Ultimate Hacks: Adulting
Personal Finance 101
Asked 2w ago
It's a general rule which means some might not fit into this rule. Still, there is no need to be concerned as all of us have different financial situation, liabilities, responsibilities and etc.
You can use it as a guide but don't get disheartened if you did not meet this rule.
Rather than focusing to fit into that rule, this is what I would do:
Get a budgeting app that is user friendly which shows you in the graphical format of expenditure like a pie chart (I am using Wallet by BudgetBakers which have both desktop and mobile platform)
Set aside an amount for categories like food
Diligently record every single transaction you made in the app. As long as the money goes out of your bank account or wallet, record it.
Review on a monthly basis of your expenditure.
It took me about 3 months to fully understand my expenditure pattern.
Once you know your spending pattern, it would be easier for you to plan as you have the numbers to work on.
Most expenses like insurance, telecom and subscription are pretty fixed unless you upgrade it.
Example of an expense that can vary is food as you know, celebration and gathering can make you spend quite a bit (but it's fine if it is once in a while)
At the same time, if you decide to engage in a financial planner, these numbers definitely make the planning a whole lot easier.
You should identify expenditure that can be reduced like food and shopping which is why you should set a monthly budget and stick with it. Most of the budgeting app including Wallet does allow you to set a budget and even prompt you if you are close to hitting the limit.
It's not the percentage of salary you save but rather remaining committed to saving that absolute sum every month.
That's a general rule for those that have no idea how or where to start. It's like a starter guide for personal finance. It's a good guide but you don't have to follow it exactly.
When I started out, there wasn't a guide though. So what I did was set a weekly and monthly budget. Start by budgeting out what you need to spend, transport, food, phone bills, etc. You need to visualise what are the needs and 'must pay' so as to achieve your work responsibilties. End of the day, if you can't do your work, you won't have the money coming in.
Next is to figure out how much you will save and invest before deciding on what you want to spend. Don't try to save or invest too much that you miss out on all the fun, don't have too much fun either. Review and reflect what you enjoy doing outside of work. Do those activities cost money? Can you afford it on a long term basis? Is there a cheaper way or alternative? The main thing is to maximise your time and money on the things you enjoy. Last of all, can you monetise what you enjoy doing? If you can or if your job allows, then work towards that goal. You might find something new about yourself that you never knew.
Do weekly and monthly review. Check if you have met your weekly and monthly budgetted amounts. Where should you cut back if you have overspend? What can you give up? Are you able to increase your income with a side hustle or invest to have some passive income? Tweak it according to your preferences and once you get the hang of it, you can make more aggressive changes later on.
Don't be too worried about the %! Because everyone's income and commitment is very different.
if you are just starting out as a fresh grad, your income might be lower thus resulting in higher % of expenses.
so long as you are setting a sum of money to save and invest every month, you're on the right track! :)
Great work settling your insurance right away!
Firstly, I would plan out an excel sheet to track the necessities and expenses for the month ahead.
Thereafter, depending on the percentage of your expenses, you can then draft out your percentage for savings!
Here is also why you shouldn't hard follow the 50-30-20 rule!
If you really want to follow the rule:
You need to look at your expenses and categorize them.
Then add them up in total and check what is the percentage of expenses to your take home pay.
If it is more than 50%, means your expenses might be higher than the rule. So you may want to review your expenses to cut down on some.
Then look at the savings and investment portions and see how you want to allocate them.
If you find that you prefer YOLO-ing, then no rules apply. 🤗
Firstly, congrats on the job! 🎉 Hope you’re learning loads!
💰With regards to the 50-30-20 rule, it’s basically a guideline for allocating your salary
50% will be set aside for expenses
30% will be set aside for investment
20% will be set aside for savings
But of course, the 50-30-20 allocation is only a guide and you can always adjust the percentage of allocation according to your needs and requirements.
There is no hard and fast rule to this, some months you might need to purchase a big ticket item, so to counter that, on months that you’re able to cut on your expenses, challenge yourself!
Since you just started your first job, you can start with 50-30-20, and see if you can eventually push yourself to 40-30-30. Or even 20-40-40! 📊
One tip would be to have designated bank accounts, for example having one account strictly for expenses, one for investments and one for savings.
And of course, you can always use the Seedly app to track your expenses (and use it to ask these important questions on our SeedlyCommunity 😉)!
Adulting is tough, don’t worry you’re not alone! We’ll work through it together! All the best! 👍