3 methods Singaporeans must know in managing finances

As a financial speaker and author, I often heard my Singaporean friends tell me that "budgeting doesn't work! “The truth is that I am not much of a 'budgeter' myself?

Once upon a time, I remember being charged up after reading personal finance books that showed mathematically why saving a dollar a day could help me become a millionaire. The lesson then point to the need for budgeting and saving up every single cent.

This totally makes “cents” to me and I would carry a black note book with me and record every single financial decision I make throughout the day which ranges for buying a “kopi” for $0.90 to pumping petrol for $98.70. I am happy to announce that this practice lasted for… 3 days at most?

Slowly, I realized that personal financial management is similar to personal fitness in the sense that we need to build up our muscles and habits. Trying to have a quick financial make over and changing finance habits is like trying to go on a crash diet and/or become fit by suddenly running a marathon one time without any foundations.

To do it properly with long term effects, I highly recommend making small changes and systemizing it into our lives. Here some methods to do that

1. Budget One Day Each Time.

Instead of doing up your 5-years or even 1-year plan, start a simple budget just for tomorrow. This is akin to start by doing 10 push ups and getting your body conditioned. Even as you are reading right now, take out your smartphone or your black notebook and try forecasting what you will be spending tomorrow.

Write the items down and review it at the end of tomorrow. Start by practicing this once a week and you will begin to see some trends and gain some financial muscles. Once you are comfortable, go on to forecast a 1-week, 1-month, then 1-year budget. And remember, allow yourself to miss, this game is about consistent action, not perfection.

2. Use Fun Events to Strengthen Your Financial Muscles.

While fun sports and outdoor activity has been one of the best ways to get us started and continuing in our physical build up, budgeting for fun events can be a great way to entice us to start learning how to manage our finances.

Since year-end is here, you can plan for a holiday or Christmas party. Each of these ventures requires certain amount of financial resources doesn’t it? Sit down and do a fun plan for an event that you know you will enjoy. How much will the transportation, accommodations, food, shopping and insurance costs?

Use a spreadsheet to help you and you may be pleasantly surprise how the categories of our monthly living budget is similar to a holiday’s expenses. Perhaps as you budget for a fun event, you may actually start to associate budgeting to having fun (like exercising being fun in sports), and continue this habit.

3. Use A “Passport” System.

This is one of my favorite methods, as I love to simplify and systemize my finances. The whole idea is to select one bank account and make sure ALL your income goes into that account.

Once this account captures all the inflow of your income, it will also be able to capture any outflow like your paying for house mortgage, insurance premium, and transportation expenses. I call this the passport system because all your monies will need to pass this bank account’s checkpoint and will be recorded.

I use this method and just to share that up till today, I still cannot reconcile all my expenses. There will be a couple of transactions which I cannot remember but overall I have a broad picture and it helps me in knowing how much I have to save and invest monthly.

Our Singapore banks are making it even easier now as banks like OCBC even have an inbuilt system to help you track and customize your spending. We can also open different bank accounts for different purposes but we need to of course consider the minimum deposit and balance.

But even if you choose to do that, I will still suggest that you choose your central account where all inflow and outflow is captured!

Here are 3 tips to help you get started and I look forward to exploring any other methods you may have. To conclude, keep it simple, make it a system and get started!