We entered 2021 hopeful, but cautious. Hopeful because there’s a vaccine on the way, and things were slowly starting to feel normal again. Cautious because if there’s anything we learned from last year (other than just how important mental health and hygiene are), it’s to always expect the unexpected.
We were given less than two weeks to revel in the glow of a new year before going back into lockdown. Businesses were barely surviving, unemployment rates were rising, and mentally, everyone was trying to “hang in there”. Now here we are, two weeks later and a week closer to another month. As relieving as pay day is, it has recently left some of us wondering if it may be our last, or the beginning of pay cuts.
If you haven’t already, it’s time to start keeping track of your finances, and prepare for any uncertainties. Taking charge of your expenses can seem intimidating at first, but it will allow you to adjust your spending habits for reduced incomes, and plan out your savings in case of an emergency. Here’s how you can start tracking your finances to cope with the current climate:
- Organize your finances
First and foremost, you’ve got to face the ugly truth. Gah! Head to your bank account and download your most recent bank statements. Start by separating your expenses into two categories: Fixed Costs (Needs) and Variable Costs (Wants). Your fixed costs are essential recurring costs, such as rent, car loans, phone bills, groceries – these are all necessities. Variable costs are those you can do without, like eating out, buying clothes, subscriptions and memberships.
- Develop a budget
Now that you know how much your fixed expenses are, you can calculate how much you’re able to save, and spend on variable expenses. Divide the spendable amount by weeks, or days, to give you a better understanding of how much to spend. We recently found out that a majority of our followers don’t have a budget because they don’t believe they have enough money – it’s not about having excess cash, it’s about tracking your finances and making sure you spend within your means. You can learn more about budgeting from HeyAlfred, a personal finance app, here.
- Create a table
Get into the habit of tracking your finances daily – it makes it easier for you to remember what you’ve spent on. A spreadsheet will allow you to see how much money you have left to spend, and help you decide which variable costs to reduce or eliminate. You can follow our example below:
Email us at email@example.com for the editable and automatically-calculated template!
We’ve connected with HeyAlfred to get the 411 on finance!
You know that feeling, when it’s almost the end of the month, but payday still seems so far away – you start mentally calculating how much you’ve spent and begin regretting that Friday night out or the time you #treatedyourself a bit too much during an online shopping spree. Some may even find it hard to sleep because their bills keep piling up, but believe it or not – for most of our adulthood, our anxiety surrounds our finances.
This is where budgeting helps.
Does the word ‘budget’ make you clench your teeth like that Chrissy Teigen GIF? You’re not alone. It does seem quite restrictive and requires too much commitment, like, “I’m just not looking for a relationship right now”.
But when you budget the right way, and customise it to your own personal choices, a budget can actually give you the freedom to spend without guilt – you won’t have to constantly worry about how the money you splurge on iced coffee could have gone to your credit card loans instead.
It’s a simple guideline for where your money goes every month, so you can enjoy your life even more. Woo!
What is a budget?
A budget is essentially a spending plan for your money – for whatever goal you have (saving for a holiday, paying off debt, early retirement etc), a budget can help you achieve it.
Having a plan will ensure that you have enough money to cover the things that you need, and are important to you.
Note: never think you don’t have enough money for a budget! If you start budgeting the second you get your first pay check, you’ll be able to build a habit that will last your entire career.
How do I create a budget?
One of the most popular ways to budget is the 50/30/20 method:
- 50% of after-tax income on needs (groceries, transportation, housing, utilities, insurance)
- 30% of after-tax income on wants (eating out, hobbies, shopping)
- 20% of after-tax income on savings and investments
However, personal finance should always be personal – like skincare, the most common method may not work for you as an individual. So, if you can’t currently save 20% of your income, try starting with 10% or 5% and grow it from there.
The best thing to do when developing your budget is to test out different ways and then tweak them to suit your own lifestyle and goals.
How do I implement my budget?
First, start by tracking all of your expenses for the previous month – write down everything you’ve spent on or use an app like HeyAlfred to help with the tracking.
This will provide you with a better understanding of your spending patterns and habits: are you spending too much on something you don’t need? Are you putting aside money for savings every month? Don’t be afraid to look at your own spending – the more aware you are, the faster you’ll be able to make better decisions for your future.
Next, set an amount for each category of spending (food, transport, bills, rent, gifts, subscriptions, entertainment) and from there, pinpoint the expenses you can do without.
Try out your new budget and don’t stress if it doesn’t work out the first few times! Maybe you find yourself constantly overspending on groceries (we, too, get carried away in the snack aisle) – is there anywhere else you can cut down on so your grocery budget can be increased? Adjust it accordingly.
How do I stick to my budget?
