A Short Guide to Budgeting-

Negative numbers have given most of us enough trauma in life, to the point where we would readily create space to lessen our suffering.
Yes, it would’ve been better to nip the problem in the bud but, unfortunately, our education system doesn’t work that way.
If you ask me, budgeting is the red pill that you immediately needs to take because the disease has spread its roots and you have no other choice now.
It will demand some guts to resist the temptation of purchasing those sneakers you always wanted. You will bless the day when you pick up a pen and paper to start fixing a substantially important aspect of your life finally.
Now, we get to the technical part.
To make a budget is to run an analysis of what you earn and how you spend or want to spend it.
It is made for a defined time in the future, for example, a week, a month or a year, (but, take my advice and stick to shorter time durations) and it needs to be re-assessed after you’ve completed that predefined period.
At the end of it, you can reflect on the pros and cons to make the next one more accurate.
Here, We are guiding to budgeting, please follow some steps:

No Reason to Not Budget

Now, every concept has its fair share of supporters and haters.
Some people follow budgeting like it’s a religion while others choose to ridicule it.
So it is pretty common to hear criticism like, ‘budgeting is for the nerds’, but I have never seen a nerd going broke before the end of the month.
Let’s explore a few categories of people who avoid taking the red pill of budgeting-
1. the affluent
2. the scared cats
3. the alive
4. the overly-dependents
5. the plain, lazy old army
The affluent are that portion of the population who feel substantially comfortable in their lives because their salaries cover up most of their expenses.
But, at the same time, how a little math exercise can jack up their savings, hopefully upgrading their lifestyle in the long-term, is what they are unable to foresee and understand.
Then comes, the scared cats, who are just too scared to get into the numbers and assume they will either produce inaccurate budgets or are too incompetent to get anything valuable out of them.
The most dangerous pools of people are ‘the alive’ and the ‘the overly dependents’.
The first segment only wants to spend their life (and money) without worries and to live in the moment.
You might know them by their other famous names like ‘impulsive shopper’ and ‘the perfect customers to sell debt products to’.
The latter segment trusts their employers and governments so much that they hand their futures to them and live on hopes of unemployment insurances and retirement funds.
Last but not least, we have the category of the ‘lazy army’!
These people assume in advance that they cannot keep up with organized routines and would falter if they try. Therefore, they spend their lives being lazy and leaving the burden of their problems to their future selves.
Honestly, intentions and reasoning do not matter.
Implications of living without a budget are the same for each individual, with a slight difference in the magnitude of their suffering.
But, SUFFER YOU WILL if you don’t hop on the nerd bandwagon to the one-stop land of budget-making!
If you have identified yourself in one of the categories above and have stuck with me this far, I believe you want to change and lucky for you, that’s what I am here for precisely.

It’s Really Not That Hard

The term budgeting is pretty heavy to listen to but, fortunately, it is straightforward to make a budget that will help you heaps.
The person you are and how you spend is going to tell you everything that you need to know on how to develop a reasonable budget.
Some of us (myself included) use a simple notebook and pen.
Others might use a basic spreadsheet, or notepad on their phone.
There are basic budgeting applications and software accessible for free on the internet, that you can use as well.
Every budget is unique because every person is unique.
Your budget might look completely different from your friend’s budget, and that is entirely okay.
Your broader objective and goals will be responsible for putting the technical skeleton that will constitute as the effectiveness of your budget.
In my experience, there are just three steps or phases to achieving it-
Step 1: Getting the calculations done
Step 2: Running the analysis
Step 3: Commit, commit, and commit!

Imagine these steps like a sandwich- it has two bread layers which are essential but, often not very amusing, but you dig in for the best part that is in the middle.
The idea is to make a healthy-looking delicious sandwich, so it does good for your digestive system.
Alright, enough with the metaphors and hypothetical situations now.
Let’s get down to business.

Step 1: Getting the calculations done – Listing!

