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Beginner's Journey: Budgeting

Updated: Jul 16, 2020

Budgeting a crucial step to creating healthy financial habits. Through the action of budgeting, we put into perspective the amount of money we are allocating to the different areas of our lives: necessities, luxuries or emergencies.

The key essence of budgeting is to hold yourself accountable as to how your income is allocated. There are some rules-of-thumb out there (such as the 50-30-20 rule or the 70-20-10 rule) but the most important aspect of budgeting is to find a ratio that works best for you.

So how do we get started?

Let us identify what typically causes budgets to fail.

1. Lack of perseverance.

There is much talk on trimming your expenditure on every single purchase by finding the cheapest alternative. It takes a toll after some time, with anxiety or stress to constantly cut costs which many do not appreciate.

2. Under-estimating your expenses.

Be realistic, not everyone saves 90% of their income. Similar to a diet, you can’t expect to lose weight in the blink of an eye. You need to set SMART (Specific, measurable, achievable, relevant, time-bound) goals. It is also common for people to spend beyond their means as they underestimate the true cost of some products or services.

3. Insufficient room for fun.

It is a misconception that saving more means cutting back on all sorts of ‘luxuries’ in life. There are some intangible benefits out of recreational activities which may help improve your productivity. Sometimes, you have to spend to earn.

So what can we do moving forward?

1. Take reference from your spending history.

If you have a bank account, take the time to identify the broad categories where your money is going to, such as Transportation, food, insurance or personal welfare. It will be helpful to use some applications either on the web or mobile to consolidate the information clearly. Write, type or draw everything out to get a clear picture of what you have.

2. From here, filter-out what is necessary for you first.

Identify your needs and wants. This way, we can set a more realistic expectation of how much is going to be spent. For example, transportation, food and insurance may take about 60% of your monthly income.

3. Set a saving goal. What are you saving towards?

Ideally, we should seek to create an emergency saving fund for ourselves. A rule of thumb is a minimum of 3-6 months of your expenses to have in the bank. You also may be saving for a new pair of sneakers, a laptop or for further education. Give yourself an approximate timeline to accumulate the money you require and see how much you will need to save per month for that goal.

4. Whatever allocation is left is up to you to decide.

Once you’ve settled your necessary spending, and savings goal. Typically whatever is left is for any unexpected expenditure such as getting your watch fixed. Remember, don’t forget to give yourself a little treat for the hard work of saving.

5. From here, constantly review your expenses.

Make use your expense tracker to your advantage! You may realise that your allocation for transportation increases due to a rise in transportation costs. Does this mean you cut down on your savings, or find cheaper alternatives for meals? It’s up to you to decide to prioritise what comes first. From here, look to continually refine your budgeting habits and make it the best for yourself.

I can’t seem to stick to a budget? Is it not meant for me?

Let us not get too disheartened if your initial few budgets don’t work out well. Like a diet, it takes time for the results to show! As mentioned in step 5 earlier, take time to periodically review and adjust your expenses. If you’re still struggling, here’s some perspective which may help.

1. Use expense tracking apps with integration with your banks.

Some of us may be using spreadsheets instead of these integrated platforms. Though spreadsheets are more customisable, it might still be more convenient to use such integrated platforms instead.

2. Make a good habit out of tracking your expenditure. Click here to refer to our other article on how to manage your expenditure!

3. Learn from your friends or online forums. These sources can be a benchmark to see where you may be overspending or underspending. Ask around and see how you can learn from the good practices of others.

4. Leverage on money-saving tools online. Honey is an extension you could install on your web browser. It finds every working promotion on the internet for you to apply it on your cart upon checking out.

5. Lastly, Don’t miss out on the fun. As mentioned earlier, many of us may get caught up with saving more and spending less, that we even cut out our own personal welfare. Sometimes we may be cutting educational courses or learning a new skill which can make us more productive in the future, and in turn, allows us to earn even more!


Budgeting is the first step to making better financial plans. It works hand-in-hand with savings and expenditure management to make your financial management scene more meaningful and rewarding.

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