Use Envelope Budgeting To Manage Your Money In Just 3 Simple Steps

According to DEBTSteps.com, envelope budgeting or envelope system is a popular way of maintaining a budget. It starts by storing the cash into separate categories of household expenses that are allocated in separate envelopes.

1. TRACK YOUR LAST MONTH’S SPENDING PATTERNS

One of the first steps that you have to take is to analyze your spending patterns, variable expenses and fixed expenses (i.e., monthly electric bills).

Fixed expenses remain the same every month (e.g. Hand Phone Plan, or HDB Rent). Variable expenses include food, entertainment, clothing, and other expenses that may change every month or year. The challenge now is for you to choose on which expenses you can reduce.

2. DEVISE A BUDGET PLAN

Recording all your expenses, no matter how big or small they may be, can help you plan your budget wisely. Categorize your expenses 7 or more sections such as Rent, Utilities, Electricity, Groceries, Gas, Entertainment, Savings, Loan, Childcare, Tax, Travel, etc.

For example if you are Fresh graduate living in your parents’ house and you earn S$1600 a month. Allocate your money with the fixed expenses first.
Rent- S$700

Utilities- S$150

Electricity- S$80

Student loan- S$100

Fixed Expenses Total: S$ 1,080

Then your variable expenses…

Savings- S$170 (transfer it to your bank account)

Groceries- S$100

Travel- S$100

Entertainment-S$100

Emergency- S$50

Variable Expenses Total: S$520

3. PUT YOUR INCOME IN SEPARATE ENVELOPES

Image Credits: wikihow.com/Do-Envelope-Budgeting

Image Credits: wikihow.com/Do-Envelope-Budgeting

Use your marker to assign each category to each envelope. Use whatever size is best for you. It shall be able to fit easily in your purse or wallet. Follow the budget plan and allocate your money accurately. Spend only from the designated envelope and stop spending once you’ve emptied it. This practice of discipline will help you save a great deal of money.

Watch this simple video tutorial of the envelope budgeting or envelope system by NCNBlog:

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How to start the year by saving

Saving

Although money can seem occasionally to be easy in Singapore, many people are still concerned with saving their wealth for later. The simplest way of earning money is still saving money – this principle will also hold for 2015. No matter what position on the social ladder one is sitting on – savings and earnings are going hand in hand. The international stock market appears currently to be in a better condition than many experts had expected a few years back. Global indices are rising and markets seem stimulated, but they are hungry for more. There are, however, continuously increasing expenses, such as the recently raised credit card interest rates in Singapore. In order to stay financially on track and pay off debts on time, one should start into the New Year with certain saving strategies. When wanting to save money, one should be aware of the fact that mere saving is not effective enough. The combination of saving and investing will not only earn and save money, but also protect its value.

As the credit card interest rates in Singapore have been raised quietly in the end of last year, the hard-earning citizens have to find new ways not to loose more money. Paying the minimum rate of your credit card bill every month, will leave you in the long run with more debt than before. Even paying more than the bare minimum will not do the trick. If the full payment is not made, the interest rates will every month calculate a new and higher debt, due to the interest rate of the month before. This accumulated interest rate can let your debt rise quickly higher than initially planned, if one is only paying the minimum rate or slightly more. The debt will grow proportionately until the full amount is paid back. As the credit card interest rates have been raised about 1%, the debt is even bigger now. Therefore, it is important to pay off the credit card bill in the end of every month. In case there is no other option than stretching the credit card, one should consider a 0% interest instalment payment plan in order to save money. The credit card interest rate can be very tricky and quickly become a vicious circle that is getting increasingly harder to break out of.

Another option for saving money in 2015 is a saving account. An extra amount on the bank account can easily become a save investment. Let the money work for itself. Many experts presume that the saving account interest rates in Singapore will go up. Some banks already have some interesting offers. OCBC has a 2.35% Bonus & Saving Account offer that not only saves your money, but also makes you some more. If one has S$10000 or even more than that, one could potentially get a high and profitable interest rate for the OCBC savings account. The interest rate will go up if no monthly or quarterly withdrawals are made. The very basic rate is only 0.05%, which isn’t much at all and frankly won’t do much to your savings. However, without monthly and quarterly withdrawals, but with additionally added funds of S$10000, one can get a rate of 2.35%. But there are also other banks offering interesting rates. One other example is the 2.08% DBS Multiplier Programme. Extra amounts of Singaporean dollars that won’t be needed throughout the year, should be therefore stored on a savings account. One should watch out for changing rates throughout the year and check with one’s bank for specifics.

One should check its options though. Purely saving without investing might not do the trick. Many Singaporeans are however very interested in long-term saving programmes, such as emergency funds. If one was to save S$10000 in a year, one does have a substantial sum. However, this amount of money will surely not be the same in a decade. The inevitable inflation will decrease the value of the S$10000 eventually. Saving accounts should therefore not be the only long-term option for one’s money. Saving account can be an ideal way to save large and momentarily unneeded amounts of money. Storing money on a savings account is, however, only advisable and beneficial, if that particular amount of money will remain for a long time on the saving account. If there is a chance that one might need the money throughout the year for some reason or another, the savings account isn’t the proper place to store it. Frequent monthly or quarterly withdrawals will reduce your interest rate drastically. Furthermore, in order to protect you money from losing its value due to inflation, one should be investing as well. The combination of investing and saving is ideal.

