By taking the time to manage your money better, it can really pay off in the long run when you start making life decisions down the road. From something simple such as staying on top of your bills to saving that extra $10 every month, you can slowly build up your rainy day funds and use them to start paying off any debt you might incur.
Do note that this is especially important since no two individuals are ever the same financially. Hence, we decided to list out 3 simple and easy tips to help you get started on managing your money and how to begin your path to basic financial mastery.
Tip 1: Know what you have and what you owe
This is probably the most basic idea that you should always work toward, or in financial terms, they call this a Balance Sheet (for simplicity sake, we decided to call this “what you have and what you owe”)
“If you never know where you are, you cannot get to where you want to be.”
By understanding this, you will know what is your START point and which areas you should be working towards. You may start your financial life with a ton of student debt to clear or have limited savings in place to clear them off. Thus, your goal should be aligned from where you currently are.
How to do up a personal balance sheet:
- The Manual approach – You can open up a excel file or google sheet and simply tabulate all your different assets (bank accounts, property, investments) and liabilities (loans, credit card debt) on both sides and figure out where you stand
- The Automatic approach – In the US and Canada there are apps like Mint and Credit Karma, but here in Singapore, we designed Seedly (an automatic personal finance app focused on the Singapore market) These apps simply help you import your balances and transactions from your bank account at a click of a button, and add them all up together in one place using secure bank-level encryption standards. At a glance you would know what your balances are and what debt you are currently incurring.
Tip 2: Know where you have been spending your money
Next, you will have to grasp the basic idea of a monthly cashflow. Where it is simply where your money sources are coming in from, and where you are spending your money every month. It is simply this beautiful equation:
Cashflow = Income – Expenses
- Fixed Income (Regular take-home salary, Allowance from parents etc.)
- Variable Income (Side jobs or small business selling old stuff on Carousell, Driving GRAB Hitch, or Dividends from investments etc.)
- Fixed Recurring Expenses (Utility bill, Phone bills, Contribution to parents, Recurring donations etc.)
- Variable Expenses (Movies, F&B dining, Entertainment, Gifts etc.)
How to do a Expense sheet
- The Manual approach – You can open up a excel file or using apps like Wally, Pocket Expense and simply list down all your expenses and income in the various different categories.
- The Automatic approach – Here in Singapore, with Seedly, it presents an easy way to automatically categorise all your income and expenses for you to create a hands-free and fast approach to help you visualise your expenses clearly. Here is the best part, if you have manual transactions using cash, you can also simply record them down manually using the ‘+’ key as well. So this essentially removes the 80% bulk of the work you would have to do to get a clear picture of your spending.
Tip 3: Set a monthly budget
A budget is a great tool to start understanding which one to cut and limit. It will take a little effort, probably 5 minutes a week to review them… but it’s a great way to get a quick idea of the money you have been spending in certain categories and know where to limit your spend.
Reasons to set up a budget:
- Less likely to get caught out by unexpected costs and big ticket items
- More likely to have a good credit rating, if you continually stay within your budget
- More likely to build up a rainy day fund over time
- Able to spot areas where you can make savings or find ways to cut
- In a good position to save up for a holiday, a new car, or another treat with extra funds spillover from last month’s budget
How to do up a Budget
- The Manual approach – You can use the same excel file above and simply do a weekly run through of all your different spending categories you spend in every month. And from there, tag them accordingly to which categories and set limits on them.
- The Automatic approach – Here in Singapore, Seedly presents an easy way to automatically set up a budget and let the app do all the work for you. Every time you make an import, you would be easily able to add to your monthly spend, to give you an amount that you can safely spend.
Here’s an Example: An “All Expenses” budget for $1,000
- You have spent $250 until the 15th of the month
- Thus, your safe-to-spend for all your expenses in this month would be = ($750/15) = $50/day
Wouldn’t that just be beautiful, an assistant to share with you how much you can safely spend for the rest of the month? We feel that this is the most modern and relevant way to manage your money in today’s fast paced world.
As with anything in life, it is often easy to feel overwhelmed and exhausted if you know you’re struggling financially, from calculating that daily transport expense to an ever dwindling bank balance.
It is therefore tempting to bury your head in the sand and ignore your bank statements and bills that come through the letterbox due for payment. But trust us when we say it won’t make the problem any better and likely making it worse.
So, take a deep breath and start by following the above 3 tips. In fact, we wrote this so that you can simply do all these steps in less than 5 minutes with the Seedly app. Once you’ve done this, at least you’ll know where you stand and what you have to deal with in the months ahead.
Seedly App – Singapore Personal Finance Assistant (4.5 stars, 135+ reviews)
The Seedly mobile app is a personal finance management tool designed in Singapore. Launched in late 2016 and currently serving over 15,000 users in Singapore, it provides users with different bank and credit card accounts to view them in a single place by importing account balances and transactions into the app. The local startup is funded by East Ventures and currently incubated by NUS Enterprise. It had underwent the 2016 batch of DBS HOTSPOT program.