There are some instances when we tend to go beyond our budget. It could be an unexpected event, an emergency in the family, or a sudden craving for an expensive gadget or luxurious vacation that can have a huge impact on our bank account. At one point, you may have been saving a lot of money from being frugal. But then when these uncontrollable situations occur, they end up causing a huge dent on our savings and leaving us low on funds.
These are the reasons why some people search for other ways to get extra funds for their upcoming needs. If they get denied of a bank loan, their next resource is to approach a licensed money lender in Singapore that citizens are recommended for fast approval. A money lender then becomes their saving grace as they can obtain their choice of loan product whether it is a payday loan or a personal loan to cover their immediate expenses. After all, there is not much assurance from approaching a family member or friend if the financial need is urgent, and you want a sure way to get the amount you need without going through an awkward or uncomfortable feeling of borrowing from a loved one. But then again, it is not a practical route to spend beyond your means and adopt a constant practice of borrowing money. Sure, a licensed money lender will always be there to support your emergency financial concerns, but are you comfortable with having debts all the time? If you think about it, you will only have an even tougher time to save money and to get out of debt since your income is now devoted on loan repayments and monthly expenses. Some people may be lucky enough to be able to put in a small percentage of their earnings towards their bank savings.
On the other hand, there are others who basically just work and make money to pay their bills and debts. So, if you are tired of going through this loop of working and spending and paying debts, it is time to rethink your spending habits. You need to set a budget for your expenditures and have a closer look at the way you spend your money on things. In fact, if you have the determination to take this to another level, keeping track of every single expenditure on a daily basis can do wonders when it comes to giving you a reality check on where your money goes.
Adopting the 50-30-20 Budgeting Technique
The way to attain financial happiness and contentment while experiencing more comfort in life is through budgeting. You have to remember that soon, you will have to quit working once you reach retirement. Other people have no choice but to cut their stream of income short because they are laid off the job. Hence, these are some things we need to prepare for by having some kind of cushion behind us in case retrenchment or retirement comes. If you are one of those Singaporeans who wish to retire in 5 years or less, then you have to be really serious about being on top of your spending and start growing your savings. This is why the 50-30-20 technique will surely come in handy if you want to become more disciplined with your income and have money set aside for retirement or emergency needs. Through this method, you can make your budget much more simplified while being able to plan well once you have reached retirement. Also, this spares you from having to figure out every start of the money how to divide your money.
So, how does this technique work?
There are three categories involved in the 50-30-20 budgeting rule. First, 50 percent of your income goes to your essential and immediate needs. Next, 30 percent is for any discretionary spending you may have. Lastly, 20 percent is allocated to your emergency funds, investment, and savings.
To give you a clearer idea how this works, we can illustrate with a sample figure. If your monthly income or take-home pay is $7,000, then we simply divide the money into three parts. Thus, $3,500 is allotted for your basic needs such as your food expenses, rent, and utilities. For your wants or those simple luxuries you sometimes crave for, $2,100 may be used to fund all these. Then, the remaining 20 percent or $1,400 goes straight to your investment and savings.
Sounds simple enough? Perhaps it is, if you are truly dedicated to achieving your desired savings for each month. However, others may struggle to keep up with this rule until they are serious about boosting their savings by being more disciplined with their spending habits and focused on their financial goals.
Let us go back again to each category for a closer look.
50 Percent of Your Salary – For Your Basic Needs
We all have our basic or essential needs. Among these expenditures include grocery shopping bills, utilities, fuel, and housing society expenses. There are also compulsory and irregular payments we may need to make such as insurance premiums or even car insurance payments. To keep it simple, these are expenses that you can never put an end to since these impact your daily life.
This is why you if you are hoping to minimise your expenditure under this category, you need to shop smarter by looking for the best deals and promos offered at supermarkets or retail stops. That may be the extent of what you can do when it comes to reducing your expenses on basic needs.
30 Percent of Your Salary – Discretionary Spending
This category refers to your “wants”. These things are not essential for you to survive, but you may want to have these for entertainment or to enjoy life more. Thus, among the items that count under discretionary spending include eating out, going to theatres, and spending a vacation. But then again, some people end up spending more on these things than their basic needs. This is where the problem starts, unfortunately.
If you want to streamline your expenses on these so-called wants, you should set a budget per month. For a $7,000 monthly income, you may set aside $70 daily (a total of $2,100 a month) for your discretionary spending. In Singapore, though, this amount may not stretch out quite far because of the high cost of living in this city. But at the same time, it is a way to grow your bank savings and retirement funds for a more secured future.
20 Percent of Your Income – Savings, Emergency Fund, Investment
Then we go to that very important reason why we are even saving money – for our future needs. We want to retire comfortably, or at least not spend each day worrying where to get the money to pay the rent or cover our food expenses. Also, we want to be prepared for life’s little surprises or these emergency expenses that can turn out to be quite a shock and stressor once they come our way.
To make these happen, you must be able to allot 20 percent of your salary towards your savings and emergency fund right at the very start of the month. Waiting until the month ends can be disastrous since you may barely have anything left t save or invest as you have already spent the money.
Just as important is your choice of where you invest your money in. Term deposit may feel very safe, but at the same time, the return on your investment may not be that much. There are some people who choose to invest in mutual funds and stocks that offer higher yields, yet you need to do your homework when choosing an online broker with the lowest fee being charged for trading costs.
Lastly, make it a point to set aside cash for your emergency needs such as hospital expenses. This way, you no longer have to be in debt whenever a sudden illness or injury occurs that require hospitalisation or medical treatment.
No matte how much you make each month, it is not impossible to save and live a more comfortable life. The key is in being more aware of how you spend your money and by allotting funds towards your future needs instead of spending uncontrollably once you receive your paycheck.