Another trick to start 2015 by saving some money is connected to one’s car insurance. Firstly, it is advisable to check the individual policies of the car insurance. Often there are unnecessary policies that one can get rid of. Checking the car insurance’s polices one might discover that one is already covered for the same event twice.  Reducing the policies to the bare minimum can help to save a lot of money. Furthermore, there are more tricks to save money with the car insurance. Increasing the deductible of your car insurance will course the premium rate of the insurance to go down. This saved money can be immediately put into a saving account and eventually used for another purchase. When wanting to buy a new car, one could start getting the money for it together a year or more before the actual purchase. Reducing one’s car insurance through different means will save money that can already finance the new car. When having finalised the purchase, one should immediately double check the insurance and eliminate all unnecessary policies. This way one can save straight from the start.

Starting the New Year by saving money isn’t the most difficult and unrealistic venture to do, but it is the combination of saving and investing that it actually makes it profitable and valuable for the individual. A saving account can be lucrative, but only if it is used properly. Therefore, one should be sure to invest and save at the same time.

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5 Ways to Teach Kids About Saving Money

Money gives people, of all ages, the decision-making opportunities they need. Educating your kids to make wise money decisions earlier on will affect their finances in the long run.

The most important thing you must do is to make saving money as fun as can be. Here are 5 Ways to Teach Kids About Saving Money…

1. MONEY INTRODUCTION

Once your children can count and discriminate, introduce them to the different denominations of money. Take a conscious effort in providing them information about money and savings and be ready in answering their countless questions.

Watch this cool way to introduce money and its values:

2. SET UP BUYING GOALS

Setting up realistic goals is the foundation to learning about the value of money and saving. Ask your children what they want to buy with their money. For instance, the toys, video games, and stationery items are the things they shall save money for. These goals will help the children learn to become more responsible.

3. USE A PIGGY BANK OR A MONEY JAR

After identifying the short-term goal, provide your child with a small piggy bank or a money jar where they can fill up their savings with. Have your child draw the picture of the specific toy on the side of the piggy bank or the money jar. Through this, they will be motivated to get what they want.

You may also want to help your child understand that some items will take longer than others to save for. For these long-term goals (e.g., going to Universal Studios), provide them with a bigger money jar.

4. ENCOURAGE SAVING

Be the good example to your children by putting some of your coins into their money jar. Since most young children want to be like their parents, seeing you do it will provide them with inspiration to save.

Aside from this, you may give them money in denominations that encourage saving. For example, give your children a $6 allowance that consists of three 2 dollar bills. Tell them to set aside $2 for their money jar.

5. PLAY GAMES INVOLVING MONEY

Image Credits: Rich Brooks via Flickr

Image Credits: Rich Brooks via Flickr

As I said, the most important thing you must do is to make saving money as enjoyable as can be. Play games that teach children about financial concepts. Such games include Monopoly and The Game of Life. They will not only have fun but it will also shape their money management skills.

Sources: Money Crashers and Family Education

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5 Expert Money Saving Tips

It is the beginning of a new journey entitled “2015”. There is a long way ahead and the worst is behind us. The future looks so much brighter! As you lay out your plans for the New Year, why don’t you take on the important goal of saving money?

Here are 5 Money Saving Tips from the Experts

1. GET POSITIVE MOTIVATION FROM FRIENDS AND FAMILY

Bob Weinschenk, the CEO of “SmartyPig.com”, believes that saving money is a group activity in many cultures. By sharing your financial goals to your trusted partner, family or friends, they can be able to support you and even donate a few bucks. Having someone by your side that share the same goal will surely motivate you to continue this positive saving behavior.

Image Credits: Ken Teegardin via Flickr

Image Credits: Ken Teegardin via Flickr

2. TAKE THE SHOPPING DEALS ONLY IF YOU NEED THE PRODUCT

Donna Freedman, a writer for “Get Rich Slowly” and “Money Talk News”, said, “Coupons plus sales can easily tempt you to buy something you don’t truly need”. Do you really need to buy a bulk of toothpaste just because you have coupons and vouchers for it? Simply, when you see an item on sale think deeply if you will purchase that item on its original price.

3. LIVE WITHIN YOUR MEANS

Purchase within your means by balancing what you need and what you want.

Miranda Marquit, the founder of “Planting Money Seeds”, highlights that by knowing that you have enough purchasing power may turn into comfortable spending without keeping the best options for your finances. So, just because you can afford something, does not mean that you should buy it.

4. THINK TWICE WHEN BUYING PERISHABLE GOODS IN BULK

Jeff Yeager, the author and host of “The Cheap Life”, said “it’s not a good deal if it goes bad before you use it”.