The objective of this step is to create a dashboard view of your expenses.
This step is to see what they are going to look like for the following week or month.
These will include all your regular income sources that consist of after-tax salary, expected bonus, and other forms of money that will be flowing into your accounts.
Next comes the challenging part- making the payments.
This is usually found to be more complicated than just penning down your expenses because you’ll find that more often than not, there is always a sudden event, whether pleasant or tragic, that weighs down extra on your regular expense cycles.
The way around dealing with all your expenses is to break them down into categories.
They could be categories of your own, write down the expected expenses and some provision for surprise pop-ups and then pool them based on their nature, time of occurrence, or magnitude.
If that sounded too complicated, let me give you a more straightforward solution to it.
Your budget should consist of three pools:
the first is the fixed expense pool that consists of those payments that are made in a regular pattern, for example, maintenance charges, rent, mortgage, etc.,
the next is the variable expense pool which is based purely upon your consumption patterns like food, transportation, etc.,
the final pool is for the avoidable expenses that you can ignore if you choose to, but are essential to write down, as these are the expenses that you should be ready to drop when things get tight, financially speaking.
If you’re a wise person and want to see your bank account double or even triple over the next couple of years, I’d advise you to re-assess your priorities and cut down on unnecessary expenses.
Try to create room for ample savings.
Another benefit that will come out of this is maintaining and looking for plans to increase your revenue sources.

Step 2: Running the analysis – Tracking!

The analysis has to begin with one simple objective in mind- your expenses must not exceed your income.
This is the golden rule and everything branches out from it.
The parallel concern is to manage your short-term and long-term financial objectives.
They both carry equal weight and have to be balanced to address two critical sides of your life;
your today (the groceries you have to buy, rent, utilities, child care supplies, etc.)
and your distant tomorrow (long-term investments, retirement savings, etc.).
The analysis has to be fueled with data. Hence, a vigilant record keeping routine is required, which could follow the simple method of writing all the payments you make.
Pro-tip- it gets easier if you are paying with your debit/credit cards or checks.
The records are automatically kept that way, and you can easily request a monthly statement that you can tally with your notes (if you were proactive enough to keep any).
But, luckily for you, bank statements usually get the work done and provide a rough estimate of your cash expenditures which will paint a very realistic picture.
Remember that analysis is an on-going process, so, the initial calculations made are going to serve as a comparison point to the actual recordings of your statements.
The act of tallying will help create further improvements in establishing a better budget for the next interval, and a better budget helps you build more realistic budgets for the next interval.

Step 3: Commit! Commit! Commit! – Re-evaluate!

The most crucial step is to commit to your newly found discipline.
You have done the calculations, and you have created a tally of your statements- this means you planned something and then matched how accurate your estimates were.
The first round of budgeting reveals very little until you are done with your identified period interval and get to learning and re-planning.
It could be a month or a quarter, usually since expenses and income flows are lined up every month.
It is advised to keep a monthly interval, as it will be a manageable chunk to digest and offers a frequent review and analysis opportunity.

Yes, You Can Do Them in A Variety of Ways!

Your basic routine stays the same, but there are already preset, intelligent fixes that you can apply to your routine to get much better results from your budgets.
Let’s review a few-
1. The Zero Budget Method
The zero-budget approach wants you to keep your balance at zero.
This means that you add up all your income, subtract all your expenses from it and the resultant should be zero.
Every penny that you earn is either spent or saved.
The money you are going to earn is assigned a purpose in advance.
For example, if you earn SNG 15000 a month and your expenses are rounding up to SNG 11000, a conscious provision will be made in advance. It can book your income as savings or find a different purpose for it, like getting it invested somewhere.
This approach is very proactive – it is ambitious to find a fair use for your money and to be flexible enough to accommodate a variety of lifestyle choices.
Read More: Money, Time, and Happiness
2. The Reverse Budget
The reverse budget, as the name makes obvious, starts from the end.
This might sound confusing, but, it really isn’t because it is essentially what most people do anyway.
The gist is to save from what is left once you are done spending.
In this approach, you first allocate for your savings and investment, then move to your essentials and then, finally to the non-essentials.
This is a very forward-looking yet, a challenging routine to commit yourself to.
3. The 60% Budget
This recommendation goes out, especially for the lazy army.
The 60% portion of whatever your income is to be spent in your routine expenses and maybe a few not-so-necessary ones that you are committed to.
The left off 40% is broken down into equal halves of 10, which are used for retirement, irregular expenses, savings, and leisure spending.

4. The 50/30/20
In my opinion, the coolest approach on the block is this one.
It is much simpler to understand and is as effective.
Individuals in the alive are the ones who best match with this style of budgeting.
The 50/30/20 divides the income into three non-technical categories-
Needs: 50% of your income is allocated to pay for your needs,

Wants: These are the not-so-essential expenses and can be defined as things you can probably survive without decently, but, they add colour to your lifestyle. Hence, 30% is allocated for the wants.

