3 budgeting techniques every young adult can pick up

18 Jul 2017 

​​It's only been a week since payday, but you're already looking back and wondering where all your money has gone – we've all been there before. Managing your finances can be challenging in your first few years of work, so here are 3 budgeting techniques to get you started.

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1. Zero-based budgeting 

In zero-based budgeting, you manage your money as though you are an employer managing the workers in your company.


Every dollar you earn is assigned a role to perform, so there is no wastage of any resources you have. This also allows you to monitor ahead of time how much you are spending on each category, and track if you are staying on task.


For instance, you may have allocated $500 for food expenses and $200 for savings. If you decide to save more than $200 this month, you will then have to reallocate some of your money from a different category.


2. Reverse budgeting 

If you have certain financial goals to hit, reverse budgeting is the way to go. A portion of your monthly income is allocated towards these goals before you are free to spend the remaining amount. With this, your financial goals will always take priority and you are certain to achieve them in due time.


Commonly known as the "pay yourself first" method, reverse budgeting also forms the basis of our CPF savings system. A certain percentage of your monthly income, depending on your age, is automatically contributed into your CPF accounts to ensure your housing, healthcare and retirement needs are provided for.


3. Snowball budgeting 

Have a number of debts to pay off? Snowball budgeting can help you clear them steadily.


The first thing you will need to do is arrange your debts according to their sizes. After this, determine how much of your monthly income you can dedicate to clearing these debts. Make minimum payments on all of them except for the smallest debt, which you should pay as much as you can.


As soon as the smallest debt is cleared, the money that would have originally gone towards paying it would now go towards the next smallest debt. This continues and builds momentum until all your debts are cleared.


Information accurate as at 18/7/2017 

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