Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Monday, 10 June 2019

Why Budgets Don’t Work—and What Does

As someone who has spent a huge amount of brain cells mulling over money, a well-known pillar of financial wellness is that you need to budget.
Here’s the thing: while budgeting is touted by many in the personal finance blogs as mission critical to getting your finances straight, they don’t always work. Not for long, anyway. For every budget I’ve tried — the 50/30/20 budget, zero-sum budget, spreadsheet, and envelope system — I would start out great.
I would meticulously track every purchase and expense, allocate my income into neat categories, and congratulate myself for creating such a neat, beautifully put-together budget. It felt like magic, at least at first.
Fast forward to a few months’ time, and I would have let my budget fall by the wayside. Why’s that? The reasons may stem from a number of reasons: feeling boxed-in from having too specific spending categories, lapsing into a cycle of shame followed by guilt for going over in X category, or from weaning interest.
Forget the traditional budget. Here’s what works instead:
Track Your ExpensesThis is pretty essential. It’s hard to figure out a long-lasting approach to saving if you don’t know where your money is going. There’s no shortage of free money management apps out there to help you track your spending.  After you have a good idea of how much your living expenses are and anywhere else your money is going, you can create a system.
Create a Money Flow SystemHaving a system for how you save and spend your money will keep things on autopilot. The less “mind time” and work it takes, the more likely you are to stay within your spending limits. Yes, this takes work. It’s not an overnight thing. 
As a self-employed freelancer, I have both a business checking account and a personal checking account. At the end of each month, I’ll automatically transfer a set amount into my personal account for basic living expenses.
I portion out “buckets” of cash that are then transferred to two separate debit cards. There’s a set amount for discretionary expenses or things that change every month. (Think eating out, groceries, gas, etc.) I also allocate any extra cash toward my savings goals. For instance, I put set amounts toward emergencies, a splurge fund, and a vacation fund. I also save for a house when I can.
Why so complicated? After I’ve devised a money flow, it’s pretty much set and I can forget about it. I methodically check my balance and monitor transactions, but that’s it.
AutomateAutomation is a godsend for a lazy money person — no shame.  I automate as much as possible: savings goals, bills, and for a buffer fund in case my checking goes to zero. My bills are paid on time, and I make sure I sock some away some of my income towards retirement. If you’re new to automation, make sure you schedule your transfers so they hit a few days before or after you get paid. You’ll also want to keep an eye on things at first, just to make sure there aren’t any hiccups.
Create a Space for Guilt-Free SpendingJust like guilt-free afternoons binge-watching Netflix while eating ice cream instead of having salads and cycling classes — you need breathing room to do whatever you please with some of your cash. This will prevent you from going hog wild and splurging. Create a separate saving account for some guilt-free spending. Or allow yourself to spend $X of each paycheck on whatever you please. Of course, this is only after you’ve covered your living expenses and savings goals.

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Have a BufferOne of your friends decides to drop in unexpectedly for the weekend and you go on a pricey dinner date and night out. Sure, it’s fun times, but also cry-time for your wallet. You’ll want to have a bit of cushion in your budget for small, unexpected expenses. I like to keep a buffer of a few hundred bucks in my monthly budget, and you may need more or less.
Place Your Money on an Emotional SpectrumTry putting your entire money situation — earning, spending, saving, and investing — on an emotional spectrum. What I mean by this is to think about the things you spend money on. What do you dislike spending money on?
For instance, maybe making payments on your student loans or credit card debt are things that make you groan or ask, “Whyyy?” 

What are you neutral about? That could be utilities, rent, and gas for your car. And last, what types of spending and money goals bring you joy? Perhaps that’s when you get to go out for massages or buy hip clothes, or that subscription box of goodies that you look forward to receiving every month. 

When you categorize your money on an emotional spectrum, it’ll help guide you toward what you want to minimize or remove altogether, and what you want to have or do more of. So if you detest paying off debt (which is more than likely) focus on crushing it as soon as possible. On the flipside, if you love investing in art, try to find ways to put more money into those areas of your life. 
Final ThoughtsWhile budgeting doesn’t always work, creating different systems to make saving and spending as easy and painless as possible, does. What works for me may not work for you. That’s why it’s important to approach it as an experiment. Exploring new ways will help you find a strategy that works best with you.

