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4 Cardinal Rules Of Budgeting

Managing your finances is not a piece of cake! Mixing motivation, perseverance, and careful planning is needed to keep everything in place. This is why people look for inspiration in books and online articles. With the abundance of resources and information available out there, you can build a massive library.

As you select certain strategies and ideals to follow, here are some of the personal finance rules that you must consider.

#1: A LITTLE GOES A LONG WAY

Start embodying the mindset that small actions eventually adds up. This slow yet steady progress is called Incremental Growth. You will notice that incremental changes pay off in the long run as you track your cash flow. For instance, cutting down on alcoholic beverages can make a significant difference at the end of the month.

#2: PAY YOURSELF FIRST

As a habitué of finance websites, you may have encountered this phrase: “pay yourself first”. This popular statement refers to routing your contributions from each paycheck that you received (e.g., automating your retirement contributions). Doing so entails that you mentally established “saving” as a priority. You are more important than any expense categories.

Most people spend their money first and save the extra later on. But, why must you turn the tables around? For starters, keeping a portion of your money reduces the temptation of overspending and improves your chances during emergency situations.

#3: FOCUS ON THE DEBT

It is challenging to save if you have a mountain of debt to hike. Before you start creating a realistic budget, you shall set a strategic plan to resolve your outstanding debt. Any lingering credit may ruin your financial goals. The sooner that you diminish the negative, the more time you will have for the positive.

#4: YOU ARE THE CAPTAIN OF YOUR OWN SHIP

You are in control of your wealth and not the other way around. Perceiving yourself as the “captain or master” helps to instill accountability over your spending habits. With financial awareness, it is harder to let money flush down the drain.

Image Credits: pixabay.com

Sources: 1, 2, & 3

How To Avoid Spending All Your Paycheck Right Away

When you are working around the clock, the end of June signifies one important thing. And that is? Payday is fast approaching! You can either stretch every cent you receive or waste it all in one day. The choice is yours.

A particular story comes into my mind when I dwell upon this topic. You see, I decided to reward myself after receiving my paycheck for the month of May. Do not worry about finances just yet! I allocated 10-15% of my salary for leisure and relaxation purposes.

I waited until the next day to stroll in the nearby shopping centre to avoid the massive crowd. I chanced upon a relatively vacant fitting room with merely 5 people (including the staff). With no intention of eavesdropping, I listened to the playful exchange between the two saleswomen. I was trying several looks on and it took me a while to change into them. To my surprise, the playful exchange got really deep! One lady elaborated how she blew her salary right away. She loaned the money to her family member. Not to mention, she partied the other night with some friends. She was upset to be trapped in a financial dilemma. Who wouldn’t be?

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Yes! It is not nice to eavesdrop on someone even by accident (sorry about that), but her situation can enlighten you. It made me realize that some people are struggling to control their money after receiving it. If you are caught in this situation, here are some things that you can do to turn things around.

TRY STICKING TO A BUDGET

This may sound utterly obvious and totally uncool, but you need to craft a realistic budget and stick to it. Planning how you will spend your paycheck allows you to prioritize your bills and schedule other expenses. It lets you account for your hard-earned money. If you cannot establish a budget with a paper, you can always use a free budgeting app.

Weigh between your needs and wants. While it is cool to have the latest gadget in the market, it may not be necessary. Stick to your budget! Remember that it is better to own items than to owe them.

GET YOUR PRIORITIES STRAIGHT

How many times have you heard the advice to “keep your priorities in place”? Do you follow it yourself? Keeping your priorities intact allows you to secure your financial future. One of my top priorities is growing my savings. I am gradually fulfilling this by accounting for every dollar I make.

Accounting for every dollar you earn takes budgeting to the next level! It assigns a label for every chunk you make. I found that “Envelope Budgeting” was helpful for this task. With envelope budgeting, I can easily allocate a specific percentage for my expense categories. It is alright to place a responsible amount for splurging. You deserve it!

AUTOMATE YOUR SAVINGS

Did you know that it is possible to sock away your income as soon as you get it? You can achieve this by automatically depositing your salary into your savings account. Award-winning finance journalist Jean Chatzky is an advocate of this. “Automating savings is the first thing everyone should do with their paychecks,” she said. She went on by saying that you cannot spend the money you do not see. I certainly agree! It is easier to save money without the tangible temptations.

