October 26

How to manage income and expenses



You’ve probably had this feeling. Where you’re scared of looking at your bank account because you can’t believe how much you’ve spent over the past month.

Your heart skips a beat when you open the banking app, and realise

gosh you’ve actually spent more than you can imagine!

The basics, are never simple.

Managing your income and expenses sounds something dull, and stupid, but it’s the ultimate foundation that you can build the rest of your wealth on.

Don't shout, it doesn't have to be like these two boys
Don’t shout, it doesn’t have to be like these two boys

Running my own business, and having to pay others for work, means keeping a tight rein on the incoming and outgoing is vital.

Else, some of my staff may not have money to buy food for themselves.

Over the years of scrimping and saving, it’s helped me to build up a series of helpful principles that have helped me to build up a considerable asset base, even though my average earnings have fluctuated wildly over the years.

This will share principles.

Establish clear financial red-lines

If you won’t do certain things, managing your income and expenses becomes much easier. If you’re clear about the financial red-lines you won’t cross, you will find it much easier to stay off the wide path that leads to destruction.

One example is using credit cards. Using money you don’t have is a clear financial redline I won’t cross. I don’t just mean this in the sense of the odd time when you borrow money from someone because you don’t have cash at that moment. But I mean buying something with money you don’t actually have.

Like buying that fancy iPhone 14 Pro Max, even though you don’t have the money.

The credit card tells you that you can have interest free instalments! But still, you’re using their money. Not yours. What you may not know is that credit card companies make the most money on customers defaulting on their loans, and paying the 25% interest rate on the loan that they defaulted.

Read the small print, dear.

It’s there.

If you’re talking about a house, that’s a different matter. Using money you borrow from the bank to buy a house is a different matter altogether. And it’s money I recommend you use, because at the end of the day, you probably won’t have 300k for a house. You can borrow that.

Have some red lines around how you're spending money
Have some red lines around how you’re spending money

One suggestion I have is to have a default no approach to credit. Every time a credit card is offered to you, just say no. it helps you stop yourself from having to make decisions around whether you need to make a decision or not.

Time is money

Saving money, sometimes is not saving you time. Saving money may be wasting time, which is something you will never earn back.

Here in Singapore, one can get a domestic helper to help with the household chores. That can be an option for those who can afford it. But even if you can’t, you can get those who come in for a day a week to finish up your chores.

Managing your time, rather than trying to nitpick on your income and expenses will serve you better in the long run.

Why? Because managing your time, helps you to use your time better, to earn more, or gain more knowledge on how to save more.

I remember that I used to go supermarket to supermarket, just to find the cheapest groceries. Sure, I would have saved 20 or 30 cents on the final purchase, but did it save me time? No.

Spending your time to learn how to earn more money may be a far better option. For example, in October 2021, I spent SG$13,6000 to take a Heroic Public Speaking course run by Michael and Amy Port, two veteran public speaking coaches. That course, whilst expensive, helped me to learn how to structure a speech, and eventually got me paid engagements as a speaker.

Don’t save pennies, and end up losing dollars.

Don’t commit time to committees

If time is money, then taking time to do ‘committee work’ is an absolute waste of time. Committees sound fancy. But they rarely get much done.

This sounds harsh, but you know its true. You have probably sat on committees, and realised that the biggest benefit, is that you manage to put it on your portfolio, over and above the impact it makes in the world. Here’s what Feynman once said about it.

Death by committee
Death by committee

To do real good physics work, you do need absolute solid lengths of time… it needs a lot of concentration… if you have a job administrating anything, you don’t have the time.

So I have invented another myth for myself: that I’m irresponsible. I’m actively irresponsible. I tell everyone I don’t do anything. If anyone asks me to be on a committee for admissions, “no,” I tell them: I’m irresponsible.

Nobel Prize winning physicist Richard Feynman, on his productivity strategies, extracted from Deep Work, by Cal Newport

Don’t get bogged down by commitments on committees. More often than not, you will realise that you’re just wasting your time.

Track every penny

Every penny counts.

Knowing how you spend every penny, and making sure that you’re faithfully recording every penny spent, can help you get a better grip of your expenses.

Since I’ve started this habit in 2014, for the past 8 years, seeing how every penny has been spent has helped me to see where the money is going in my life. Whilst this sounds boring, this can no doubt be one of the best ways to catch yourself whenever you’re bursting your budget.