This is why he stresses the importance of making a shopping list and sticking to it.

5. LASTLY, LEAVE YOUR CREDIT CARDS IN THE HOUSE

Stacy Johnson, the President of “Moneytalksnews.com”, said, “we’re more likely to overspend with pieces of plastic than real money”. Personally, when I shop, I only carry cash that I am willing to spend so I won’t go over budget. This prevents impulse buys.

Sources: Reader’s Digest and GoBankingRates

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How to check if your savings are safe

How to check your saving are safe

When making an investment, one wants it naturally to be safe. Most investors make their moves only with secure projects that seem unshakable. Some even prefer investments that potentially generate less but are secure than investing in a something that is shaky but could be highly profitable in good circumstances. Surely there are investments, which are stable and generate a favourable income. However, as the international market grows increasingly interconnected, more and more investments and business areas can be effected by daily fluctuations and financial breakdowns. There is one question that rises – how can one be sure that one’s investments are safe?

When the international housing bubble erupted, plenty of people lost their money. However, many more questioned whether their investments were safe or were as well danger. These questions aren’t easy to answer, as obviously each area of investment is different. However, there are a few things to be kept in mind. First of all, the location of your investment is key. It can depend on the country whether your investment is protected or not. For example, if you have savings in the UK, you are covered up to £ 85.000. In case your bank goes bankrupt or fails, your savings are covered up that amount of money. This is however not straight forward, as not all banks in a country are regulated by the same. If you have obtained an account at a foreign bank, you may want to check whether your account is also regulated in your country. Foreign banks may be subject to the controls and regulations of the country of origin.

Although banks have created protections for the accounts of their costumers, it doesn’t mean that each account is safe. In most cases one has a certain protection sum at one particular bank, not for each account at the same bank. If you have a larger amount of money deposited within several different accounts at one bank, it is very likely that one is only protected for a total amount. If one demands better security for the funds, one should shift the savings to different banks. Having one’s savings distributed among the accounts of different banks, one feels surely safer and less paranoid, especially if one fears the next global economic breakdown coming soon.

Having understood these protections schemes and knowing where your money and investments are located, one has taken the very first step to save one’s earnings. For obvious reason, different countries and banks have also varying protection programmes and regulations. Having savings distributed among several accounts, it allows you to freely move the money when needed. In the case of an international crisis or any similar event, the accounts in the various countries are differently affected. This provides the chance to move the funds as desired.

However, one should also know which banks are vulnerable and which aren’t. Keeping one’s funds within the FSCS, the Financial Services Compensation Scheme, one can provide further protection and security. Furthermore, it is important to know who owns the banks in which you have deposited your money. Your bank might have been bought or is owned by another superior bank that could be more vulnerable. Therefore, one should be aware of who owns what bank. Changing owners within the banking system isn’t an uncommon procedure and can sometimes happen faster than one tends to believe. In case you are for some reason not able to distribute your money among different banks, you should consider a joint bank account with your partner, as those are usually covered to higher amount. As the amount can vary though, you should check for the details with your bank.

Many people prefer to keep their money in an offshore saving account, as the interest rates are there significantly higher as with normal banks. Considering the collapse of the Icelandic bank Icesave in 2007, one has a very recent example of large amounts of offshore money that can disappear extremely fast. In any case, banks often don’t require the account holder to live in the country in which the account is situated. Therefore, it is advisable to research the country with the personally most favourable conditions. As different countries have varying amounts and limits that are protected, one can choose and customise one’s own saving accounts around the world. Wherever you decide to keep your money the £ 85.000 limit is a good guideline for an account. If this limit seems for some reason implausible, than one should try to separate one’s saving somehow. Although the limit of approximately £ 85.000 cannot be met, any cut and division will be a further protection.

If one is really scared of another collapse like in 2008, then one should really obey to this limit. The reason is that the governments, which mostly have to deal with the consequences, will prefer a bailout than payouts. Therefore, the FSCS compensation scheme protects certain amounts, but nothing beyond that. In most cases, the governments cannot afford that a bank goes bankrupt. It is often cheaper and more convenient than if a failed bank is saved with public tax money – even though this is not understandable to most of the population.

Another alternative is state-owned banks. However, not every country has this kind of luxury. One has often the chance though that one can use a state-owned bank in a country, which one isn’t living in. State-owned banks have however the advantage of being the first one to be rescued in the case of a heavy situation. If one has money abroad with a state-owned bank, one can relax in most cases. Surely not all state-owned banks are the same. For obvious reasons one should choose a democratic country as well as a bank that really is regulated as a state-owned bank according to international standards instead of a few questionable individuals.

Personal savings and investments surely are tricky issues. Although the international market is more vulnerable than ever before, it doesn’t mean one needs to submit one’s savings to luck. The distribution of wealth between several different accounts is often a stable solution.

 

* (In Singapore, we are protected by the Singapore Deposit Insurance Corporation, or SDIC, of up to S$50,000)

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