Sunday, September 20, 2009

Keeping track of my Budget

Many people monitor their cashflow by looking at how much cash they have in their POSB account whenever they withdraw money. If their POSB Savings is growing, it probably means positive cashflow. If its not, then they may only complain that they are not earning enough.

This group of people will always feel that their POSB savings don't seems to grow and whenever the amount gets larger, its time for some big ticket expenses and the POSB savings comes back to a small amount it was originally 1 year ago.

For me, I keep track of my budget by using my monthly Balance Sheet and Cashflow Statement. It is actually a very simple excel spreadsheet which I file under "Adrian's Money" in My Document folder.

My Balance Sheet
* I only have Cash and Invested Assets in my balance sheet.
* Personal Use assets and CPF are left out of the picture. As I don't have specific debts except mortgage and I pay all my credit card bills on time, I also leave debts out of the picture.
* I make use my internet banking to check the balances of all my bank accounts and key all the figures in my assets positions every 1st or 2nd of the month.
* I will also log into the SGX and i-fast account to check on my investments.
From my balance sheet, I know very clearly if my savings and investments are growing.

My Cashflow Statement
Its pretty tough to track cashflow but I have a few tips to keep things easy for you.
1) I giro link all my fixed expenses such as insurance premium, regular investments, transportation, phone, utilities, etc.
2) I normally use my credit card for entertainments such as shopping, movies, dining, club memberships, etc. I earn some points yet able to monitor how much I spent for shoppings.
3) Only one savings account will be used for above 2 purposes so that I can print my monthly statement every first of the month and key the appropriate figures into my excel spreadsheet.
4) As for food and business expenses, I normally uses cash. I will also make use of the 2 slots in my wallet. The first slot of cash is strictly for food and client's meeting where I withdraw an average of $100 every week and the 2nd slot is for anything else that need cash.
5) If there are extraordinary expenses such as wedding dinners and holidays, etc, I'll write it down on my notice board and record them appropriately in my cashflow statements.

It is impossible to be exact with such tracking system and its hard to track that few dollar and cents. Hence I have that last column called "Unaccounted Cash" in order to reconcile my month end savings account figures with the following month opening. I'll try to keep this unaccounted part as low as possible.

The Discipline
Budgetting is about taking some discipline. It normally takes me about 30-40 minutes to complete this exercise every 1st or 2nd of the month and I feel that I'm in control of my finances. I'm a frugal spender and disciplined saver but surely not a stingy person. I still treat friends or colleagues for coffee or tea or good dining once a while. I try to delay some of my wants and increase my regular investments whenever I ready.

I should be earning below a typical Singaporeans wages for my age but I believe that I'm above average in how I manage and monitor my finances. I hope to help impart such discipline into my client's life and this is my job as a Financial Planner. I'm not the best or most intelligent planner and I'm still learning from others. I was quite sad to hear others commenting that I'm incapable to help other just because I'm not as rich as them or just because I'd recommend Unit Trust as part of their investment portfolio.


Anonymous said...

Wah pianz. Where got so much time to monitor money like you. You expect others to be siao on like you ah?

la papillion said...

Hi adrian,

Admirable effort :)

I started tracking all my expenses on a daily basis, meaning that I record every item that I spent on the day in my hp and update it onto an excel sheet. The excel sheet is broken down into food, transport, household expenses, entertainment etc...basically into categories so that I know exactly how much I spend on each.

I wanted to do it for only 2 months, but since I started, I've been doing that for 2 whole years already. It only take less than 1 mins to update it daily.

It's not much effort, and you should try it too. It's impossible not to improve something if you track it closely.

Thomas Zhuo said...

I think as a financial planner, it is really important to set a good example by adopting a budget and then recommending it to a client. Sometimes "it's not how much you make, but how much you keep that matters". So good job and keep it up!

alex said...

Dont understand the comment above.

Keeping track of personal expenses and cash flow is a commendable thing to do. People who cant even find the time to do that normally cant find extra cash to spend at the end of the month or the year.

Aspire said...

Hi there!
Just wanted to say I like your posts. They're very informative. I also admire your want to improve people's lives. I'm in the midst of setting up my own blog for the same reason. However, as it's in the new stages, I could use some advice or comments. Pls feel free to pop by. It's

Well all the best! And thanks for the information.

Anonymous said...

Hello Adrian

I came across your blog after reading your comment in tankinlian's blog on the SAIL.

I read your post on budgeting, and i offer my views as below.

It's very difficult to discipline oneself to spend 40 minutes EVERY month logging in all the expenses details in a spreadsheet!!

Here is an alternative way which I practise for the last 3 years.

Firstly, it has to be assumed that your expenditure is less than your income each month.

Secondly, analyse only the basic statistic of bulk expenses and bulk savings each month. Don't waste time figuring how much spent on Guo Teow mian or eletctricity costs each month. Focus on the grand total expenses and try to maintain that steady.. that is the golden rule.

The practical part goes like this.
Have a baseline value for POSB account balance, let us say, $5,000. Every month, your salary goes there and your spending also comes out of that account. At the end of each month, your account is supposed to increase beyond 5,000 (as per assumption 1). Transfer any balance higher than 5000 to a separate account (maybe OCBC etc) - that is your real savings. That is at the start of each cycle you must have exactly 5000 in the POSB. You just monitor and make sure the figure in your OCBC account (the one with the excess above the base number) either keep constant or increases, and you adjust total spending to meet that goal.

Special treatments: for yearly or quarterly payments such as condo maintenance fees or road tax, do ACCRUAL accounting, spread out all the payment on per month basis, and make a deliberate deduction each month from the POSB to pay into your own Accrual account (separate account, maybe UOB bank etc). When the time comes to pay the road tax draw it out straight from the Accrual account, this no longer appears as a big blip in your expenditure for a particular month.

To maintain sense of real expenditure each month, I also accrue all visa payments (e.g. $600 to buy a TV) directly to the accrual account first, and all visa payments are immediately settled the following month, from the accrual account. In this way it also makes sense to buy on instalment basis because on your balance sheet you are actually paying one shot to your own accrual account first, therefore during any month you have good control of your exact expenses, and you will never have the visa company chasing after your "real" POSB account money.


Khiat Han Hwee Adrian said...

Hi Rex,
Thanks for sharing your method on budget tracking.
Its the discipline and habit that counts in the end if we want to keep track of our cashflow and budget plan.
I enjoy that half an hour to check all my statements on the 1st or 2nd of the month. Its just become a habit and I don't find it tough. Just like La Papillion who did it on a daily basis. I'm sure he don't find it tough too.