Without a high savings rate, there is nothing else to do. None of our finance articles here can help you if you can’t do this vital Step One.
“It’s so hard! CPF already took 20% of my pay.”
We can understand that. Because we are you. We face the same limitations. How about we walk this through together? How do we start with Step One?
Know what you’re dealing with
I would like you to buy a small, cheap notebook. In this notebook, you will only write down your finance stuff.
Go through your transactions for the last 6 months and write down everything that is a fixed cost. Utilities, mortgage, transport expenses, everyone’s meals, telco bills, subscription bills for streaming and whatever, groceries, household and toilet items. Write them down for the last 6 months. You should see that the 6 figures should not differ by much. Add them together, divide by 6, and then add 200 as a buffer. This will be your monthly fixed cost. This is what you’re dealing with each month.
Save the rest in a separate account
Subtract the fixed cost from your take-home pay. This is what you’ll save each month. I recommend you open another bank account to save this. Putting your money in different containers make sense. You now have one jar of money that should only be growing. You take no money form this account unless absolutely necessary. This is your wealth account. Now, some bank accounts offer you higher interest rates. Some come without an ATM card, which is good for what we’re trying to do here. Do your own research on this, and choose the best option from there. Look out for those with a fall-below fee. You don’t want your money to be chipped away by service charges.
What’s the $200 buffer for?
The buffer serves two purposes. Some months you spend slightly more or slightly less. The buildup from what you don’t spend slowly grows into an emergency cash. Also, I do not want you to stress about taking a cab home one day late at night after work, or worry about the nice meal you’re going to have with your friends or family or date. That’s what the buffer is for! You can allow yourself to spend some money without worry, as long as you’re disciplined about the savings part.
