Not sure how often working adults tracks their salary flow, but I do it each month. More often than not, I hear people complaining they do not know where their money have gone to mid-month. Whether it is a mindmap, flowchart or even excel spreadsheets, it is a simple habit that is both useful and long-term positive implications.
Some people depend on next month’s salary to cover for this month’s bills. Others depend on their “expected” bonuses to pay annual insurance premiums or blow it away on extravagant holidays.
This is how I have done it:
Tier 1 Pay-Yourself-First. I am an advocate of setting aside fixed sums of money in my investment and savings fund. You build your nest egg to secure your future and create a cushion for financial emergencies, unexpected medical expenses or loss of job. Without savings, many people do experience a large amount of stress.Why not take care of your future first? Expenses are scary. If you spend your money first before saving up at the end of the month, you may find it hard pressed to do so.
Tier 2 Fixed monthly expenses. I scan through the big ticket items that is a must to settle each month. This includes parents allowances, mortgage loan, childcare fees and taxes (income and property) which I have opted for monthly GIRO. After this is done, I can breathe much easily for what is next.
Tier 3 Ad-hoc expenses. It is now finally time to look at the smaller ticket items that varies each month or that occurs annually / one-off. While I take the public transport to work, a car is still useful as I make cross-island trips during the weekend for leisure. What is unique about Tier 3 is that the amount and frequency of occurrence is dependent on how much is left throughout the month. If the amount is dwindling for instance, I would probably spend more meals at the hawker centers instead of restaurants or even food courts.
Tier 1 CPF contributions. My CPF monies are my monies. 37% worth of my salary being accumulated each month is alot of money, and if channeled wisely, will go a long way in navigating my retirement at age 65.
The above flowchart that I have done is a simple one for me to update and track. In reality, it is more complicated (which may included bonuses, staff benefits etc.) than that but it is good enough.
To do well, you need to be aware of where your dollars are going. Keeping track of your salary is the first step to building this understanding and fulfilling the financial goals that you have set in life.