You will be able to set a percentage split or a pay-yourself-first budget and judge whether it fits Singapore costs.
Many budgeting methods ask you to plan a long list of categories and then check each one every few days. Plenty of people don't want to do that. Some try a zero-based budget, like it for about three weeks, then stop opening the spreadsheet. If that sounds like you, there are two low-effort methods to look at: the percentage split and pay-yourself-first. Both can work well, and both fail in predictable ways. Know where each one fails before you choose.
A percentage split divides your take-home pay into needs, wants and saving by fixed shares. You only watch the three totals. The best-known version is 50/30/20: 50% for needs, 30% for wants and 20% for saving and paying down debt. It comes from the American writers Elizabeth Warren and Amelia Warren Tyagi, in their book "All Your Worth".
People like it because there are no sub-categories and no daily tracking. You need three numbers and a rough idea of which bucket each payment goes in. Use the needs, wants and saving buckets from lesson 1.3 to sort your payments.
Take Wei Ling, a salaried worker. Say she takes home S$3,800 a month (all the figures for her are example figures). Under 50/30/20, she gets S$1,900 for needs, S$1,140 for wants and S$760 for saving.
The most common way a percentage split fails in Singapore is on the needs share. Rent for a room or a flat, support for parents and family, and loan repayments can easily take more than half of a young person's pay. Going over the needs share in that situation does not mean you are careless. Those costs cannot be cut this month by trying harder.
Wei Ling's real needs come to S$2,160, which is S$260 more than the S$1,900 the split allows. She rents a room, gives her parents S$300 and pays S$390 in debt minimums. None of these can shrink this month. A split that ignores high needs doesn't make them any smaller. She would miss the needs target every month, decide budgeting does not work for her, and stop.
The fix is to change the shares to fit your real needs, then decide whether you can accept the result. Wei Ling could switch to 60/30/10. That gives her S$2,280 for needs, which covers her S$2,160 with S$120 to spare. Wants stay at S$1,140, which is S$110 less than she spends on wants now. Saving becomes S$380, almost four times the S$100 she saves at the moment.
When you change the shares, protect the saving share. If your needs are so high that almost nothing is left for saving, the problem is in the needs bucket. Look at a cheaper room, a different phone plan, or a conversation with your family about how much support you give. Trying to spend less on wants through willpower will not fix it.
A pay-yourself-first budget moves a fixed saving amount out of your account on payday, before you spend anything. You then spend the rest without tracking categories. Saving is treated like a bill that gets paid first.
This works because saving no longer depends on money being left over at the end of the month, which rarely happens. A standing instruction moves the money on payday, so it never shows up in your spending account.
If Wei Ling sets up a S$400 transfer on payday, she has S$3,400 left to spend. Her regular spending averages S$3,410, so she needs to trim about S$10 a month, which looks easy. But that average left out a S$450 wedding in December, and it left out Lunar New Year. Pay-yourself-first has no line for irregular costs. They get paid from whatever is in the spending account that month, and when that isn't enough, people are tempted to move money back out of savings. Module 3 deals with this by adding a separate line for costs that do not come every month.
If your income changes from month to month, base the saving amount on your lowest normal month, as set out in lesson 1.1. Farhan earns commission, and his pay goes up and down. On a S$3,400 month he moves S$350. Any commission he earns above that is extra. Planning a whole budget around income that changes every month is a separate skill, taught in the course "Self-employed and freelance: money with irregular income".
Both methods only work if two things are true. First, your fixed costs are stable, so the needs bucket doesn't jump around from month to month. Second, you will not raid your savings account.
Be honest with yourself about the second one. If you know you move money back from savings when your spending account runs low, a method with no category limits will leak. An envelope budget or a zero-based budget will hold better.
Get your spending picture from lesson 1.4 and your lowest normal take-home pay ready. Work out a percentage split and a pay-yourself-first budget on your own numbers. Adjust the shares if your needs are higher than the split allows, then decide which method you will use, or whether you need an envelope or zero-based budget instead.
Work out what a 50/30/20 split and a pay-yourself-first amount would look like on your take-home pay, and note which one your spending picture could actually support.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).