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

Oct 2022
Jun 2020
calculating personal budget, spending and income

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 post-CPF income sources

Calculate your take-home salary, net of CPF. If you are 30 years old and earning $4,000 month from a full-time job, your take-home salary would be $3,200, as shown in the table below.

Next, add any side income that you have — such as from private tuition assignments or music lessons. The final figure will be the amount that you can spend each month without dipping into your savings.

Category Amount per month
Gross salary from full-time job $4,000
Employee CPF contribution -$800
Take-home salary from full-time job $3,200
Private tuition income $500
Total earnings $3,200

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).

chart of sample expense breakdown

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.

chart of expense breakdown into necessities and treats

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 post-CPF income (in Step 1). This will be your "profit" for the month. Good job!

Repeat Steps 4 and 5 if you realise that you are saving too little or too much (a happy problem, it must be said).

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.

Next on the Endowus Fin.Lit Academy

Read the next article in the curriculum: Emergency fund: Why every Singaporean should have one


This article is for information purposes only and should not be considered as an offer, solicitation or advice for the purchase or sale of any investment products. It is recommended that you seek financial advice as to the suitability of any investment. Whilst Pte. Ltd. (“Endowus”) has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or typographical errors.

Any opinion or estimate above is made on a general basis and none of Endowus, nor any of its affiliates, representatives or agents have given any consideration to nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Opinions expressed herein are subject to change without notice.  

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