Manage your personal budget in five quick steps
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Manage your personal budget in five quick steps

1 Jun
18 May

Planning our annual budget is like planning for a holiday — we are excited by the new adventures that we will embark on, but the amount of work needed can also be intimidating.

To ensure that our hard-earned money is spent meaningfully, a realistic budget acts as a yardstick for us to keep track of our expenses.

Today, let's roll up our sleeves and start planning our budget for now and the long term.

Step 1: Determine all your income sources

Calculate your take-home salary and add any side income that you have — such as from private tuition assignments or business income or any freelance work. The final figure will be the amount that you can spend each month without dipping into your savings.

Step 2: Gather documents to plan your budget

Pull out your credit card statements for the past year. Categorise your spending into different buckets that make sense to you, such as groceries, phone and utility bills, shopping, holidays, and so on.

Look at your bank transaction records. Similarly, categorise any withdrawals into buckets, such as your income tax, allowance for your parents, domestic helper salary, and any miscellaneous expenses. Net off any deposits from friends for any related spend made on credit cards. This is especially important if you fight to pay the bills to get cash rebates or miles (as is always the case with our team lunches at Endowus).

Remember the 80:20 rule (where 80% of the outcome results from 20% of the input) when you are coming up with this estimate.

After going through a few monthly credit card statements, you should be able to have a fairly good estimate of your expenses.

Only three more steps to go!

Step 3: Break down budget into 'necessities' and 'treats'

As you go through your credit card bills and expenditure, you will have a grasp of when you might have been more frivolous or careful with your spending. Try to recall the times when you spent more than you should have on online shopping or bought a round of drinks for your friends.

Separate your food and travel expenses further into two groups: "necessities" or "treats". This can be highly subjective — a weekly cup of bubble tea can be a necessity to some but a treat to others. Always remember that we can be responsible with our finances without being too harsh on ourselves. It's about balancing #adulting and self-care. After all, many millennials have a tendency to overspend and indulge, and you can definitely err on the side of caution when managing your expenses.

Step 4: Adjust personal budget based on preferred lifestyle

Change is the only constant — the same is to be expected for budgeting as well.

Consider any factors that will change your spending patterns in your monthly budget, so that you do not set yourself up for failure.

For example, you may be expecting a child, which means you will soon need to take into account additional recurring expenses such as milk powder, diapers, and childcare. Or, if you're about to start working at a new location, that can affect your daily commute cost or the average price of lunch.

Also, it's a good idea to set aside a small sum for other ad-hoc expenses that may occur.

Step 5: Prepare your personal monthly income statement

Now, it's time to factor in any one-off expenses. These could be big-ticket expenses such as electronics purchases, overseas vacations, or gifts for loved ones.

You can either expense one-off items immediately, or set up a piggy bank — also known as a sinking fund — to apportion a small monthly sum for the large costs.

To calculate the amount you would have saved each month from budgeting, simply subtract the estimated expenses (in Step 4) from your aggregate income (in Step 1). This will be your "profit" for the month.

With your budget ready, you will know how much you have left to save and possibly invest in the longer term.

A smarter way to ensure that you actually save this amount is to "pay yourself first" — have two bank accounts: one that receives your salary and can be used for expenses, while the other holds your savings.

An option is to follow the 50:30:20 guideline, whereby you allocate your income in terms of needs, wants, and savings respectively. But this is all a matter of personal circumstances and preferences.

When you receive any income, it's a good habit to immediately transfer money from your expenses account to your savings account so that you are disciplined in saving your money. The money in the savings account should be used to form part of your emergency fund, or for investments.

With these five easy steps in mind, it's time to start budgeting!

To get started with Endowus, click here.


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Investment involves risk. Past performance is not an indicator nor a guarantee of future performance. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. 

This article is not intended to be relied upon as a forecast or research or investment advice, and should not form the basis of any investment or other decisions. The information contained herein is not intended, and should not be construed, as any legal, tax, regulatory, accounting or financial advice. If you would like investment, accounting, tax or legal advice, you should consult with your own professional advisors regarding your individual circumstances and needs.

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This article has not been reviewed by the Securities and Futures Commission of Hong Kong.

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