Consistency is key. Don’t set a budget that is too strict – start small and be kind to yourself. If you’re used to spending RM500 on eating out every month, it would be unrealistic to cut it down to RM0. While it’s good to challenge yourself, don’t set yourself up for failure either.
To be consistent, you also have to enjoy the process, so put aside a budget for the things you like too!
Tip: Automate things like paying your bills – you can also automate your weekly savings via the HeyAlfred app.
How can HeyAlfred help?
HeyAlfred is a personalised financial tracking app that helps you save, budget and track your spendings.
It automatically tracks all of your spendings (across different bank accounts) and displays it on the dashboard – allowing you to see what you spend on by category. From viewing all your spending categories in one chart, you’ll be able to identify your habits and notice when you over spend.
HeyAlfred also dishes out budgeting and saving tips to help you stay on track of your financial wellness journey. From the data based on your personal spending, the chatbot Alfie will let you know when you’re close to going a little over budget.
The latest version of the app lets you automate your savings (via their partner Pod), so you can easily save for any goal you have – there’s nothing like a well-planned savings goal for your next big adventure (or purchase) to reward yourself with.
The COVID-19 crisis has caused an economic downturn with businesses being forced to either shut down or implement cost cutting measures that include pay cuts and layoffs. This has many employees living with the fear and anxiety of losing their jobs.
By creating an emergency fund, you’ll be able to financially prepare for any emergencies, such as unemployment, with a safety net to fall back on. Emergency funds can keep you covered during a time of need without having to depend on credit cards or high-interest loans. If you already have debt, this can help prevent you from accumulating more.
Ideally, an emergency fund should cover 6 months of your expenses, but during pressings times like these – here’s how you can start saving right away:
1. Calculate your expenses
It’s important to know where your money is going rather than wondering where every time you check your bank balance. Go through your recent account statements and create a spreadsheet that shows your daily, weekly and monthly expenses. This will help you understand your financial situation better.
2. See what you can cut out
As we’re not encouraged to eat out and saving travel costs by working from home – put aside what you would usually spend instead of using it to shop online (we know how tempting it is!). Find and cancel any unused paid subscriptions, as well as review your current plans, such as cellphone and insurance, to see if there’s a more cost-effective alternative.
3. Create a savings account
It’s easier to see, and not touch, your savings when it’s kept separately from what you spend. Open a savings account at the same bank or one that has a higher interest rate – it needs to be accessible in case of an emergency.
4. Set a savings goal
Moving forward, set a target for you to save daily, weekly and monthly to get into the habit of saving regularly. You’ll be able to see that even saving RM5 a day can amount to almost RM2,000 at the end of the year! This makes it more encouraging and easier to do.
It’s become more essential to start an emergency fund for both your financial stability and peace of mind. All you need are the right goals and a realistic plan to match!
Wellness is more than skin deep
One of the biggest myths about self-care is that it’s a luxury. Don’t believe the hype. Wellness has been promoted as lavish spa treatments, expensive facial creams and exotic vacations, when in reality, it’s mundane activities like allowing yourself to sleep in on the weekends and unfollowing social media accounts that make you feel bad. Sure it can be pretty pricey to pay for a therapist, sign up for a gym and stock up on healthy food, but financial wellness isn’t how much you spend on wellness – it’s about the wellbeing of your finances.
It’s hard to feel good when your finances aren’t looking good. The stress can even take a toll on your health and unfortunately, some financial situations might make it hard to get help. Don’t beat yourself up when it comes to things you can’t control, but by being more diligent about money management and mindfully spending within your means – you’ll be able to improve your financial health and prepare for a rainy day or emergencies. This is especially the case in today’s climate as we face the economic effects of the COVID-19 pandemic.
Learn to plan better
- Being aware of what you have can truly empower you. Knowing how much money you have in your bank account can help you better manage what goes towards your expenses, such as bills, spend (your wants and desires) and savings – this can ultimately help you monitor your finances and identify how to improve it.
- Decide what your goal targets are for each category and stick to it – it’s better to be realistic in your targets, than idealistic, to make it more achievable.
- Create a yearly budget to track your expenses – there are a lot of tools that can help you with that, which we’ll share in future stories.
Contribute meaningfully to others
Once you have yourself and your family covered, it would be great to consider the community and those in need. You can allocate some of your finances for meaningful contributions (one-off or monthly) to charitable causes that you believe in – whether it’s geared to help those who are underprivileged, raise environmental awareness, find a cure or encourage the advancement of creative industries. The opportunities are plentiful and the choice is yours – go for a cause that reflects your passion and champion it! As Sam Smith’s Money On My Mind goes, “do it for the love – of yourself and others”.