Sure, it can be tempting to spend, without looking at your leftover budget for the month. But ignorance is not bliss. In fact, if you’re constantly bursting your budget, you’ll definitely find yourself being more stressed.

It’s simple. Get an app like Toshl Finance. After every expense, record it down.

How to manage income and expenses
Toshl, is just great

Plan a fortnightly review

On the 10th and 25th of every month, I sit down in front of my spreadsheets, and figure out

  1. where the money is going,
  2. where the money is coming from
  3. And where I should move my money

This fortnightly review, is according to a checklist where I:

  1. Record down all my expenses
  2. Record down my income
  3. Reflect on the expenses that I’ve spent on, and see if there are things that were unexpected expenses

This fortnightly review can help you to have a better handle of your income and expenses, helping you to respond accordingly rather than react, when money is gone.

I admit that there are many times when I’ve skipped past the fortnightly expense checking, only to find myself feeling anxious, for no good reason. Having clarity about where your money is going, and actually knowing that you still have money for the month, can be very reassuring.

Save first

Pay yourself first.

Squirreling money away like a little squirrel, means that I need to have good memory for the day when I might forget that I still have money somewhere
Squirreling money away like a little squirrel, means that I need to have good memory for the day when I might forget that I still have money somewhere

Spend out of what you have left. This sounds logical, but trust me. It’s not something many people do.

Saving first ensures that you have money for times when things go bad. It also gives you the flexibility to do what you want. For example, in 2021, I left my job, opting not to renew my contract. I was tired of working at something that gave me little life. Without a savings pool, I would have never had that optionality.

Freedom, comes with savings.

But what’s more important is also to deliberately save what’s left over. I channel 11% of whatever I take home each month into a CIMB Reserves Account, which is very hard to get to. There’s no card for that account, ensuring that there’s few ways I can spend that.

This is a technique from Michael Michalowicz, under his book ‘Profit First’. In his book, he shares how this technique can help you to plan for the unexpected, but also make sure that you’re constantly putting aside profit in good times, for the times when things go bad.

Michael promises this.... but I'm not instantly sure this should make you quit your job and go into business. Do your own (very considered, and long) research.
Michael promises this…. but I’m not instantly sure this should make you quit your job and go into business. Do your own (very considered, and long) research.

Having used this technique for a year, I’ve seen how it’s really helped me to put a substantial headroom to growing my business over the past year, despite having no outside funds.

Have different accounts for income, and expenses

I’ve said in another blog article about how I have 9 different accounts. Let’s talk about the personal ones, and how I’ve structured them.

  1. UOB Savings account – this is a current account, where I do the bulk of my everyday expenses like transport, or paying for groceries
  2. DBS Savings account – this is a income account, which is tied to my PayNow so that people can pay me
  3. CIMB Reserves Account – this is a rainy day fund, where I transfer 11% of every month’s salary to

At the start of each month, I will transfer $400 from my income account to my current account. This is done automatically via a GIRO transfer.

Doing this allows me to have clear red lines between income and expenses. Doing this may sound like too much trouble. After all, isn’t it much more hassle free to have everything out of one account?

Yes… but doing this can help you to work within a budget for the month. For example, if you’re paying out of your current account, when it’s out of money… it’s out. There’s no way around it. You just don’t have money to spend. It establishes a clear line, rather than you constantly spending out of your savings.

Reflect on what you’re doing

There’s no point having fancy spreadsheets if you’re not reflecting on what you’re doing every month. Clearly, if you’re treating people to one too many meals…. Then you need to be aware that you’re doing that, and stop. Especially if you can’t afford it.

Reflecting on what you’re doing can be as simple as asking yourself these three questions:

  1. Do I know what I’m doing?
  2. Is this something I want to be doing?
  3. What needs to change?

That can put you on a firmer foundation to growing your income, whilst capping your expenses.

Remember, money is your friend

For those people who complain about money all the time, they are just bad at it.

Money is fun. You can have fun with it, if you treat it like a little jellyfish, cute on the outside, but ready to sting the moment you’re not ready.

Be careful. Take time to know your finances, and be aware of when you’re dipping into the red. But as long as you’re putting in effort, you will get there.


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