Some Thoughts About Expenses

One of the things that is bothering me recently is the savings increase rate.

For a while now, I have been tracking my personal expenses, and have begun tracking Li Ru’s expenses too.

I differentiate expenses into fixed and variable expenses.

For fixed expenses, here are the various categories:

  1. Phone Bills
  2. Utilities
  3. Insurance
  4. Income Tax
  5. Hair Cut
  6. Mortgage
  7. Family allowance

For variable expenses, here are the various categories:

  1. Meal
  2. Transport
  3. Entertainment
  4. Shopping
  5. Travel
  6. Others

Once you start tracking, you should have a rough idea of how much your fixed expenses is, and they should not differ by much monthly.

Variable expenses, usually do not have a predictable pattern as they are largely disrupted by sudden life plans, such as an impromptu travel plan (travel), a worn out shoes (shopping), birthday celebration outing with friends (entertainment), a housewarming gift for your friend (others).

If you have a high fixed expenses, it will be very frustrating to manage your personal finance. That’s because, with your monthly salary, you have to use that to deduct the fixed expenses, and use the remaining for your variable expenses. After that, you are left with the leftover which you can save up for either a rainy day fund or to invest it.

I’d think the normal fixed + variable expenses for someone in your late 20s / early 30s to be around S$2000 – S$3000. (Mine’s S$4000 a month!)

The rough estimated expenses breakdown for someone in your late 20s / early 30s:

  • Food S$450 (S$15 / day)
  • Transport S$100 (Mostly bus and MRT, occasional grab)
  • Phone bill, Utilities S$100
  • Insurance S$100 (estimation)
  • Income Tax S$100 (estimation)
  • Mortgage / Rental S$500 (per person estimation)
  • Family Allowance S$500 (estimation)
  • Shopping S$100
  • Groceries / Hair Cut / Others S$100

Total: S$2050

Assuming your income is at S$4,000, which is not bad, your take home pay will be S$3200 after CPF.

Your savings per month will roughly be slightly over S$1000 a month, a year of that will be S$12,000.

Might not be able to do much with S$12,000 annually in terms of wealth building, hence I can understand why managing one’s personal finance might be a sian thing to do for some, because whatever he or she do, might not be enough to move the needle especially in the first few years.

What he or she can do is hopefully, increase the salary, or get some side income, and in the short to mid term, increase the savings rate.