Am I budgeting right? Life hacks for your 20s and 30s, from two financial experts

DO I REALLY NEED TO TRACK ALL MY EXPENSES TO BE A GOOD BUDGETER?

Budgeting may be daunting to some – especially when there are stories of people who write down everything they spend on, including the bowl of noodles they had for lunch – but, said Tan, it can actually be very simple. 

His advice: Set up three bank accounts – the first, for crediting your salary; the second, for expenses; and the third, for savings. “Every month, you just automatically transfer the amount you need for (fixed) expenses to one account, and the amount you want to save to the other,” he said.

So long as your discretionary spending is within what’s left in your salary account, it will ensure you don’t overspend.

What if you’re married, like Png? He and his wife maintain two accounts – a joint one into which his salary is credited, and his wife’s which serves as their savings account.

Tan said married couples who wish to budget together can have four accounts in total – one income account each, and two joint accounts, one each for savings and expenses. 

“Don’t let your savings co-mingle with your expenses account, because once it does, it’s very difficult to draw the line when you’re spending,” said Ong.

“It can also be very gratifying and encouraging to see the levels in your savings account rising,” she added.’

If you have yearly recurring payments like insurance premiums or road tax, Tan suggests dividing such expenses by 12 and setting aside the money you need monthly. That way, when the payment is due, the money has already been allocated.

HOW MUCH SHOULD I SAVE EVERY MONTH? AND WHAT IF I HAVE A BIG PURCHASE COMING UP?

A good guide for this would be to save 15 per cent of your gross income, said Tan.

Ong said the Institute for Financial Literacy’s recommended ratio is 10 per cent of take-home income, but of course, the more the better.

But what if, like Jasmin, you have big-ticket items like a home or wedding coming up? She hopes to have at least S$50,000 for her wedding fund, equally split between herself and her partner, by 2023.

The first step for any couple, said Ong, should be to discuss what they expect for the wedding, what their budget should be and if it is a realistic target. Once this has been settled, they should then set up a joint wedding expense account and agree to each put a fixed amount into the account every month.

As for buying a home, which is on the cards for both Png and Jasmin, couples should ensure that they can afford to pay the mortgage over the long term. MoneySense advises that the flat purchase price should not exceed five times their annual household income; and that their mortgage servicing ratio should be within 25 per cent of their gross monthly income.

A Build-To-Order HDB flat would typically cost them less than a resale flat. And the latter might also require them to spend more on renovations, Ong noted.

Renovation costs should be budgeted for; if they take up a loan for that, it will be “added debt”, she pointed out. Her advice to folks like Jasmin, who on top of that has a wedding to plan for: “If finances right now only permit them a basic renovation, they can always add on along the way.”