SINGAPORE – Rather than restricting your expenses, having a budget lets you spend guilt-free on both your needs and wants.
That was the main takeaway of a panel discussion held on Sept 17 as part of The Straits Times InvestMe campaign that is aimed at increasing the financial literacy of its subscribers.
To budget well, you must first envision the lifestyle that you want, said Leon Loh, financial services consultant from GEN Financial Advisory.
Loh, who spent 22 years in corporate finance, said many people he has spoken to struggle to figure out how much money they need for retirement.
“While some might estimate that they need between $5,000 and $8,000 a month, they might not have a clear idea of their spending pattern and what they spend on,” said Loh.
This makes budgeting and tracking expenses a good way to understand one’s spending needs, he said.
Loh was one of two panellists at the third ST InvestMe event—Smarter Ways to Manage Your Money– which was held at the SPH Media auditorium at News Centre in Toa Payoh North.
The panel discussion was moderated by ST senior business correspondent Chor Khieng Yuit and hosted by ST Invest editor Tan Ooi Boon.
Loh has tracked his expenses since 2002, transitioning from putting in his expenses into an Excel sheet to using apps to do so.
“Every weekend, I’ll consolidate the numbers from my app and look at my spending track… then I’ll know if I’m on track or if there are areas that I have to pick up the slack on,” he said.
A budget is like a blue print, said fellow panellist Tan Huey Min, general manager of Credit Counselling Singapore.
“You work so hard to earn your money—so tell your money where to go to. Otherwise, you won’t even know where your money goes to,” said Tan, who also tracks her expenses on a spreadsheet.
Having a budget does not mean you cannot have fun with your money, said Tan.
“You can spend on your wants, but set a limit. Have some fun; you can watch a movie or meet up with your friends. It’s okay to have some ‘fun money’,” she said.
But having a budget is not enough—one must make sure they are spending according to their plan. This especially important in retirement, when people no longer have a monthly salary to rely on.
Retirees should work out how much their desired lifestyle costs and compare that with recurring income from sources such as CPF Life and their private investments.
They should also have savings available for less predictable expenses like medical treatment, home maintenance and replacing household appliances.
Loh said cash flow becomes particularly important during retirement because retirees need to ensure their financial resources can last throughout their lives.
Another smart move is to ensure that you do not use loans to pay for non-essential expenses, such as overseas holidays.
Before taking on a loan, one can consider the acronym PAO – purpose, affordability and options, Tan noted. For instance, before you use your credit card to pay for your plane tickets, you should consider whether you can afford the loan repayments, and whether there are alternative options, such as postponing the trip until you have saved enough for it.
The panellists also stressed the importance of financial resilience, which is the ability to withstand unexpected shocks such as unexpected hospitalisation for a medical condition.
When asked if it was too late for those in their 40s or 50s to begin financial planning, Loh said starting earlier gives savings and investments more time to compound, but people can still take action later in life.
“If you are already in your 50s and 60s, you have to plan for your retirement based on what you already have and the lifestyle you can realistically live with, rather than take excessive investment risks and end up losing it all,” said Tan.
Ultimately, the amount a person earns does not necessarily determine how financially secure they are, said Tan.
Someone on a high salary who spends heavily can end up with less savings than someone earning less but consistently saving, she said.
The Sept 17 event was the third in a series of six financial literacy courses that are being held in the coming months. They cover topics such as smart investing, financing life goals, expense management and property strategies.
To attend these courses, just sign up for the ST InvestMe 24-month All Digital or All Digital and Print subscription package, which costs $29.90 per month.
Existing subscribers can recontract or upgrade their current plan without incurring any penalty for their existing plans.
In addition to the courses, subscribers can access the InvestMe website, which offers practical tips to help them plan their finances better.
The website will also feature columns and articles from ST Invest every weekend. The next financial literacy course – Smarter Ways To Manage Your Money – will explore smart money management tips, with advice on how to spend and borrow wisely.
Subscribers can attend this event on Nov 19 at the SPH Media auditorium or join the session online.