This article was originally published at

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Sunday, 2 June 2019

5 Numbers More Important Than Your Income

As my friend Mel says, “Numbers are sexy.” We love talking about numbers and tend to fixate on them — particularly when it comes to how much we earn. “I’m a six-figure freelance designer,” or, “If I take this job, I’ll earn $10,000 more.” 

We oftentimes measure our worth based on how much money we rake in. It can be easy to feel like you’re behind, or a grade-A underachiever when your cousin or bestie or partner makes more than you. Sure, your income is important, but there are other numbers that deserve a closer look than how much cash you earn. When it comes to financial wellness, here are five metrics that trump your income.

1. Cost of Living Index
Bottom line: the salary you earn living in one part of the county might not stretch as far living in another part of the country. It's like how we always say "if we earn in Singapore and retire in Malaysia, our money will last us 3 times longer". But if you earn in Singapore and retire in Singapore, the budget might be tighter. The same applies if you earn in Malaysia and retire in Malaysia.

How much you make is relative to a number of things — one being the cost of living in your stomping grounds. So the next time someone says they’re making $120,000 but live in Silicon Valley, chances are they aren’t enjoying the same standard of living, than those in less-expensive parts of the country. 

2. Compensation Package
When it comes to your work salary, it’s also important to look at the entire package, including the benefits you will be getting. Your employee benefits can make up to one-third of total compensation costs. That includes health benefits (medical coverage), corporate discount (mobile plans, gym memberships, etc), and group rates on things like car insurance, life insurance, and even financial and legal advice.

Besides your take-home pay, you’ll want to factor in the full suite of benefits that your employer offers. In turn, that makes a difference as to how much you have to work with each month.

3. Happiness Report
Yes, happiness is a difficult thing to pinpoint. But in recent years metrics have been developed to gauge how happy nations are as a whole, giving us a good idea of wellbeing and work-life balance.
The U.N.’s World happiness report uses data from the Gallup World Poll, which surveys citizens in 156 countries on how happy they feel — to determine the overall well-being of a country’s denizens. The Cantril Ladder, or Cantril’s Self-Anchoring Ladder of Life Satisfaction, is made up of 10 rungs. The bottom of the ladder equals 0 and represents the worst possible life for you. The top of the ladder equals 10 and equates to the best possible life for you.
Per the Gallup World Poll, Finland, Norway, and Denmark, respectively, ranked highest for happiness. The bottom three countries were Afghanistan, Central African Republic, and South Sudan. Where does Singapore fall? 34 out of the 156, not too bad. 

Consider doing your own happiness assessment using the Cantril Ladder. Are you living your best life? What does it exactly mean for you to be living your best life? What steps can you make in the right direction to boost your well-being?

Recommended Post: 10 Ways to Save on Insurance

4. Net Worth 
Remember: Your income isn’t a measure of your wealth, your net worth is. To figure out your net worth, tally up your assets — this includes your investments, how much you have sitting in your savings, and any other assets, like your home or car. Next, tally up your debt. Subtract your debt from your assets and you have your net worth.

Net worth gives a full picture because it factors in how much money you make, how much debt you owe and how quickly you’re paying it off. It’s what you have left at the end of the day that’s for Future You. Having a positive net worth shows that you’re financially healthy. 

5. How You Spend Your Money
Are you putting your paycheck toward paying off debt, helping your family, or are you squandering it? Not only does how you spend your money affect your progress toward net worth, but it’s ultimately an indicator of what you value.

For instance, while I am typically pretty frugal when it comes to clothes, I spend more on good food. There are no right or wrong, it is just a personal preference. Just make sure that you are not overspending or exceeding your budget to indulge in the things that make you happy.

There you have it. Five metrics that are more important than your income. As you can see, while your take-home pay does play a key role in your financial well-being, there are other ways to measure your financial success.

This article was originally published at

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