Managing Money And Expenses – A Guide To Budgeting Income In Singapore

managing money and expenses a guide to budgeting income

You go to work every day and earn an acceptable income. Yet, at the end of every month you start to get panic attacks when standing in line at the ATM machine, and you’re pretty sure your net worth is negative. That’s a sure sign you’re in poor financial health and need to start budgeting your money.

Sure, you could hire a professional to help you get your act together. But being broke, you’re afraid you won’t have any money left over to manage after paying the financial planner.

The good news is that it’s totally possible to budget on your own and succeed in managing your money and expenses without a financial planner breathing down your neck.

Sure, it takes a bit of effort at the start, but in couple of months you’ll be working on autopilot, meaning you’ll be improving your finances without having to drown in a sea of bank account statements or wrack your brains every time you take out your wallet.

Simply follow our step-by-step guide on how to plan your finances.




Set quantifiable financial goals

set quantifiable financial goals when managing money and expenses

If you don’t come up with financial goals to work towards, there’s no way you can automatically expect to see a pile of money gleaming in your bank account at the end of every month.

On the other hand, when you have a financial goal to work towards, you can then purposefully budget and save to reach it.

But you need to know the difference between an achievable financial goal, and wishful thinking.

If your goal is “to become a billionaire” or “get rich quick”, that’s akin to promising yourself you’ll attain the body of a supermodel before tucking back into your plate of char kway teow.

having fun in a bathtub of money

The more quantifiable and specific your goals are, the less overwhelming they become, and the more likely you are going to be able to take actionable steps to achieve them.

That means, instead of saying you want to become rich, break down into cold, hard figures how much you will need to get there.

Here are some examples of overly vague goals, and how you can turn them into quantifiable, specific ones that are also attainable.

Overly vague goal

Quantifiable, specific goal

I want to own a home.

I want to buy a 4-room HDB flat by the age of 35.

I want to get rich.

I want to have a net worth of $x,xxx,xxx by the age of 50.

I want to give my family a comfortable life.

I want to boost my income to $xx,xxx by the time my oldest child is in primary school.

I want to retire early.

I want to have $x,xxx in passive income, as well as savings and investments worth $xxx,xxx by the time I’m 45.

When your goals feature cold, hard figures, then you can do the math and work out what it takes to achieve them.

One of the reasons you should make your goals quantifiable is so you can work out whether they can realistically be achieved.

Most of Singapore would like to retire at the age of 30. But when you’ve calculated how much you’ll need to save and invest to get there, you’ll probably realise that unless you strike Toto, you’ll have to come up with a more realistic timeline.

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Split your income into different bank accounts

splitting your income to manage your money and expenses

Unless you’re actually 12 years old and your piggy bank is big enough to contain your life savings, you should already have at least one bank account, from which you withdraw cash via ATM and pay your bills.

Once you’ve worked out your financial goals, it’s time to open a few more bank accounts. Unless you’re a mathematician or the kind of person who does brainteasers for fun, it’s a lot easier to keep the money allocated to different purposes in different accounts.

dividing your income into two accounts

Here are some of the bank accounts you might want to maintain:

1) Account for daily expenses – You’ll want to pick one with a decent ATM network in case you need to withdraw cash. This is also the account you’ll want to use to pay your bills.

2) Account for your monthly salary – This account is essential if you’re having trouble sticking to your savings goals. Transfer the portion of your pay you wish to save immediately into this account when you receive it. You can even automate this step by applying for a standing instruction that will automatically transfer a pre-determined amount every month from one account to another.

3) Accounts for your various savings goals – Saving up for your first home, a car, or your kids’ education? Set up a separate account for each so you can track your progress more easily.

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Spend no more than 50% of your income on necessities

spend 50% of your income on necessities when managing your money and expenses

Everyone has a different idea of what a reasonable proportion of your salary you should spend and save. If you’re earning a massive monthly sum and live like a monk, saving 99% of your income might be possible, but for most of us it isn’t.

For us mere mortals, as a general rule of thumb, it is advisable to ensure that not more than 50% of our incomes goes towards necessities each month.

Your salary includes your CPF contributions

By the way, when we talk about income, we mean take-home income after deducting CPF contributions. So if your monthly salary is $4,500 and your take-home pay after CPF deductions is $3,600, you should spend no more than $1,800 (50% x $3,600) on necessities.

What counts as a necessity? You want to include only things you wouldn’t be able to remove from the list even if you wanted to.

So, unless you’ve found a way to photosynthesise nutrients from sunlight, groceries are a necessity. But that high tea buffet or that reservation at the fancy restaurant, no matter how many Michelin Stars, is not.

Your kids’ school fees are necessities. But their golf lessons, ballet lessons and iPads are not.

And because we know there are people who will insist that retail therapy or copious amounts of alcohol are necessary for their sanity, we’ve compiled a list to help you differentiate between needs and wants.


NOT necessities


Restaurant meals

Utility bills

Regular smartphone upgrades

Insurance premiums

Overseas holidays

Home loan repayments

Home décor items

Kids’ school fees

Enrichment and tuition


Cosmetic surgery



Home and vehicle maintenance


Gym membership

By spending no more than 50% of your take-home income each month on necessities, you’ll have at least 50% leftover to spend on non-essentials and to set aside for saving and investing.

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Only spend a maximum of 20% on entertainment, hobbies, shopping and other desires

spend 20% of your income on desires when managing your money and expenses

Remember our column of needs and wants above?

