Ever found yourself at the end of the month, checking your bank balance, and going “WHERE THE HELL DID ALL MY MONEY GO???!!” No, seriously. It’s happened to me. After some careful research, I’ve found that there are two explanations for this phenomenon: 1) You donated all your money to a “Nigerian prince”, or 2) You suck at keeping track of your expenses. Since I totally support donations to the Nigerian royal family, let’s focus on number 2: knowing where the hell your money goes to.
Why even bother?
Okay, I know what you’re thinking: “Zomg another moron telling me to ‘keep a budget’, so that I can ‘live within my means’ and ‘save for a rainy day’. ” Hear me out – it ain’t what it seems. First of all, I’m not asking you to “keep a budget” or save the receipts from every $2 cup of coffee you buy – knowing what you spend on doesn’t have to be painful.
Why bother to keep track of your expenses? Because if you want to figure out how much you wanna SAVE, how much you wanna INVEST, and how much you have left to SPEND ON BOTTLES AND MODELS (I mean, spend on things you love), then first you have to figure out how much you’re spending every month. This has two advantages:
1. You know exactly how much it costs for you to live your life – and this is a surprisingly enlightening piece of information to know. By figuring out what your “compulsory” expenses are, you’ll know that even if you earn just $1 more than that amount, you’ll never starve, or be homeless, or have to beg. If you’re a young, carefree, sexy dude like me, with no mortgage, no car, and few worries in the world, that amount is surprisingly small. Think about it – it’s a helluva refreshing feeling to know that you always have the option to switch to a happier, lower paying job if you wanted to, because to live your life, you only have to make enough to cover your low, low, low expenses. Here, I’m only talking about the essential, “compulsory” expenses: rent, food, transport, insurance, fuel, etc etc (Hint: if it’s boring, it’s probably an essential expense).
2. By knowing what you spend on, you can quickly identify all the useless fat in your life, the ones that are silently sucking your money away without you even noticing, and DESTROY them. There was a time when I didn’t check my bank statement for like, 2 years, because I didn’t want to think about money (oh, I was young and naive), but when I finally did, I realized I was paying like $10 bucks a month for some magazine subscription that I wasn’t even reading anymore. That shizz was outta there faster than you could say “Readers Digest is lame!”
So how do I do this painlessly?
Most personal finance advisors will always start with the same old tired piece of advice: Keep a budget and save your receipts to track your spending. Or input your expenses into your phone’s budgeting app. This sounds nice and sensible, but there’s just one problem: IT DOESN’T WORK. I don’t know about you, but I’m not going to spend 15 minutes every night collating my receipts and figuring out what I spent on. Or remembering to whip my phone out to punch in my expenses when I purchase a $0.60 pack of sweets. All these actions require “effort”, which I’m really not a big fan of. Instead, I’ll tell you how you can track your expenses in 3 steps:
1. Charge everything to your credit card and let it track your spending for you. If you’re awesome, you’d be charging everything you can to your credit card. I would literally charge a can of Coke to my credit card if I could, except that the cashier would give me such a dirty look that I might die from it. Still though, aside from the obvious benefits of earning rewards/cashback (more on that in another post), the big advantage of credit cards is that they consolidate all your expenses into one single bill. If you succeed in charging EVERYTHING to your credit card, congratulations, you no longer have to touch the germs that come with money (eww), and by glancing at your credit card statement at the end of the month, you’ll know how much your expenses are, without ever having to keep a “budget”.
2. There may be some things that you can’t pay by credit card. For example, if you rent an apartment, some landlords may want you to write them a monthly cheque. Or if you live in Singapore, some telcos will only allow you to use certain credit cards for automatic bill payments, so if you don’t have that particular card, you’ll have to pay using GIRO or some other means (I’m calling you out, Singtel!) In that case, collate all your bills from that month and add up the monthly figures. This will literally take you 10 minutes if you keep your bills in the same place. If not, start collecting them from this month.
3. There are other things, like meals, or snacks, or coffee that can’t be paid by credit cards and won’t issue you with a bill/receipt. (Try asking the dude at the hawker centre for a receipt. He’ll probably cut you up and turn you into char kway diao.) For those, take a random arbitrary number per day, and multiply it by the number of days that month. For example, you may cater for about $15 a day for meals, snacks, coffee, etc etc during a regular working day (excluding those nights when you go out for fancy dinners and drinks). It may be more or less on any particular day, but it should average out to that figure on the whole. Don’t bust your balls too much trying to figure this one out – just observe how much you spend on “normal” stuff for one day, and that should be a pretty good estimate.
That’s it, add 1. + 2. + 3. and you’ve got your magical figure for HOW MUCH IT COSTS TO LIVE YOUR LIFE. No keeping a “budget”, no fumbling with receipts, no interrupting a lunch conversation to punch the cost of your meal into your phone, nothing. Just a once-a-month exercise and you’re going to be able to painlessly track how much you’re spending regularly. Once that’s out of the way, we can then focus on how to optimize what’s left over from it… but we’ll leave that for later 🙂
- How to start with as little as $100 a month
- The proven strategy that beats 80% of professionals
- The specific investments to start with, and where to find them in Singapore