karting when possible. It can be simple and natural — such as these locations!
The best but cheapest food in Singapore is in Little China. Authentic dimsum and noodles have the most affordable price. With its downtown appeal, you have a lot of hawker stalls offering different delights priced only a third of a five-star restaurant’s top-tier menu. The same is true in Little India; you’ll find a huge selection of Indian cuisine on the cheap, and it tastes much better than fine dining — you can feel the homemade soul in every bite!
Budgets Can Save Your Life if Done Right
Excellent budgeting is an important skill for any Singaporean and individual in the world to learn. It might take some practice, but don’t be discouraged if your first budgeting tries failed as a result. Just keep focusing on maintaining and keeping your budget tight because one day, it can definitely save you from financial pitfalls without any difficult consequences.