Building Financial Discipline in Singapore – Your 4-Step Guide

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Financial Planning

We often only think about the need for better financial discipline when we find ourselves lacking the money to pay for the things we want.

I really need to start watching my spending! I'm spending way too much on shopping every week!

Brandan Chen

Financial Planner

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Does the sentence above sound familiar to you? We often only think about the need for better financial discipline when we find ourselves lacking the money to pay for the things we want. While you might have uttered that sentence in jest, the deeper implication is that you might not be prepared for the unforeseen in life - an unfortunate hospital stay, a sudden retrenchment or a family emergency. In such cases, it always pays to think ahead and build your financial reserves, but how does one start?

The focus on building financial discipline always starts with a practical financial budget. This is the same for any major events in life - a wedding, a newborn baby or buying a house. Starting with a budget not only helps you to narrow down and focus on what you can afford, it also gives you a realistic look at your own expectations and minimizes unpleasant surprises.

Not sure of how or where to start? Our 4-step guide here is a good starting point for you to build up your financial discipline by tracking your expenses, clarifying your financial priorities and lead a financially-prudent life without feeling miserable!

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Step 1: Tracking Monthly Expenses

Before you can come up with a budget, you need to assess your current financial situation by looking at your monthly spending patterns. You can do this by tracking your expenses for 2 to 3 months for a more holistic picture of how you are spending.

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Tracking can be done using various methods, including using your monthly credit card statement as a guide, keeping receipts or using personal finance apps like Seedly to keep a log of your expenses. Doing this will not only give you an idea of whether you are spending more than you should per month, but also how much you are spending for each category, such as grocery, food, entertainment, and shopping.

Step 2: Think About Your Financial Priorities in Life

Depending on which stage you are in your life, you’re likely to have different priorities. A new graduate may focus on paying off his study loan, while someone in his thirties is probably working towards buying a new home or starting a family. What’s yours?

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Think about what your current priorities are, and what you want to achieve in the next five years -repay outstanding debt, save for your wedding, new house, higher education or spend a year traveling without working? Identify your goals so that you can work that into the budget.

Whatever your goals are, most of them will likely include the need to save. However,do you know that inflation can “erase” the value of your money overtime? To ensure that the value of your money does not decrease over the years, it is important to consider alternative methods to make your money work harder for you. Depending on your risk appetite, some examples could include getting insurance savings plans or other investment products. Committing to a regular savings or investment plan can also help you instill that discipline to save.

Step 3: Setting Up the Monthly Budget

Once you have decided on your priorities, it’s now time to include them in your monthly budget. You should also include 2 other categories in your budget if you haven’t – insurance protection and investment. While many Singaporeans recognize the importance of saving, some may neglect getting the necessary insurance protection and consider alternative viable methods to grow their wealth. These are definitely important aspects of financial planning, since an unexpected event, such as illness or unemployment, easily wipe out your savings.

Start your budgeting journey by creating a simple spreadsheet with your monthly income and put in the essential expenses, such as mortgage, insurance payments, savings, utilities, etc.

pen and a calculator

Remember to add in all your financial priorities first, including savings, and then using the balance for miscellaneous expenses like shopping and entertainment. You may find it hard to fit in all your expenses within your monthly salary, but that’s alright. You can always start somewhere and modify the budget for each category as you go along.

Step 4: Sticking to the Budget

Your monthly budget plan is now up! The easy part is done — now what’s left is possibly the biggest challenge - sticking to it. You’ll probably need to find ways to help you stick to your budget and may find yourself a little restraint during the first few months. But don’t worry, because that’s actually good as it helps you to build up awareness before you next open your wallet.

To help to keep your expenditure within your goals, you’ll most likely need to make some compromises along the way. Want to splurge on a $10 salad for lunch? You’d probably need to cut back on that morning latte and switch to local Kopi. Prefer to take a cab home after a long day at work? Then you’ll need to take the MRT on the weekends to make up for that cost.

The point is that spending prudently does not mean scrimping on everything and making your daily life a nightmare; it’s about making compromises and shifting the expenses around. There are in fact many easy ways to save on a daily basis with some planning and effort. Here are some additional tips for you:

  • Carpool instead of taking individual rides.
  • Save on snacks by eating from the office pantry.
  • Look out for dining deals when eating out. Certain mobile apps such as Eatigo, Chope and Hungrygowhere often offer good deals when dining at off-peak hours or when dining in a group.
  • Smart usage of credit cards can help you earn cashback, rebates and discounts. Make sure you clear your monthly payment promptly though!
  • Look out for a variety of discounts for food after hours. Some bakeries have discounted bakes close to end of the business day– buy them for breakfast!
  • Exercise at a lower cost – gym memberships, especially the established chains, can be costly. Why not make use of the excellent sporting facilities we have via ActiveSG and save some money? The Ministry of Health also organises many free or low-cost sports activities to encourage a healthier lifestyle. Check out this link for a list of various activities located around Singapore.
  • Earn cashback when you shop online with your favourite brands using a site like Shopback.
  • Consider second-hand items that can sometimes be fairly new and going lower than the original price. Carousell is a great platform to scout for used items. You can even consider selling some of your used items for a bit of cash!
  • Planning for a holiday in the coming months? While we know the trick to getting a cheap flight ticket seems like rocket science, here’s a helpful infographic put together by Skyscanner to help you.

Setting up a monthly budget to help you instill financial discipline isn’t all that difficult, isn’t it? It may seem a little tedious, but following the 4 steps above should help you kickstart on a more financially-prudent life and it’ll hardly take you more than a day to help you improve your financial health.

Disclaimer:

This advertisement has not been reviewed by the Monetary Authority of Singapore. The information in this article does not necessarily reflect the views of Manulife (Singapore) Pte. Ltd. All stated information, including external links, are general information and does not constitute or form any recommendation of insurance plan. Certain information in this article may be taken from external sources, which we consider reliable. We do not represent that this information is accurate or complete and should not be relied upon as such.

This article is for your information only and does not consider your specific investment objectives, financial situation or needs. We recommend that you seek advice from a Manulife Financial Consultant before making a commitment to purchase a policy.