Personal and Household Spending Budget

Back in October 2006, I wrote a blog on “Know your expenses per month” (dated 23 October 2006). It’s been four and half years, so I decided to review my current situation and compiled a new list based on expenditure made last year.

The source of such information came from bank statements, cheque stubs, invoices and credit card statements. All these source documents were still available and not discarded. If one wanted to track actual expenditure, then there is a need to keep these source documents for at least one year.

Since 2006, my current situation has changed with regard to life style and matters pertaining to home front. But looking at the overall annual expenditure, it came as a surprise that the quantum amount still remains about the same.

By doing this exercise, though it may be tedious, it helps you to know where the bulk of monthly spending went to and more importantly it set you thinking how best to reduce spending on non-essential expenditure.

Note that expenditure is not the same as cash outflow. The latter may include payment for insurance premiums (a form of savings/investments), charity donations (to benefit others), and investments (such as shares, bonds, unit trusts, etc). These can be separately tracked.

In looking at cash outflow, personal income tax is an item which has to be set aside for payment to IRAS.

The other major spending include payment for durable goods and capital expenditure (e.g. household appliances, renovations, etc), and vacations.

When money is tight, then discretionary items can be cut back. If not, you must save before spending on them. I am an advocate of “not to borrow and spend” but “to save and spend within your means”. At the end of the day, you still have to set aside money for retirement. This whole exercise is the first step to retirement planning.

Copyright © 2011, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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