[23 March] Tips to manage your expenses better

Contrary to popular belief, you DON’T have to be ‘good at math’ to know how to manage your expenses better.

And yes, while you may know some people who just seem to be blessed with good money management skills, managing your expenses is something you can learn and practice. 

When we hear words like ‘personal finance’ and ‘managing expenses’, we might get overwhelmed - these are big, scary words banks use to talk about complicated concepts surrounding money! But trust us, it’s a lot easier than it sounds. The key is to get the basics right, and then repeat it every day until it becomes a second nature habit to you. 

Here are 5 easy tips you can start doing today to manage your expenses better:

• Have a budget

A lot of people never start a budget because they think they have to go through the tedious process of creating an Excel spreadsheet, listing down expenses and crunching the numbers to make sure everything is balanced.

But no, you don’t have to have the skills of a chartered accountant to create your first budget! You can start by setting aside a specific amount for each of your spending category, like:

• Bills and utilities
• Groceries
• Rent/mortgage
• Subscriptions
• Child care expenses
• Emergency fund and savings

Don’t worry if things don’t add up the first time you start budgeting - the point is to keep on adjusting as you go along, find a balanced budget that works for you and do your best to stick to it.

For example, let’s say that you’ve decided on a monthly budget of RM200 for groceries. Test it out for a few months and see if RM200 adequately covers your grocery needs. You can adjust upwards or downwards but bear in mind that any adjustment to one spending category will also affect how you allocate for the others.

Check out Dave Ramsay’s envelope method for a low-tech method to budgeting.

• Track your spending

Small purchases here and there add up, and it is easy to lose track of. Next thing you know, you’re over budget and you can’t really pinpoint where all the money went!

Start tracking your every spending, especially in the first few months when you’re just learning to budget. You can do this by keeping all receipts in a safe place, then adding up the amount at the end of the day, week or month. Categorise the expenses so you can identify which are the spending categories you’re having trouble keeping in check. 

You can also employ the use of expense tracking apps like HeyAlfred (it’s free!), which is hassle-free, secure and has cool features like an expense report that does all the accounting work for you.

There are other methods that you can try – Excel spreadsheet, envelope method, jotting in a spending journal, etc. The point is to use whatever method you’re most likely to stick to.

• Limit your ‘extra’ cash

One tip to managing your expenses better is to LIMIT how much you’re allowed to spend with leftover cash.

Sometimes after you’ve paid off all your expenses for the month, you end up with some extra money (yay you!). This can be spent on fun stuff like having a nice meal out, buying a new pair of jeans etc. 

Set a monthly limit on the amount you’re allowed to spend, for example RM100. So even if you’ve managed to have an extra RM400 in your bank at the end of the month, allow yourself to spend only RM100 on the fun stuff - the remaining RM300 goes straight into savings. 

•  Plan for larger expenses

Let’s say you’ve got a washing machine, one so ancient that it’s no longer doing as good a job as it used to and doesn’t have the cool eco features like the newer models. It might sound like it’s time for a new washing machine! But wait, don’t go and charge it on your credit card so fast! 

If you can hold off the purchase for a bit longer, this is when you want to start thinking about saving up with that goal in mind. Give yourself a reasonable time frame for when you’d like to make this purchase so you can look for the best prices and also evaluate whether the purchase is necessary. This ability to ‘delay gratification’ will go a long way to helping you manage your spending patterns more efficiently. 

More importantly, when you save up for something and don’t use a credit card or loan to make the purchase, you avoid paying interest. More money saved, woohoo!
You can create different savings goals on the Pod app and slowly put money into your goal, whether it’s for a new laptop, a vacation or even to pay off student loans.

• Save first, and consistently! 

This is something we all know we have to do, but do we actually DO it? A lot of people put money into their savings whenever they have any leftover at the end of the month. 

But the trick is to always save first, BEFORE spending. That way, saving money becomes non-negotiable. Never disregard how important saving money is for your future, so treat it like you’re paying any other bill!

Deposit money into your savings account every month when income comes in. You can set up the Pod savings app to make automatic monthly transfers so you don’t have to remember to do it yourself. You can also set up standing instructions through your bank so that your savings are transferred into a separate bank account, if this is your preference.

These are 5 tips you can practice today to start managing your expenses better. In the beginning, you may not be used to sticking to a budget or practicing delayed gratification with your purchases. Don’t worry if you hit a stumbling block - being good with money takes practice! The more you take the steps to turn these actions into habits, the easier it will be to take control of your finances.