The internet can tell you 100 ways to be better with money. From drawing a budget to spending on the necessary (i.e $100 pumpkin mask isn’t logical) and different ways to increase your income (i.e. walking your neighbour’s dog or baby-sitting their child or vice versa). The biggest mistake I’ve made throughout the years was “sticking to a structure” and comparing my bank account balance with Kim Kardashian. By “sticking to a structure” I mean, excessively-obsessing over my Ideal Budget Pie Chart. Till date, I still find spending $100 on Peter Thomas Roth pumpkin mask necessary and my neighbour still doesn’t own a dog and/or a baby.
Ideal Budget Pie Chart: 30% Household, 20% Food, 20% Clothing, 20% Savings, 10% Transport
I am sharing this partially as a joke but mainly to tell you how I followed my IBPC and failed miserably. Not literally, but I could have spent less and saved more at the earlier stage. Here’s why IBPC did not work for me:
30% Household : Aside from giving ‘home allowance’ (like most asian kids), I had no other expenses that has relevance to the household. Excess are then spent on overpriced coffee, gel pedicures and shopping (Sephora anyone?).
20% Food : -
20% Clothing : When I just started making money, this was presumably a normal expense. I pretty much spent 20% on clothing (and shoes) because apparently, it was the right thing to do. I wonder who spends 20% of their income on clothing every month!?
20% Savings : -
10% Transport : -
From the above, you can tell that aside from food and transport, other aspects were unfit for my lifestyle. Since I have budgetted 20% on clothing and with the excess from household, I allowed myself to go shopping which ended up spending way more than necessary! Ideal Budget Pie Chart wasn’t ideal for me after all. Two years into IBPC, I noticed:
(one) I’d intentionally spend more;
(two) I was using my savings for travelling;
(three) My ACTUAL savings end up dwindling;
(four) I did not budget for debt repayment; and
(five) I could have saved at least 50% of my income.
Pies aside. So…how can we be better with money?
If you are reading this, you probably want to be better with money. Here goes a few tips under my sleeves.
DO bake your own pie.
Bake and cut slices to your fancy. Have a thing for fitness? Budget that in. Love travelling? Budget for that too. Design a bespoke budget that is relevant with the now yet reflects your future goals too. Do keep check and adjust where necessary. I did not budget for debt repayment which was a mistake!
DO think think think think think (alright that’s enough) consciously before making a purchase.
“The quickest way to double your money is to fold it in half and put it in your back pocket” -Will Rogers-. Rogers said it all.
DONT compare your finances with others.
Kindly suggest not to compare the size of your pie with other’s (how rude did that sound). Level of income and expenditure varies. It is important to acknowledge that higher income doesn’t necessarily mean more savings. Remember that everyone is different, work with what you have.
DONT benchmark your savings with the Golden Savings Ratio.
Depending on your lifestyle, determine savings % that best suit YOU. If liabilities take up a huge portion of your budget, tone down on savings. Nothing worse than setting unrealistic goals. If you are debt-free or have lesser liabilities, I encourage you to go all out. Most importantly, be honest to yourself.
DONT think of ‘upgrading’ so soon.
It is human nature fo want better things in life. By experience, one common mistake is to go for an upgrade immediately after a payrise. We will share more in another post.
This post focuses on being better with money you already have. Everyone has a personal take on managing their own finances therefore what suits me might not float your boat. I can’t say that I’m GOOD with money but I’m certainly not BAD with it. I have learnt the hard way so I hope to share my experience for those who are trying to not burn your bank account. Are you good with money?