As adults, you probably hear the term ‘budgeting’ all the time – at work, at home, even on the news. You have a vague idea of it being about money, but it still feels somewhat foreign to you. But don’t worry – you’re not the only one thinking:
“What the hell is budgeting?”
Budgeting, in personal finance terms, refers to creating a plan to spend your money. It sets parameters for you to spend within your means and reduces the possibility of overspending – or ending up broke. Here are some ways you could start budgeting:
One: Map out a spending plan or budget for the next 6 months to 1 year.
This allows you to foresee which months you’ll be tight on money, and other months that you’ll be able to splurge a lil’ extra.
Two: Fulfil your immediate obligations.
This refers to your home bills, telephone bills, giving money to your parents… the list can go on and on and on – you get what we mean. Don’t spend money on things you don’t need. Use that last bit of foundation, wear that pair of shoes out, or make it do.
Three: Set up an emergency fund.
You don’t need to solely depend on CPF for your savings. It could be 3-5 months’ worth of wages and you could start with setting a regular deposit schedule into a separate savings account. Start small – with $10 a week, slowly increasing to $20, and so on and so forth. Without realising it, you might even be saving up to hundreds a month.
Four: Make the most out of your expenses.
It is definitely a myth that all good things are expensive – it’s not! Do not splurge on unnecessarily expensive items on the pretence of quality. Do your research on the product, and understand the benefits it could bring you before you make the purchase. You should never do it for the brand, or for the (Insta)gram.
Five: Do not be in debt.
The best way to be debt-free, is to pay your credit card bills on time and maintain a good credit rating. You should also ensure that your annual expenditure is less than your annual income – that is the key to financial independence!
We realise that it is definitely easier said than done, and it really requires a whole lot of discipline on your part as well. As a start, you could utilise MoneySENSE’s Budget Calculator to help you keep track of your monthly expenses. Just like losing weight, the starting is always the hardest part! So don’t give up, and stick to your spending plan – you’ll be able to see the fruits of your labour sooner than you think.