You already know how important it is to have a budget if you want to get your finances in order, especially in the oversized shopping mall that is Singapore, but unfortunately a budget is no Fairy Godmother who can twirl her wand and make all your money woes vanish.
The problem with coming up with a budget is that you actually have to use your brains to make it work.
If you’re seeing no progress despite having wasted hours plotting your budget, it might be time to admit that it sucks.
Some signs your budget sucks include:
- seeing no increase in savings
- seeing no reduction of debt
- continued failure to repay debt on time
If you are experiencing some or all of the above, congratulations, the following article applies to you.
Your budget is probably a failure because of one of the following.
1. It doesn’t gel with your personality
Trying to persuade an ah beng to part with his long fingernail or an auntie to take it easy at a sale is like hoping an ineffective budget will improve your finances—it’s an exercise in futility.
While part and parcel of having a budget is to force you to cut back on certain expenses, if you’re totally unrealistic you’re going to fall flat on your face after one or two weeks of abstinence.
For example, unless you’re a robot and can subsist on batteries, you’ll obviously need to budget enough to feed yourself, or else you’ll bust your budget once you start dying of starvation.
Your personality often holds the key to the reason you keep busting your budget.
If you’re the sort of person who will shrivel up and die without an active social life, setting aside only $10 a month for going out is going to send you to Woodbridge.
Similarly, if you’re a parent, you might to want to set aside some money for activities with the kids or risk going insane as they wreak havoc on the house.
2. It’s too easy to ignore
Even if your budget is so mathematically perfect it would be a supermodel with a Harvard degree if it were human, if you can’t discipline yourself into sticking to it, it’s not going to work.
Incidentally, the way to make a budget work is not to just “tell yourself” you have a budget. You might remember how your parents “promised” you that they would get you a pony, and we all know how that turned out.
Instead of beating yourself up for busting your budget again, make it impossible to ignore.
Every month, ferret away all the money in your budget that should be set aside for loan repayments and savings so you don’t spend it. Open a separate account or pay your bills immediately if that’s the only way to keep your hands off the cash.
Next, download a budgeting app on your smartphone so you can track every cent you spend. Whether you’re buying $300 footwear or paying 10 cents to use the toilet, everything should go into the app.
Budgeting apps let you break down and track your spending in different categories, so you’ll always know how much more you’re allowed to spend on food, shopping, etc.
Here are some free budgeting apps you can use:
3. It gives you no leeway to deal with emergencies
In a perfect world, our monthly expenditure would be as predictable as the Singapore General Elections.
Unfortunately, life does throw you expensive curveballs now and then.
Perhaps you’ve been driven to see the dentist by a toothache, or your air con broke down and you had to call the repairman.
Maybe your kid failed all his subjects in the prelims and you had to hire an emergency tutor before the PSLE.
Your budget should contain a buffer for emergencies and contingencies which, if not used, will be funneled into debt repayment or savings.
4. It’s too vague or flexible
If your “budget” is just a vague promise to spend no more than 99% of your total earnings every month, why bother, seriously?
Your budget exists to create structure and foster discipline in spending, not give you lots of hugs and be your best friend forever.
So unless it’s actually strict enough to pinch you where it hurts, it’s as useful as an unused gym membership.
While you certainly need some flexibility when it comes to emergency spending and other periodic needs like home repairs and annual insurance payments, all of your discretionary spending—this means stuff like clothing, entertainment and alcohol—should be strictly capped each month.
Too many people give themselves a flexible “alcohol budget” at some point in their lives, the only rule of which is to stop drinking when they feel broke. And we all know how well that usually turns out.
Do you have a budget and has it actually helped you to improve your finances? Let us know in the comments!
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