In Singapore, there are institutions which allow you to automate your money such as the POSB eMySavings Account. This automatic monthly savings account allows you to keep S$50 to S$3,000 during each “savings date”. You are free to choose a schedule that works best for you.

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From building an emergency fund to gaining self-control, there are other ways to avoid spending all your paycheck immediately. You just have to be creative!

Sources: 1 & 2

Bad Money Habits That You Need To Drop When In A Relationship

Maintaining a healthy relationship with your significant other entails stabilizing the disposition of your finances.

Read thru this article to know how bad monetary habits can potentially harm your relationship. Furthermore, you will get an idea on how to conquer these habits.

#1: AVOIDING FINANCIAL CONVERSATIONS

A healthy long-term relationship is built on trust and transparency. As things get serious with your partner and marriage becomes a viable option, consider discussing about finances. You need to resolve your potential spouse’s money problems before it is too late.

Fully disclosing about your financial circumstance to your partner can be uncomfortable at first but, you have to at least try. Tell your partner about your outstanding debts, financial obligations, income sources, and other assets. This will make you empathize with each other more. From time to time, do not forget to check if your goals are in lined with each other.

#2: STICKING TO YOUR OUTDATED BUDGET

Improve your financial state this 2017 by establishing a robust budget. The budget that you created when you were single may be efficient, but you are now budgeting for two. Being in a committed relationship means that you have to take on more expenses with more resources. Begin by studying each other’s spending habits. Then, trim down unnecessary expenses after compromising. You may also adapt the budgeting techniques of your partner.

I, for one, allocate a small portion of my income to date nights. Let us face it! We belong in a generation where it is acceptable for women to split the tabs with their dates. Give this new perspective a chance as a loving relationship is a two-way street.

#3: LOANING YOUR VACATIONS

I know how much travelling can ease the stress of a hard working Singaporean. However, consistently deducting your romantic vacations on your credit card can take a toll on your wealth. Spending money that you do not have is a dangerous habit to possess. Imagine the arguments that boil down due to the frustration of not being able to meet up with the outstanding debts. This is why you must cultivate a travel fund in advance.

#4: SKIPPING THE BUDGET FOR GIFTS

According to the internationally-acclaimed book by Gary Chapman, there are five ways to express your love to your partner. These five ways include gift giving, quality time, words of affirmation, physical touch, and acts of service. Understanding your partner’s love language will help you to strengthen your bond.

I am only going to focus on one love language – the gift giving. For people who place importance on the tangible symbols of affection, it is important to remember your special dates. You are bound to celebrate various occasions together such as anniversaries and birthdays. Not to mention, Valentine’s Day is coming up soon. Is your wallet ready?

It is a good idea to allocate a budget for gifts before buying one. Otherwise, you have to face budget trimming and other financial woes.

#5: KEEPING A MONETARY SECRET

Secrecy is rarely beneficial to a relationship. Research showed that 1 in 10 people considered breaking up with their partners upon the discovery of a financial secret. Millennial participants were even less forgiving as reaped a figure of 1 in 5. These numbers convey how secrets can strain a “loving” relationship.

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The impact of keeping a monetary secret depends on the couple’s income, the item purchased, and the frequency of purchases. Another significant monetary secret is having a stash for escaping the relationship. Having undisclosed assets and secret bank accounts can affect the level of trust given by your partner. The primary source of damage is not money on its own, but it is the unpleasant habit of concealing the truth.

Sources: 1 & 2

Why I Failed At Budgeting

Making New Year’s Resolution is synonymous to crafting a new budget plan. Creating these two signifies an act of self-improvement. However, no plan is entirely foolproof!

These are just some of the reasons why I previously failed at budgeting:

I FOCUSED HEAVILY ON THE PRICE

Before purchasing a new laptop for work, I inspected some of the contenders from the well-known brands. My new laptop must not only fit my physical preferences, but also my financial limit of up to S$1,000. I searched vigilantly through the store and found a 14-inch HP laptop as well as a 14-inch Dell laptop. These two devices have the same processors and operating system. However, the main memory of the former is 8GB and the latter is 4GB. An important fact is that only the Dell laptop was within my budget.