If you manage allocate no more than 50% of your income to needs, you can then allow yourself to spend up to 20% of your income on the non-essentials—those wants or desires that make life just a little more comfortable and fun.

strutting through life and flinging money

We’re pretty sure you don’t need us to offer suggestions on what you can spend on in this category. In fact, your main challenge will be reining in your competing desires and trying not to go overboard, just so you don’t bust that 20% limit.

So whether your poison of choice is overpriced hipster cafes, liver-murdering amounts of alcohol, designer handbags, overseas holidays you promptly plaster pictures of all over Instagram or collecting statues of scantily clad anime characters, it doesn’t matter. You can spend without guilt so long as you ensure you spend no more than 20% of your monthly income on it.

Again, make sure you calculate this figure based on your take-home pay after CPF deductions, rather than before.

So if you earn $4,500 a month and take home $3,600 after CPF deductions, you can spend up to $720 each month on desires.

Now, what happens if you want to go on that dream holiday to Iceland, which you’ve estimated will cost at least $4,000, but with your $3,600 take-home salary you can only afford to spend $720 a month on fun stuff?

That means you’ll have to cut down on your spending in this category over several months until you’ve accumulated enough to be able to comfortably spend $4,000 without having to dip into the portions of your money set aside for other purposes.

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Make sure the remaining 30% goes into long-term savings and investments

spend 30% of your income on savings and investments when managing your money and expenses

So you’ve spent no more than 50% of your income on necessities, and no more than 20% on fun stuff.

That leaves you with a good 30% of your monthly take-home income.

This money should be channelled into long-term savings and investments.

By the way, this category is also the one that’s the most essential to financial health, so it’s important that you diligently stick to this part of the budget over a long period of time.

But that’s not all. You’re not just going to dump the entire 30% into some savings account and forget about it.

At the start, you’ll be breaking down this amount into three categories as follows:


Percentage of take-home income

Emergency savings






how to split your savings when managing money and expenses

Here’s what you need to do:

Emergency savings

Deposit this sum into a bank account for long-term savings. You will need to build up your emergency savings until they reach a certain amount.

This money is not to be touched except in the event of unexpected, unavoidable expenses, such as a medical emergency, job loss or fridge breakdown.

How much that sum should be depends on how financially stable you are.

If your job has been described as an iron rice bowl and you have no trouble spending within your budget every month, you can probably stop accumulating money in your emergency fund when it’s worth 3 months of your monthly salary.

But if you have a variable income (eg. if you’re a freelancer, private tutor, real estate/insurance agent, Grab/Uber driver), you probably want to make sure you have at least 6 months’ worth of your typical monthly income stashed away.

Once you have a big enough emergency fund, you can redirect this 10% portion to investments or insurance.


Unless you’re Beyonce, you probably don’t need to get your butt insured.

But there are some basic types of insurance all Singaporeans should consider.

Working-age Singaporeans should definitely consider buying medical insurance, because falling seriously ill is expensive and you may not want to limit yourself to public hospital treatment. Medical insurance should enable you to make claims for consultations, treatment and medication if you are sick enough to be hospitalised.

The most common medical insurance policies are Medisave-approved Integrated Shield Plans. These work as a sort of top-up of your existing MediShield Life plan, and you can pay for a portion of the premiums using the funds in your CPF Medisave account.

If you have dependents like kids or aged parents, life insurance is also a must. Life insurance generally offers payouts to your beneficiaries if you die, or to yourself if you fall seriously ill or are permanently and totally disabled and therefore unable to work.

Some people like to combine life insurance with investment by buying investment-linked life insurance products, but make sure you do your research before deciding if such a plan is for you.

When you’ve got these two basic types of insurance covered and still have room in your budget for more, you might want to consider other types of insurance such as personal accident or critical illness, to name a few.

If you’ve never bought insurance before, you might be confused. There’s no harm in talking to an insurance agent, without feeling pressured to sign up for any of their products. They’ll quickly teach you the basics of how insurance works.

Once you understand the basic types of insurance you wish to get, you can compare prices for free on MoneySmart. Get free health insurance quotes here, and life insurance quotes over here.

mining coin is not how you invest


Investing for retirement and other medium- to long-term financial goals is smarter than simply saving, because you’ll be helping your money to grow over time.

You have several options for your portfolio, including stocks, ETFs, property, unit trusts and lower-risk investment vehicles like Singapore Savings Bonds or fixed deposits.

You’ll find more information on how to build an investment portfolio elsewhere on MoneySmart.

Remember, when it comes to investing, the earlier you start the better, no matter how modest the sum. That’s because the more time your money stays invested, the more it will grow thanks to compound interest. Here’s how compound interest works.

So don’t make the mistake of putting off investing because you think you don’t have enough set aside. You don’t need much to invest in stocks on SGX as the minimum lot size is a mere 100.

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Final note – Advanced Planning

Technically speaking, if you are able to stick to the above budget, you should be, by most financial planners’ standards, managing your money well.

We’ve split up the above categories (necessities, desires, savings/investments/insurance) according to the 50-20-30 rule of budgeting, which is a very popular financial planning model.

50-30-20 managing money and expenses

But if you’re willing and able to comfortably spend less than 50% of your income on necessities, less than 20% of your income on desires, and allocate more than 30% of your income to savings/investments/insurance, go right ahead. In fact, that will put you into even better financial health than people who stick religiously to the 50-20-30 rule.

So for instance, let’s say you can comfortably spend only 30% of your income on necessities and 10% on desires, while channelling a cool 60% into savings/investments/insurance.

This means that you might be able to achieve those financial goals we talked about at the beginning of this article even sooner. Congratulations, you’re ahead of the curve.



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What are the biggest challenges you face when managing your money and expenses? Share them in the comments!