Savings: Last comes the savings and 20% of the income is allocated to this, although a few criticisms exist that not having a more significant portion for your savings slows down your long-term gradual upgrade in your lifestyle.

How to Budget When You Have No Budget?

Let’s assume I am always running out of cash somewhere around the last ten days of the month, and I am left racking slowly under the deadly weight of debt.
What am I to do?
Crying is probably an option.
But once I am done with that, picking up the pieces can put me back on track.
The following commandments can be picked up and used to give a breather to your cash flows and plans for the future:

1. It is wise to consult with your debt/loan counsellors to find a win-win situation.
This could mean an extension in your loan payments or an adjusted schedule that may suit your cash inflow better.
2. If you cannot save, don’t save.
Some people religiously want to have savings, so much so that they over-use their credit cards for necessary purchases rather than tipping into the designated savings portion.
A very simple reminder- the debt payments are not yours and will be costlier in the future but, savings are yours, and they cost you nothing.
3. Re-evaluate your spending patterns and tick off all the useless expenses that you make without realizing it.
Yes, letting go will be hard but, it is necessary and all for the better.
4. Start using cash to make your purchases.
A debit/credit card swipe does not give you enough feel to start caring about your money. When you pay in cash, you realize what went out of your pocket and how much is left behind.
5. All the cutting down on parts of your life to balance your budget is probably going to trigger a negative sentiment with this activity.
And no activity is worth compromising your mental peace and well-being for, hence, remember to treat yourself to keep up with the habit and stay motivated.
These little moments will allow you to stick to your new-found discipline.

Mayday! Mayday! We’ve lost control!

What if you are already in a debt trap- most likely in the denial phase- trying to avoid understanding the gravity of rising debt on your future and your financial stability?
It is okay to get carried away, and it is okay to be scared.
But, it is not okay to avoid it.
The debts are upon you, and you need to suck it up and take responsibility for your actions.
And trust me, it is not going to be that painful once you get your hands dirty.
The foremost step is to open up those emails and envelopes and start penning down whom you owe money to, how much and the money is due.
This is important because, the more you delay it, the more it will start piling up with additional penalties.
Once you’ve listed all debt openings, you will need to categorize them based on three things: the cost of it, the size of it, and the deadlines for it.
Once you are past that, the call for action is now, and you have to buckle up.
It is not that difficult to be smart about your money, and dropping a few pricey lifestyle choices is not going to hurt you.
You can always seek professional help with us on this platform, and we will ensure to make the process of your re-stabilization as seamless as possible.
Credit rating is crucial while you are stuck in debt because a better credit score can open up some relief options for you and provide for the very necessary breathers.
The debt with the highest interest rate, or cost, has to go first.

The Bottom Line

A good budgeting routine helps you with more than just losing some excess baggage, financially speaking, and will bless you with the ability to reduce the wastage you unconsciously create with your hard-earned money.
This realization will nurture better habits in you, and better habits will reduce your stress levels.
Therefore, a good education about how to deal with your money is essential.
In the words of Robert Kiyosaki, the author of Rich Dad, Poor Dad, “School teaches people about how to be poor and stay poor”.
Nobody wants to stay poor; everyone deserves the right to take a shot at a better, more sustainable lifestyle, but, it takes a little sacrifice today to earn a little extra tomorrow.
Such little continuous actions compound big enough to make you climb the social ladder upwards.
Regardless, I understand the difficulties of managing finances every month.
It comes with added pressures of its own!
Make a list every month, keep track of ALL your payments, allocate a day at the end of the month specifically to do the math on your expenses.
Who has all that extra time lying around?
If all this sounds like too much work to you, I suggest that you talk to our money experts, who will be able to guide according to your circumstances.
As I said, every person is unique, and as such, your needs would be unique, too.
My generic advice is great, but, sometimes you need that extra support and push to get yourself together.



Jun Sing Tan

I help young adults and working professionals achieve their financial goals with a full suite of risk management and wealth accumulation solutions. I firmly believe that financial education should be easy and achievable for all. I am committed to service and hope to be your one stop financial solution.


Jun Sing Tan

November 18, 2020