Which one did I chose? The one with better specifications. Although it retailed for S$1,099, I still taught that it was a smarter investment.

According to a 2012 study published in the pages of the “Journal of Marketing Research”, people fail to follow their budget because they are more likely to spend more than they planned. You must not always beam too much focus on the price. Instead, compare the value (e.g., which has laptop optimal screen size and RAM) of what you are getting before committing to a sale.

MY BUDGET WAS TOO STRICT

Upon getting my first full-time job, I started to restrict myself. My goal was to make enough money to save up for my graduate studies and to help my parents in the household expenses. I did so. I gave about 10% of my salary to my parents and 50% would go to my savings account. I removed my trips to the spa and the cinema. A hefty savings greeted me at the end of every month. But, I felt burnout as there was no room for pleasure. This is when my budget failed me.

To turn things around, I started to make money on the side. I became a blogger that solicits money for endorsements. Eliminating unnecessary expenses is a good idea, but you must reward yourself (from time to time).

I FELT EXHAUSTED WHILE TRACKING MY SPENDING

You need discipline to track your own spending. I realized this firsthand. I used to compile all my receipts and banks statements. But, it got too exhausting! I started with a willpower to succeed until the constant vigilance took a toll on me.

A study supports my statement as it was found that self-control and intelligent decision making involves one’s energy supply. Once this energy runs out, you are more likely to go on a spree.

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Get things by following thru your plan. Practice is the key! Improved decision making and control will become second nature to you as time passes.

Sources: 1, 2, & 3

How To Get Your Finances In Order After Bankruptcy

While experiencing bankruptcy is tragic and bouncing back is challenging, there are some strategies to get your monetary train on track.

1. COMMIT TO CHANGE

You are feeling isolated and helpless due to the recent loss of your assets, bank accounts, and primary source of income. Declaring bankruptcy can shake one’s confidence in many ways. However, you need to be reminded about the brighter things ahead. Is there any place to go to than up? The best thing that you can do now is to pick up the pieces and put them back together.

The first step is to make a strong commitment. Change your financial habits and be ready to perpetually follow through a plan.

2. ANALYZE THE CIRCUMSTANCE

You must analyze the overall financial circumstance that you are in, especially the events that led up to your downfall. Figure out the financial mistakes you made in the past and avoid repeating it in the future.

I have to admit that some setbacks are due to factors that are beyond your control (e.g., layoffs due to recession). While others are due to poor financial decisions. For instance, you became addicted to retail therapy and exhausted all your income on designer goods. You skipped out on emergency fund in favor of your fashion sprees. This is why you must come up with a plan to dig yourself out of the financial trap.

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3. FIX YOUR BUDGET

A new budget will help you rebuild your wealth by placing some constraints on your spending. Treat this as a map that will guide you to your financial goals. Now, let us start with the income. It is most likely that you are left with a single source of income that pays a minimum amount. Search for other part-time jobs or additional streams of income that can aid your journey. Face the uphill battle with a realistic budget.

Find ways to ensure that you are spending less than you are earning. I know it is not easy at first but, you have to endure the tides. Cut the unnecessary spending that you can spot in your previous budget. Rather than purchasing a smaller flat, ask your friends or family if you can crash their homes and pay a “rent” for the meantime. Lastly, sell your mint condition items to earn more money on the side.

4. PAY OUTSTANDING DEBTS

Contrary to popular belief, bankruptcy will not dissolve all your debts. You are not entirely safe yet! Although many of your unsecured debts were discharged, other forms of debts may still be on hold. This includes child support and student debt.

This is why you must gather and organize your financial documents. Determine all your obligations and list them down. Then, figure out various arrangements to pay off each one.

5. KEEP THE FAITH

The graceful bamboo stands firm in a beautiful sunny day. But, it is not always sunshine and rainbows. As strong winds gush through the forest, the graceful bamboo sways with the breeze. Be pliant like a bamboo. Embrace the strong winds of life much like this graceful creature does!

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No plan is entirely perfect and roadblocks are inevitable. Do your hardest to rebound from every setback and reverse the financial situation. The worst thing that you can do right now is to give up!

Sources: 1 & 2

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