You will be able to design a set of standing transfers that run on payday.
Payday is when most good intentions about saving are made, and the two weeks after it are when they quietly fail. The salary sits in one account with the rent, the card bill and the weekend's plans all drawing on the same balance. By the time you think about saving, the number you meant to put away has already been spent on things you would not have chosen over it.
The fix is to make the decisions once, when you are calm, and let the bank carry them out every month. This lesson shows you how to design that payday flow. Lesson 2.4 is where you set it up.
When all your money sits in one account, the balance tells you nothing. S$3,000 might be plenty, or it might be rent, a card bill and your parents' allowance with nothing left over.
Split the money by purpose instead. Most people need three places.
A bills account receives the money for fixed costs and pays them. If its balance is right after payday, every bill is covered, and you never have to check it again.
A spending account holds your day-to-day budget for the month. This is the account behind the card you tap at the hawker centre and on the MRT. Whatever is in it is what you can spend, so a glance at the balance tells you how the month is going.
A savings account receives the saving amount and the irregular costs line from your spending plan. Many banks let you create sub-accounts or label pots inside one account, which works as well as separate accounts and saves you opening new ones.
Use the accounts you already have where you can. You may find that your salary account works well as the bills account, and an older account you rarely touch makes a good savings account.
Schedule the transfers for the day after your salary usually arrives. The saving goes out first, before you have had the chance to spend it, so saving stops depending on willpower at the end of the month.
The timing has one catch. Salaries do not always land on the same date, because of weekends and public holidays. If yours sometimes arrives a day or two late, date the transfers for a day or two after the latest it normally lands, so a transfer never runs before the money is there.
Next, take the bills off your to-do list. Put recurring bills on GIRO or a standing instruction from the bills account: phone, internet, utilities, insurance premiums, loan repayments, town council charges. For rent paid to a person, set up a recurring transfer.
Then deal with credit cards. Set each card to be paid in full automatically from the account that funds its spending, every month. Interest on an unpaid card balance is usually far higher than anything your savings earn, so a single forgotten payment can cancel out months of careful saving. Paying in full by default removes the risk of forgetting.
Before you move money around, read the terms of your main account. Many Singapore bank accounts pay bonus interest only when you meet conditions: crediting your salary, spending a minimum on the bank's card, paying a number of bills by GIRO, or keeping or growing a balance. Moving money out to another bank can break one of these and cost you more in lost bonus than the new setup is worth.
The terms change, so check them on the bank's own product page rather than relying on what you remember. If a condition is at risk, adjust the design: keep the bills account at the same bank, or move the savings to a sub-account there instead of to another bank.
Here is Darren's payday flow, using the spending plan from lesson 2.2 and figures made up for the example. His salary of S$4,200 lands on the 28th in his main account, which he keeps as the bills account because his bonus interest depends on the salary landing there.
On the 29th, three transfers run. S$500 goes to his savings account, S$300 goes to a pot inside it labelled irregular costs, and S$1,570 goes to his spending account. That leaves S$4,200 minus S$500, S$300 and S$1,570, which is S$1,830 in the bills account, exactly his fixed costs. Rent goes to his landlord by recurring transfer, and his parents' allowance, phone bill, study loan and insurance premiums go out by GIRO across the month.
His credit card is paid in full every month from the spending account, because that is where its spending is budgeted. Any tutoring money he earns goes straight to savings when it arrives.
Drawn on paper, it is one box for the salary, four arrows leading out of it, and a few smaller arrows from the bills account to the people he pays. Your own version will have different amounts and perhaps a different number of accounts, but it should be just as easy to read.
Draw your payday flow as boxes and arrows: salary in, then each transfer, its amount and the account it goes to.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).