WHAT does proper and effective budgeting actually look like and how do you do it? Marcella Purnama offers her tips on how students can easily save money and better manage their everyday expenses.
Budgeting is something so basic, and yet growing up, we are never taught how to budget properly.
Or maybe it’s just me.
When I was still living with my parents, I would be given pocket money and they would say, “Don’t forget to give tithe and save.” But how much can you spend and how much should you save?
“As much as you can,” they would say. Which can also be translated as none.
That said, I don’t think I’m a chronic spender. I have always tried to save money and thought I was pretty good at it but when you begin earning your own money to pay off your own bills, you start to realise how big a problem money can be in your life.
Budgeting: start early
I started budgeting properly when I was 22. Throughout my undergrad degree, my motto was to spend less than what my monthly allowance was and save the rest. It worked out okay, but it should have been better. I never knew the answer to “What’s your monthly living cost?”, which I should have.
So start budgeting early, and start now.
Here’s what you need to do:
1. Determine your fixed cost
Fixed cost means paying all the stuff that you really can’t live without: your rent, transport, phone, internet and water, electricity and gas bills.
Essentially, these are the payments that you need to pay every month, every time, without fail.
2. Calculate your food costs
Food is a necessity but when it comes to factoring it into your budget, there isn’t exactly a fixed cost. While other budgeting articles might consider it a fixed cost, the money I spend on food every month will always differ.
So ask yourself: “How much do I spend for food every month?”
I personally try to set aside $600 every month for food. This also includes coffee, snacks and the occasional flourless orange cake craving. Yes, eating in makes all the difference in food budgeting.
I would recommend spending about $30 on groceries each week and limit your budget to eat out at $15 per day.
3. Set aside a budget for luxury spending
Luxury spending simply means ways for you to treat yourself. It’s for the things you want to buy but don’t necessarily need (okay, watching the latest Avengers movie is a need!).
For me, luxury spending includes the customised chopping board that I bought for myself a few months back, the hand mixer that I bought a few weeks ago and the newly released hard cover book that I bought the other day.
And remember, this budget goal should not be too modest, nor should it be too over the top. If you’re too modest, you would end up blowing your budget every time, and that’s not good.
Personally, I set aside $260 monthly for guilt-free shopping. Some months I hit the mark, some months I go under and other months I go over. And that’s okay!
4. Get a budgeting app
Odds are you have a smartphone that can download an app. If you do, do yourselves a favour and download a budgeting app. Some apps are paid and some are free, and you can try different apps before you finally settle down with one.
I enjoy using Best Budget — it starts as a free app, but after doing 100 transactions you have to move to the paid version, which costs $1.29. It works well for me, and I’m happy to pay the amount.
With an app like Best Budget, you can include all your budgeting categories: fixed cost (I simply call this “utilities”), food and entertainment. If you have more categories, put them there too.
Once you’ve added all those values in, the next step is quite important: knowing every expense you make and including that in your overall budget. Every time you spend $1.80 on that chocolate chip cookie, put the number in. Every time you pay $10.80 for that char kway tiau, put the number in. There’s no point in having a budget if you don’t track your expenses!
5. Adjust your budget accordingly
A budget is malleable and flexible. It will always change, especially when you’ve only just started out on it. Track your expenses and see how much you actually spend on food, utilities, groceries and more. Then analyse your spending: can you cut back on some of the budgets? Or should you allocate more money to the food category?
Most importantly, remember that you have to be realistic in setting your budget. We all want to save as much money as we can, but setting a strict, conservative budget will only result in you going over every month.
You can also adjust your budget according to your needs. For example, if you’re working and you get your paycheck every two weeks, set a biweekly budget instead of a monthly one. Huffington Post has a good article on how to budget for those who work by adjusting your expenses according to the 50/30/20 rule (that is, set aside 50 per cent of your income for fixed budgets, 30 per cent for lifestyle and 20 per cent for savings).
When I started this budgeting journey, the one thing my boyfriend kept drilling into my brain was this: “Save, but don’t be stingy.”
In other words, be thrifty with your money but never stingy. Go out and have good food. Go out for brunch with your friends. Pamper yourself once in a while. But always be mindful of your spending and don’t spend the money you don’t have. And always, always pay your credit card bills to the dot (oh my, an entirely different article altogether).
We all strive to be successful in life but it really does all start with learning how to wisely manage money.
As the old Chinese proverb goes: “The rich man plans for tomorrow, the poor man for today.”
So start budgeting now and see how much money you can save!