Budgeting isn’t about being miserly. It’s about being smart

When you’ve got multiple bank accounts, credit cards and random cash bills hiding in wallets and bags, keeping track of where your money is going can quickly feel like a full-time job. 

But you need to ensure you have enough to fulfil your financial commitments, or to pursue certain goals. Not tracking your expenses is also risky for your financial security. Case in point: A reader of mine who recently lost over S$4,000 when her credit card was compromised.

One thing is for sure: If you’re hoping to attain financial freedom, you need to learn to budget well and stick to it.

BUDGETING IS A KEY LIFE SKILL

In a book aimed at helping him prepare for primary school, my son wrote: “I will learn how to spend money”.

I laughed and gently told him that no one needs to learn how to “spend” money – rather, he needs to learn how to budget instead.  

Most of us probably first encountered this in primary school. Think back to when your parents gave you pocket money each week. How long did it take you to discover that if you blew it all on snacks or toys on Monday, you’d have to go hungry for the rest of the week?

Those early experiences taught us to prioritise, plan, and save up for things we really wanted (in my case, my favourite story books). 

As adults, budgeting isn’t all that different – but the “B” word doesn’t always carry a positive connotation. 

Many seem to think it’s about being stingy or giving up things we enjoy. We balk at the thought of cutting out favourite foods or saying no to fun weekend outings with friends. 

But budgeting isn’t about depriving ourselves. It’s simply about having a plan and making conscious decisions about our money and what matters most to us.

A friend of mine spent many years documenting his every expense manually in a notebook. The experience was so painful, he jokes, that it helped him to avoid spending any more money than he had to.

I can relate. I used to document my daily expenses on my phone, and later stopped only because I found it hard to manage multiple budgets after I got married and had kids. 

The good news is you don’t have to log every expense to be a good budgeter. 

Here are some methods to make budgeting less of a chore.

THE 50/30/20 RULE

First is one of the most popular budgeting methods: Allocate 50 per cent of your income to your needs, 30 per cent for your wants and 20 per cent towards your future financial goals.

This takes the guesswork out of finding a balance between your financial commitments and leisure. For instance, if your monthly income is S$4,000, you put S$2,000 towards your mortgage or rent and bills, S$1,200 for dining out, entertainment or shopping, and S$800 for savings or investments. No elaborate calculations needed.

But there are several scenarios where this approach falls short. 

For instance, those dealing with hefty mortgage payments or high rents may find it impossible to fulfil those with just 50 per cent of their income. If you’re still clearing off student loans or if your income is a little lower, leaving 20 per cent untouched may seem like a luxury.

To make this method work for you, adjust the ratios to fit your personal circumstances.

For example, in my twenties, I allocated 50 per cent of my income for my expenses and put the remaining 50 per cent towards savings and repaying my student loans. 

ZERO-BASED BUDGETING

This method involves assigning a specific task to every dollar of your income. 

Start with your monthly income figure and list out everything your money needs to cover, such as bills, loan repayments, necessities, discretionary spending such as dining out or entertainment, savings goals and investments. Adjust your expenses until the total matches your income figure.

The good thing about this method: It ensures that every dollar has a purpose. You’ll have full visibility over your finances and be more intentional about money management. You can adjust it from month to month to account for periods of higher (or lower) spending, such as when you travel and during holiday seasons. 

The downside, however, is that it requires you to take time out at the beginning of each month to work on allocating your money. 

If this sounds unfeasible, it might be better to set up an automated budgeting system for yourself instead. Look up one of the many banking and budgeting apps available to help you out with this.

GIVE YOURSELF AN ALLOWANCE

One of the best ways to budget is one we’re probably most familiar with – by spending within our allowance. 

To do this, you can designate a separate bank account as your spending account. Each month, transfer “pocket money” to yourself to spend from that account only. 

If you’re self-employed, or have variable expenses or multiple income streams, this will be especially helpful to ensure that you are keeping well within your spending limits. 

REVERSE BUDGETING: PAY YOURSELF FIRST

My personal favourite budgeting method is to simply pay myself first.

Known as reverse budgeting, you simply need to set aside a fixed amount or percentage for your savings and investments each month, and then use whatever is left for your expenses.

The money in my high-yield savings account is “untouchable” – it’s for saving up towards my long-term goals. However, there are certain times when I need more money than anticipated for my expenses. 

When that happens, I transfer more over from my savings account – but at the same time, I make a mental note to ensure that this doesn’t become a recurring affair. 

This method enables you to prioritise your financial goals over your expenses. As a working mum-of-two with limited free time on my hands, this is now my favourite and most fuss-free approach to making sure I never bust my budget.

CHOOSE A BUDGETING STYLE THAT WORKS FOR YOU

Ultimately, the best budgeting method for you will come down to your personality, lifestyle and financial goals. 

Whatever you choose, what matters most is that you stick to it. There will always be temptation to cave – a limited-time sale, or an impromptu holiday trip with friends.

Earlier this year, “loud budgeting” started taking off on TikTok – a trend that seeks to normalise being on a budget. 

Loud budgeters openly and expressly turn down social activities and invitations that don't fit into their budget or financial goals, so this could be one strategy for you to stick to your guns amid peer pressure. (See: Do you struggle when your wealthier friends want to meet up for an extravagant dinner?)

Whether you choose to go for the classic 50/30/20 rule, the discipline of zero-based budgeting, or the goal-oriented approach of reverse budgeting, the key is to find a method that you can realistically implement for your lifestyle. 

That way, you’ll never dread the “B” word again. 

Dawn Cher, also known as SG Budget Babe, has been running one of Singapore’s most popular blogs on personal finance for the last 10 years.