Effectively handling your money begins with budgeting. If you are looking to control your spending and have more saved for, well, saving, the path to that goal necessarily runs through a budget.
You might think that “budget” and “spending control” are essentially the same thing, but they aren’t. You can easily run through the steps of using a budget without having much of a handle on controlling your spending. Conversely, you can control your spending and have no budget. These two things can exist independently of each other.
Categorising Your Expenses
Following that, sort your expenses into two categories: essentials (like rent, groceries, and utilities) and non-essentials (like entertainment and dining out). This will give you an even clearer picture of your financial inflow and outflow. Then, identify the areas where you could reasonably cut back to give you more financial breathing room.
Tracking Your Spending
After that, I want you to track your spending. You can do this with budgeting apps or good old-fashioned spreadsheets. The key is to stay on top of the daily/weekly/monthly rhythm of your expenses. Review what you’ve spent a couple of times a week; that will help keep you accountable.
Once you have an even better grasp of your income and expenses, set yourself some financial goals.
Setting Financial Goals
Divide your goals into manageable pieces, and apportion your budget to them. This helps you keep your revenue and spending in easy harmony as you work toward your objective.
The 50/30/20 Rule
A basic but highly effective guideline for budgeting is the 50/30/20 rule. In this scheme:
- 50% of your revenue is meant for needs (rent, food, and other can’t-avoid expenses).
- 30% is allowed for wants (entertainment, hobbies, and other “fun” spending).
- 20% goes to savings (emergency fund, investment, and debt repayment).
When you adhere to this guideline, you guarantee that you will lead a life within your financial scope while directing a meaningful portion of your earnings toward wealth accumulation.
Preparing for Unexpected Expenses
A fundamental piece of the budgeting puzzle is allocating funds for expenses that pop up without notice—like medical bills or urgent home repairs. Your goal should be to allocate funds for these types of events on a semiannual basis and to reserve 3 to 6 months’ worth of living expenses somewhere accessible in case of an emergency.
Fixed Deposit: A Low-Risk Saving Option
An FD (fixed deposit) account is a dependable, low-risk saving alternative that presents a better interest rate than a traditional savings account. A fixed deposit allows you to keep a certain sum of money in the bank for a set period, from several months to a few years, with the expectation of receiving a guaranteed interest rate. Hence it is important to find the best fixed deposit rates Singapore.
In recent years, that rate has fallen, but it is still higher than what banks pay for ordinary savings accounts. In Singapore, fixed deposit schemes are available from all banks and cater to various needs. A fixed deposit is a good way to save and allows you to grow your net worth with a baseline, low-risk, low-effort kind of investment.
Ensure you won’t require access to your funds before locking your money up in a fixed deposit. If you do need to withdraw money, be prepared to face penalties and the possible loss of interest. Fixed deposits are a great way to save money that you don’t need for everyday expenses while earning a much higher return.
Sticking to Your Budget
Once you’ve developed a budget, the real work begins: sticking to it. It takes commitment to review your budget regularly and adjust it as your income or expenses change, but doing so is essential if you want to stay on the financial path you’ve chosen.
It is vitally important to have control over your money if you expect to achieve any degree of financial stability. For me, the linchpin of such control is budgeting. By keeping a close watch on both the money I make and the money I spend (and, yes, those very twin tracking can be made with good ol’ pen and paper if you’re not a fan of budgeting apps), I am able to manage my money well enough that I can save. And the things I save for are not always short-term goals. Some are medium-term, and a few have been long-term dreams.
