SG Budget Babe
Asked on 02 Dec 2019
What's a good ratio to consider? any tips to save more after just coming out of school?
As a fresh grad, start by exercising prudence in spending; this will go a long way to helping you build good spending habits.
I have a 40-30-20-10 framework. 40% on expenses. 30% on loans (if you are paying back your university loan, then you will want to ensure that you pay this off first before looking at investing or saving) 20% should be saved until you have at least 6 months of emergency funds, 10% on your insurance coverage.
Once you have hit 6 months of emergency funds, you'll be able to start investing/saving. If you have paid off your study loan, then you can also invest that 30% segment. So in theory, you can easily invest 50% of your salary, more if you don't spend that much in the 40% segment. Depending on what goal you are investing for (short term, long term), aim to invest as much as you can when young; when you are married or have a kid, you will find that your ability to invest will take a hit due to family expenses, at this point, what you have build up when you were young will continue compounding, which can only be a good thing.
I always transfer out 20% of my income to another saving account immediately once i receive my paycheck. 65% for insurance/loans/expenses. Then 15% for investment.
20% of whatever you earn for the long term (retirement)
30% of whatever you earn for the short to medium term (usually for a wedding, house, reno, kids, car, etc)
02 Dec 2019
Some insights from a fellow fresh grad (I started working in July).
So far, I have managed to save about 60-70% of my take home pay (after CPF), of which half goes to investments. I don't have a study loan/haven't settled my insurance policies but I do give allowance to my parents so I think it depends on your personal commitments. But as you are still young and to make use of compound interest I believe that you should try to save at least 50%.
Some tips that I find really useful:
Track your expenses - it may seem tedious at first but it is really helpful in understanding the breakdown of your spending
Identify the top 2 areas where you spend the most on and try to cut down from there (like for me it is food and shopping)
Besides saving you should also aim to grow your income - side hustles, grow your career, having a high interest savings account, making use of cashbacks etc
Just make sure to find the right level that is comfortable to you! Set small goals in the beginning as you wouldn't want to cut down till you feel like saving is a chore.
I used to save only 20% of my salary.
while a friend of mine save more than 50% of her salary.
I used to think that making money is way more important than saving, especially for people of young age (I was barely making $3k when I graduated)
However now i think a good saving ratio at the start of your work life helps to prepare you for the future.
Go for a high ratio that you can afford while still at a comparatively comfortable social life. :)
(as in, you can still afford to date and socialise sensibly)
Hey there! Well.. I honestly do my best to save 50% of my salary! As much as I can.. I know that I will only spend on what's necessary. Even up till today! With that said, I don't actually keep very close track on what I spend.. It's definitely important but my personal view is that it makes me more stingy.. So yeah. Haha! But at the start, try your best to build up at least 6 months of emergency funds first!
I think minimally it's wise to save 30%, although 50% would be ideal but I reckon it's quite tough in terms of absolute value to save 50% as a fresh grad.
Just to save up first (pay yourself first) before spending on the others. All the best!
Personally, I saved everything left after food and transport, as a fresh grad.
At that time I was earning $1.5k a month with tuition and internships, and my goal was to save $1k a month!
I will say instead of asking for the perfect ratio, first find out what exactly you spend every month first. Then the leftover money is what you can save.
Saving 40% per month should be quite good already unless you income is quite high then you can save 50-70% and that will be good enough.
I write cool stuff about personal finance and money-saving hacks here.
As much as possible basically.. For me when I started, I saved up to 50% of my salary. As long as you are prudent, you would be able to save a lot more.
Hi Cally, a good start will be 20% but try to bring it up to 30%.
I recommend your first goal is to get your medical insurance sorted out first, followed by saving up 6 months of your fixed expenses before embarking any other thing like life insurance or investing.
My advise to saving more, is to do budgeting. I use the Spendee app to track my spending so I know which area I spend more and subconsciously, by tracking, it makes me more prudent with my spending.
Beyond your fixed expenses such as phone bills, transportation etc, set aside perhaps 20% for entertainment and shopping and try to save the rest until you have enough for emergency funds of about 6 months salary.
When I was a fresh grad, I spent about 30-40% of my take-home (money to folks is considered in here), everything else went into savings. This "savings" then split into legit savings (sit in bank and do nothing except generate interest) and some went to stocks. A few months back, some people in the community have been sharing articles that at the age of 30, one should have saved up at least $100k. It's completely doable, use that as your target! I hit the target before 30, despite having a very basic pay (I don't work in the finance nor for the government) because I'm generally a thrifty person. I don't splurge on meals, daily lunch cost me around $3.50 and I take public transport everywhere if I can. I used to think that I'll be able to afford branded goods after I started working and while I think I actually can afford it, I can't bear to part with the money. After a while, you'll realise that you had actually accumulated the wealth you've targeted!
I would say depends on your liabilities.
For me, my fixed expenses when I just entered the workforce includes:
10% for parents allowance
15% for education loan repayment
And I give myself about 20% for food transport generally spending etc so the rest goes into savings!
Rather than a %, maybe tracking how much you really need on a daily / monthly basis will give you a good gauge on what you can cut down and what you need to spend. Some people may have more commitments than others :)
There's no right or wrong ratio because everyone's liabiliites and financial circumstances are different. For instance, if you're the sole breadwinner of the family and earning less than $3,000 a month, it would be quite hard to save when so many people rely on you for a living. Instead, you should work with what you have.
If not, then I think some of the ratios the other community members have suggested are worth considering.
I would even say it is ok to save 0% of your salary if you're already spending very little but using most of your income to pay off your student loan (4% isn't cheap...)
As a fresh grad, if you dont have study loan, you should be able to save up to 50%. (the amt after cpf deduction) This is the best time to save as more and more commitments will come up later on.