You can also consider getting a certified financial planner to assist you with understanding your finances but many are not comfortable disclosing personal information.
I will cover a 10-year period, from the age of 25 to 34. Why? Because I haven't live that long yet. Seriously, if you can manage your finances during the first 10 years your work life, you can pretty much handle your finances for the rest of your life; assuming no major setbacks which could adversely impact your income (that's why we need insurance).
The trick to budgeting is NOT to be too detailed or precised. Otherwise, the budget becomes cumbersome and you'll not be able to go through it. For a start, use whole numbers that end with a zero, e.g. $30, $100, $120, $1250. It is far easier to calculate.
Let's make some assumptions for this sharing:
- a starting monthly salary of a fresh uni grad in 2015 i.e. $3000; take-home $2400
- at least 2-months of annual bonus
- annual salary increment of 5% (makes calculation simpler)
- living with two parents and a late-teen sibling in a 4-room HDB flat.
- single and dating
- no major loans (you can include study loan if you have one)
- take public transport
Expenses can be categorised as fixed, variable and discretionary. Fixed expenses simply mean the expense remains the same throughout the year. Variable expenses are those that change according to the level of usage, activity and volume. E.g. Electrical bill. Discretionary expenses are non-essentials or "wants" aka shopping for stuff you want.
Let's start with the monthly essentials:
a) Meals (Variable) - $10-$15/day x 30 days = $300-$450
We all need to eat and food is a tricky thing, especially in Singapore. I watch my diet/weight carefully. It didn't take me long to realise that it is easy to gain weight as I get older, due to a decline in metabolism rate and a lack of exercise. Hence, I try not to eat too much fancy stuff by going to restaurants or cafes. For lunch, I normally eat at a food court. I also bring my own water bottle to reduce my intake of drinks with high sugar content. Anyway, guys have to worry about their annual IPPT and I'm not ready to break my unblemished 100% pass record!
Inflation also plays a part when eating out. I recalled spending about $30 for a complete meal for two with desserts at Swenson's in 2008... now, that same meal can cost almost twice!!! Living with parents would translate substantial savings for dinner. Occasionally, you'll go out with your buddies for dinner so it's cool to spend a bit more. But if you like food and have no issue with weight gain, then you can go afford to spoil yourself a bit... just don't get carried away by treating your friends too frequently unless it is a special occasion... mainly treat your date and families. Overall, you should keep your meal's budget between $300-$500.
b) Transport (Variable) - $5/day 22 days = $110 + $240 (cab rides) = $250 - $400
Dreaming of getting your own car? Having one in Singapore is no joke and you would need to set aside at least $1500 per month. Remember our take-home salary of just $2400? Yup, let's forget about driving for now unless you don't mind eating instant noodles and biscuits every day.
c) Phone Plan (Variable) - $40-$60
Middle-tier plan. You may need to increase it if you jobs requires it. Most likely your company will provide phone allowance... Don't forget to check with HR if you are entitle to corporate phone plans.
d) Internet (Fixed) - $30-$50
I'm not sure about those 3-in-1 plans like Singtel MIO. I tried it once and later discovered that I simply have no time to watch TV. I must admit that MediaCorp refreshed TV programmes are rather good these days. Besides, I use VPN and Netflix for just $15/mth for wholly US TV and Video content. Hence, i went for just pure Fiber Optics connection - 200MBPS unlimited bandwidth for $39/mth. Don't think I need anything faster for watching Hi-Def Youtube Videos. Heck, I survived 8 years with just 6MBPS broadband and it was good enough for me...
e) Insurance (Fixed) - $100
There are two schools of thoughts when purchasing insurance. (1) Buy Term, Invest the Rest (2) Buy Life. I have both because my parents (bless their souls) got me a Life Assurance when I was 16. I had since taken over the payment of premiums and the cash value had just crossed the 5-figure mark. Good to have in-case of emergency but the coverage is woefully little for me now that I have my own family to care for so I had to get Term Insurance that pays out a tidy sum to my dependents upon my demise. Generally, it not recommended buying expensive insurance policies unless you are hopeless at saving $$$. Anyway, there are quite a number of articles out there on this issue so do Google it. If I were to start afresh, I will simply take out a basic Term Insurance and a comprehensive health/hospitalisation plan. I may even skip the Term Insurance as CPF Board deducts about $30-$40 from your CPF account to pay for a $50,000 term insurance. For now, let's keep insurance to 4-5% of your take home salary.
f) Savings (Variable) - 20% of your take home salary or about $500
If you can save more, then by all means do it! Make sure you have at least 3-6 months of emergency cash stashed in your savings account.
f) Mom & Dad (Variable) - $420-$590
Thus far, we have budgeted about $1220 to $1560. We still have a balance of about $840-$1180. In Singapore, the act of filial piety still exists. Some parents don't need your money but it's still a good gesture to give some to them. The amount you want to give to your parents is entirely up to you. The more you give, the less shopping $ you have. For simplicity sake, let's just split it in half. But do give more when you get bonuses :)
g) Shopping (Discretionary) - $420-$590
So! All that you're left with is about 20% of your take home salary to spend on anything you like. Not a lot huh... Well, just so you know that I had spent within the range of $500 to $800 during my earlier years so it's possible. Just make sure you don't get carried away by paying large purchases in zero-interest installments using credit cards... more on that later.
END OF PART 1