How to manage your money - Framework for EVERYONE

Описание: Intro 0:00
Here is a universal framework that everyone can use to organise their finances. This is similar to the 50/30/20 Rule, which is a proven way of managing your finances like the rich, but with a personal twist.

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Why is a financial framework is so important? 0:31
For some, we live like hummingbirds. We are one critical event away from a financial catastrophe. We fail to prepare for emergencies, & we have such a high burn rate. We must have a solid plan in place so that we're not caught off guard.

Financial Framework Intro 2:01
The financial framework contains buckets which has different items & serves different purposes. Generally these are most of the items you're gonna have in your financial life.

1. Expenses 2:16

Things commonly included in this bucket are daily needs such as food & transport, bills, credit cards etc. This bucket is to meet your current personal needs & wants.

We want to keep it low & keep it balanced. The general idea is to reduce expenditure as much as possible so that you can allocate it elsewhere. But don't skimp on these so much to the point that you feel miserable and not have your needs met.

Finding ways to cut expenditure might seem like a sacrifice but it'll be beneficial to you in the long run. One thing that helps is to gamify this bucket & make reducing expenditure fun. Make a challenge & reward yourself. This makes things fun but at the same time always keeps your needs/wants in check.

2. Savings 3:47

This involves things like your bank account or any place where you would store cash that is liquid or basically easily accessible. The purpose of this bucket is to store your emergency fund, fun fund & spare cash.

Emergency Fund
Everyone must have an emergency fund. This is 3-6 months of your expenditure. This will help to tide you through tough periods of economic uncertainty & critical events such as retrenchment. Nobody likes to be in that position but if you are, at least you're prepared for it.

Fun fund
Reward yourself for doing a good job with managing your finances well & enjoy life. This could be going for a nice holiday or buying that item that you've been eyeing for a long time.

Spare cash
A catch-all for all other miscellaneous items.

3. Investments 5:19

The usual suspects for this are stocks, cryptocurrency, property & CPF. This bucket is for the long-term, to grow your money for use later on in life.

Consistently set aside money to invest in the stock market. This allows your money to be put to work so that it grows even while you sleep. If you only have a small amount to invest, remember “Better something than nothing”.

Putting your money in something called the S&P500 is better than hiding your money in the bank. Bank account interests rates are ridiculously low at 0.05% whereas the S&P500 gives you an average of 10% every year. This means that money in the bank loses out to inflation which is 2-4% annually. You’d also want compound interest on your side.

The exception is if you have a high interest debt above 10% like from credit cards, get rid of those first before investing.

Property is also part of this bucket. Open yourself up to more options by seeing property as a potential investment. Young couples often make the mistake of taking on a huge housing loan to buy a depreciating house that they declare would be their forever home. What they don’t realise is that 10 years down the road, with different lifestyle choices & income, they might change their mind on how they want to live. Unfortunately, they’re already stuck with a property that is now worth less than what they paid for. As such, they miss out on the opportunity to accelerate their financial growth.

4. Giving 7:42

This covers any form of donations or it could even be blessing someone. I'm proposing this as a dedicated bucket since it serves a specific purpose which is to make generosity a lifestyle. It'll also help you financially by qualifying you for tax reliefs.
Don't give if you are in a dire financial situation. Even if you really love giving, you can't give what you don't have. Don't give everything away & leave yourself in a financial mess.
Start somewhere that you're comfortable with & continue growing from there. Always remember the reasons why you give & never give out of obligation.

Allocation (My Recommendation) 9:11

50% - Expenses
20% - Savings
20% - Investments
10% - Giving
Due to different seasons of life/lifestyle changes, you may change the percentages up a bit. Keep it balanced!

Outro 9:54
You were created a human so live like a human, not a hummingbird. Be consistent in applying the framework. Don't expect overnight success in your finances but instead enjoy the process & don't give up.