Learn how to budget in your 20s

Your 20s are the most important decade of your life. During this exciting phase, you are likely to experience many changes, including building a successful career, expanding your social circle and for some, getting married and having children. With so many things happening along the way, how do you balance between achieving your goals and having fun?

To master your own life, start by honing your budgeting skills. It can help you stretch your hard-earned dollars so that you can channel your money into what matters most—you can achieve your financial goals sooner.

TAKE IT FROM WARREN BUFFET: SAVE BEFORE YOU SPEND

Cultivate a habit of saving. Try setting aside at least 10% to 25% of your monthly take-home income. Ultimately you should decide what ratio works best for you based on your goals and lifestyle needs. Then you won’t need to dip into your savings regularly to make up for shortfalls. Another tip is to keep your savings in a separate account, away from your spending account. Money that’s kept out of sight is kept out of mind.

LIST YOUR MONTHLY EXPENSES, DOWN TO THE LAST CENT

Tabulate your monthly expenses over time for a better picture of your spending habits and patterns. That way, you will know exactly where your money is going, and what you should be cutting back on, if necessary. You may also find monthly expenses tracking apps useful when doing your monthly budgeting.

BE CONSCIOUS OF YOUR FIXED AND VARIABLE EXPENSES

Knowing how your money is spent gives you a better idea of your different expenses. It may even help you to trim your annual expenses by hundreds, if not thousands, of dollars. Although fixed expenses like rent, phone bills and monthly payments for a car loan cannot be reduced in the short term, being mindful of them can help you make a conscious effort to cut down on other expenses. If you are not conscientious with your tracking, an expensive dinner or a new branded bag can easily cause your monthly expenses to spike up.

SUM UP YOUR DAILY SMALL INDULGENCES

As insignificant as they seem, small expenses like a daily cup of artisanal coffee can add up over the course of time. This money could be directed towards more meaningful things, such as paying off a credit card bill or achieving your savings goal. But it doesn’t mean that you need to give up your regular caffeine hit or small treats. Instead, you can explore cheaper alternatives like simplifying your Starbucks order, or grabbing a Kopi from the hawker centre.

UNFOLLOW AND UNSUBSCRIBE FROM IRRATIONAL SPENDING

The rule of ‘out of sight, out of mind’ works well here too! It’s all too easy to rationalise your next buy when you are constantly bombarded by the latest trends and promotional messages online. By scrubbing your social media clean of these enticing images, you are less likely to make impulsive and unnecessary purchases.

MAKE YOUR CREDIT CARD WORK SMARTER FOR YOU

Credit cards do not have to be a gateway to debt. It may sound counterintuitive but credit cards also allow you to utilise offerings such as substantial discounts, reward points and cash rebates. Choose credit cards that best suit your lifestyle needs so that you can enjoy better mileage for every dollar spent. What’s more, if you consolidate your spending on one or two cards, you can accumulate your points and rebates faster. That said, do remember to pay your credit balances on time to prevent racking up on late payment charges and massive interest over time.

ALWAYS HAVE A CONTINGENCY PLAN

If you are diligent with your savings, you may already have a comfortable sum to pursue your life goals, such as taking a sabbatical or buying your first car. But what if the unexpected happens, like a medical emergency or an unforeseen lump-sum expense?

Make sure you have sufficient money set aside for rainy days. You might not be able to predict when you need it, but having money on hand ensures that you can handle any contingencies.

AT THE END OF THE DAY, TREAT YOURSELF

Budgeting sounds boring and restrictive, doesn’t it? You may feel deprived of the freedom to spend as and when you like. But let’s not take the fun out of living. Even with all that budgeting going on, you can put aside small amounts of money for occasional treats or save towards a bigger reward like a dream holiday. When you know you have budgeted for the splurge, you will feel less guilty about putting your planning on hold for the occasional indulgences.

ASK AWAY FOR MORE ADVICE WITHOUT OBLIGATION

Have more money-related questions? Head to the NAV Hub for a private one-on-one session with the NAV crew to have your financial queries addressed. You will also enjoy a free evaluation of your financial status. Fret not; no products are sold there so you won’t feel obligated to make any purchases. In the meantime, stay tuned for the next article to find out more about how you can be a master of personal finance.

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Speak to the NAV crew today for a free financial health check and how you can better plan your finances.

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