It’s almost a universal routine for everyone worldwide. Everyone dreads waking up and having to face a long eight-hour workday ahead of them. Yet, everybody complies with this dreary lifestyle all for the effort of securing a respectable paycheck in attempts to sustain a decent living. In spite of that, every month a common fear seems to loom over everyone’s bank account balance as they worry they’re suddenly in the red. 


This is partially the reason why many people employ the help of a financial advisor to help budget one’s finances. They often underestimate their own discipline and capability in managing it themselves. However, if one is equipped with substantial knowledge and tools of the trade, it becomes entirely possible to be completely self-sufficient in financial planning. One way to do so is by being educated about household finances; and getting to know the open electricity market is one step to take. 


  1. Setting realistically attainable financial objectives

As the saying goes, “If you fail to plan, you fail to plan.” Without curating a relatively detailed plan, it’s not surprising how difficult it may become to project one’s financial goals. Money doesn’t automatically accumulate in one’s bank at the snap of a finger every month. However, if prepared with a concrete financial objective to work towards, the mind becomes sharpened with steel determination to achieve this goal.


However, it’s pertinent to distinguish between realism and wishful thinking. Wishful thinking is blind optimism and hope for something completely unattainable. Examples of such would include wishing to be a billionaire overnight or having your dream physique without exercising. 


The best way to avoid such pitfalls of thinking would be to quantify and specify one’s goals as much as possible. The less vague and wishy-washy the financial expectations are, the easier it will be to solidify reasonable milestones to accomplishing these goals. Deconstructing the process enables one to generate a personal step-by-step guide to financial success.


Some examples of transforming vague objectives would be instead of claiming “I want to own a house”, set numeric figures into the mix like “I want to own a condominium at 35-years-old”. By quantifying the goals with a substantial time frame and expectation, it becomes clearer on the necessary actions needed to take towards it. Math never lies. Although the majority of Singaporeans would love an early and luxurious retirement, real-life says otherwise unless someone strikes the lottery.


  1. Diversifying your bank account allocation

As long as an individual reaches a state of somewhat financial independence, it’s highly encouraged for them to expand and diversify their savings avenues. Saving one’s lifetime earnings in a piggy bank is hardly respectable as compared to opening at least one bank account.


Once the individual’s financial independence is more established, the next appropriate step would be to open a few more bank accounts. By purposefully allocating one’s finances into various categories of bank accounts like daily expenses, monthly salary, big-ticket items, or long term savings goals, it becomes easier to manage one’s expenses.


  1. Account for daily expenses

This account is self-explanatory where it poses as a decent ATM network for the individual to withdraw cash on a daily and afford incoming bills.


  1. Account for monthly salary

This account is also self-explanatory but more useful for those struggling to adhere to their savings goals. By allocating a fixed portion of one’s monthly income into this account directly, it minimizes the risks of misspending from the get-go. This process can also be automated by opting for a standing instruction that automatically transfers the predetermined amount once the monthly income flows in.


  1. Accounts for other miscellaneous goals

This account is more relevant for those big-ticket purchase goals such as a car, house, or a future child’s education. These definitely fall under the long-term category.


  1. Necessities expenditure should never exceed half of income

Although the definition of reasonable income expenditure is up for debate, there is a rough guideline for expenditure limit. Unless an individual earns a ridiculously huge income coupled with living in a monastery, it’s practically impossible to save 99% of one’s income.


Hence, a general rule of thumb for saving would be to ensure that monthly expenditure on necessities should never exceed half of one’s income. Moreover, the income in reference here is the take-home income after compensating for CPF deductions. Therefore, if one’s income is $3,600 after CPF deductions, simple math dictates that necessities expenditure should not exceed $1,800. This ensures a safety net of at least 50% of income left to sustain for emergency funds, savings, or investments.


Now comes to the complex part: what exactly constitutes as a necessity? Purchases like groceries, education fees, utility bills, insurance schemes, healthcare, transport, home maintenance, or loan repayment fees are all counted as necessities. Purchases like restaurant meals, high tea, tuition classes, frequent smartphone upgrades, and holiday trips to name a few don’t count. 


  1. 20% of income on non-essentials

20% of one’s remaining 50% of income can now be channeled into satisfying one’s personal goals and desires. These purchases help make life more tolerable by converting it from simply surviving to living. 


Regardless of what one’s personal desires are, as long as they fall within the 20% of one’s income, it doesn’t matter what they spend on. They are free to spend as guilt-free as they please. 


Thus, basing it off of the previous income example of $3,600, 20% of this amount would translate into a respectable $720 at one’s disposal. However, if one’s desire happens to exceed the 20% substantially, like an expensive holiday, this just means that one has to cut back on expenditure in other categories rather than maintaining current miscellaneous spending at the expense of other more essential categories.


  1. Remaining 30% for long-term savings and investments

For this last portion, the remaining 30% of one’s monthly take-home income should be prioritized for long-term savings and investments. This category is particularly important for maintaining financial longevity because not only does it tide you over for a rainy day, but it may also help to flourish your finances in the long run.


This 30% can be compartmentalized into three equal proportions: emergency savings, insurance, and investments. By allocating 10% to each section, Singaporeans would have fewer worries managing unprecedented events such as critical health scares (through insurance), retrenchment (through emergency funds), and growing one’s money (through investments). These examples are arguably equally as important as managing necessity expenditure because, in the long term, they have the biggest impact on one’s financial health. Hence, this is a category to not take lightly.



After all is said and done, financial planning is a personal responsibility. Even if one chooses to enlist the help of a financial advisor, they can only do so much in advising finances accordingly. How finances are managed is truly up to an individual’s discretion and discipline and how far or much they want to achieve with their finances in the next decade. Good finance doesn’t happen overnight.





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