You will be able to plan the stages from a starter buffer to a full emergency fund.
Open your banking app and find the standing instruction that pays your most expensive debt each month. Note the amount and the day it goes out. When that debt is cleared, the only thing you will change about that instruction is the account it pays into.
The day your last credit card payment clears is a good day, and also a risky one. The money that used to go to the card is now free. If you don't give it a destination, it usually drifts into dinners, shopping and weekends away within a couple of months.
Once expensive debt is cleared, send the money that went to it to your emergency buffer, on the same day and through the same standing instruction. Change the instruction's destination to your buffer account and keep the same amount and the same payday. Leave the rest of your budget as it is. You're already used to living without that money, so if the transfer keeps running to a new destination, your spending can't absorb it. When a later debt ends, add its repayment amount to the buffer transfer too.
Wei Ling, the course's example person, is following the plan from lesson 5.4, which sets out her month-by-month timeline. All of her figures are invented for the example. Her starter buffer of S$1,000 has been in place since month 2. She clears her credit card in month 8 of her plan. Until then she had been paying S$570 a month to it.
From month 9, the same S$570 goes to her buffer account on payday. She changes nothing else in her budget. Her personal loan carries on at S$300 a month until month 18. When the loan ends, she adds that S$300 to the S$570, so from month 19 her buffer grows by S$870 a month (S$570 + S$300 = S$870).
A full emergency fund is often several months of essential costs. If you're starting from S$1,000 and your target is over S$8,000, the target can feel too far off to care about. Milestones break the big target into stages, and each stage counts as a real achievement. A common set is one month of essential costs, then three months, then the full target if it is larger than three months.
Each stage protects you against something bigger than the last. One month covers a large repair, a hospital excess or a short gap between jobs. Three months covers most job searches. The full target covers whatever your situation needs beyond that.
Every milestone is a multiple of your essential costs: what you would still have to pay in a bad month after cutting every want. These are rent, bills, insurance, transport, groceries, family support and loan repayments. Wei Ling's essential costs come to S$2,055 a month:
rent S$950 bills and premiums S$135 transport S$110 groceries S$260 support for her parents S$300 loan S$300
Her milestones are S$1,000 (her starter buffer), S$2,055 (one month), S$6,165 (three months, S$2,055 x 3) and S$8,220 (her full target of four months, S$2,055 x 4). She chose four months because her parents rely on her monthly contribution, so losing her job would hit them as well. When her loan ends in month 18, her essential costs fall by S$300. She leaves her targets as they are, because a slightly bigger buffer costs her nothing and she prefers the extra margin.
How many months your full target should cover depends on how steady your income is, who depends on you, and how long it might take you to find another job. The Singapore personal finance system, end to end, module 3, Build an emergency fund that fits your life, takes you through that choice step by step, starting with lesson 3.1, How big your emergency fund should be. If you haven't set a full target yet, use three months of essential costs as a placeholder and come back to it later.
The buffer has two jobs that pull in slightly different directions. It has to be quick to reach in an emergency, and it should stay out of sight day to day so it doesn't gradually turn into spending money. Keep it in a separate account you can move money out of within a day, but that you don't see every time you spend.
A common setup is an account at a different bank from your everyday one, with no debit card attached. A transfer can still reach your spending account the same day, but the balance isn't on your main banking screen when, for example, a flight sale comes up.
Keep the buffer in a savings account or a similarly safe deposit. Don't put it in an investment that can fall in value. You can check whether a deposit is covered by the Singapore Deposit Insurance Corporation. The Singapore personal finance system, end to end, lesson 3.2, Where to keep it: safe, liquid and separate, shows you how to check, and explains what does not count as an emergency fund.
Before you go further, use your budget to work out your own essential monthly costs, because every milestone you set is a multiple of that figure.
Write your buffer milestones from starter amount to full target, with the essential monthly cost each one is based on.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).