Everyone knows that you should start investing early. We’ve seen the advertisements for it, we’ve had everyone around us talk about it. But where does the money to invest come from?

For most of us, the bulk of this money comes from our salaries from our daily jobs. But then, we have things to pay for and things you want to buy. So how does one find the money to invest? By simple budgeting, of course.



Just as how your expenditure will vary from month to month, so does your income.

Figuring out just how much you have each month is more than just putting down the number you have after taking out CPF from your salary.

Your month includes all income that you get in that particular month. If you get a nice little bonus from your job or some birthday money, include it! Of course, if you find 2 dollars on the floor, feel free to buy a drink with it instead.

If you have extra money that you’re not accounting for and not using it right, then you’re not budgeting effectively!


The 50-30-20 Rule

Whatever you think of Elizabeth Warren, this rule she popularized is mostly good advice. Or at the very least, it’s a good place to start.

What this rule mostly means is to budget 50%, 30%, and 20% of your monthly income for necessities, wants, and investments/savings.

50-30-20 rule graphic

Picture from: https://bankonus.com/

The 50%

Do all of us really spend 50% of our income on necessities? I don’t know 🤷🏻‍♂️

How much you actually budget for your necessities depends on your own situation. For those who live at home and can save on rent, this part will probably be lower. For those who have to give more to their parents, this part will be larger.

Whatever the case, this “50%” should always be your priority and shouldn’t be callously sacrificed. 

Pay down your debts, make sure your bills are settled, and ensure that you have enough to eat before buying a Switch just to play Animal Crossing!


The 30%

Honestly, the 30% is usually going to be higher because why else are we all working for, right!? 

Well, as long as you have your necessities settled, what’s wrong with spending a little more on yourself sometimes?

As humans, we all have different likes and hobbies that we enjoy. Some are cheaper than others, like watching movies, while some might be more pricey. 

Whatever it is you enjoy though, you should make an effort to work it into your budget, even if it’s expensive and people don’t understand why you love it as long as you’re not sacrificing necessities for it!


The 20%

The final 20% budgeted for savings and investments should really be higher but I think most people already get why this part is important.

The importance of being prepared for black swan events and making sure that you have enough money in cases of emergencies have been very clearly highlighted by the COVID-19 situation so there isn’t really a need to talk about it that much.

And with investment advertisements being shoved in our faces all.the.damn.time, I think we get that we should start investing unless we want to work until we’re 80 or something. 

Common Mistakes

Well for one, not having a budget. Secondly, following their budget right down to a T.


Being Inflexible

Just as every month of your life is different, so will your expenses be! You might have to spend a bit more in January because your earpiece broke or you might spend less in March because COVID happened and you can’t travel anymore.

Be flexible and adjust your budget accordingly to your needs and wants for the month!


Mental Accounting

Why do most lottery winners go bankrupt after a few years? Because they treat their lottery winnings differently from money they gain from their income.

On a smaller scale, most of us are guilty of this, especially when the year-end bonuses come around. Splurging on something that we usually wouldn’t get is fine but spending your entire bonus just because it’s a bonus might not be the best idea.

Any amount of income you get is money that should be factored into your budget properly and used smartly!


Sticking to The Same Budget Forever

If you find that you’ve budgeted too little for your necessities for 3 months straight, then maybe it’s time to revise your budget.

Budgets are guidelines that you set for yourself. They are meant to help you plan for the future while making sure that you are happy enough in the present.

This means adjusting your budget whenever necessary so that you can find the perfect balance between both!


Not Asking for Help

Now of course, even if you have someone else plan your budget perfectly, it’s not worth anything unless you follow it.

But if you have trouble following a budget or making one, then it might be a good idea to speak to someone who knows what they’re doing. 

This doesn’t have to be financial advisors, it could simply be your parents or a friend who’s been working longer than you have. 

But if you’re looking for an unbiased opinion, then perhaps someone on Kalpha could help! Financial advisors have a stigma attached to them, that they always want to sell you something. 

But on Kalpha, you can rest assured that we do our best to weed out users that do not have their Learners’ best interests at heart!




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