Best tips for managing money during difficult times

It doesn’t take a genius to realise how important it is to put aside part of your income. It’s not just to save for your car, your house, but also for an “emergency fund” in case you lose job or face a truly difficult cicumstance, like recession.

Given the ongoing interest rate hikes and increasing cost of living, it has become more important than ever to plan your spending as wisely as possible. Even when you’re just a student or fresh graduate, you should start doing it now.

As the saying goes “it’s easier said than done”, it’s not that hard to draft a fancy plan for how you handle your money, but when you have the money and there’s so much things you’re craving for, it takes a lot of discipline to stick to the plan.

And I’m not telling you to live like the poorest person in the city, but believe me, I’ve seen young people with high income ending up in great debt and never having enough money to deposit for their first house, let alone helping their loved ones financially.

1. Have a detailed spreadsheet of your income and expenses

That sounds pretty straight-forward right? All you have to do is list them, yet many people fail to do it properly. You have to make it incredibly detailed: your rent (or mortgage), your phone, your utility bills, internet, food, fuel, public transport, child care, insurance…etc.

Some costs are paid on a quarterly or yearly basis, I found it useful to combine them then divide by 12 (months), that way you know that you’re saving sufficiently until the day you need to pay for it.

The important thing: you must know how much you can save per month. Are you saving enough money that in certain amount of years you can use it to buy your first home? Does your expense exceed your income? If you’re not happy with the current saving, how much more you want to save?

2. Cut unnecessary items

I’m not telling you to stop buying the stuff that you want or doing the things that you love, but to what degree is the question. Again, you have to be really disciplined to make it work.

Say you drive to work? If you are not able to work from home and your car expense is not “tax deductible”, use public transport, buy a monthly pass or even yearly pass. It makes even more sense now when fuel price is high.

You love shopping? Wait until the end of financial year or Christmas to buy things like clothing at a cheaper price.

There’s so much more that you can cut, but try to ask yourself: what are the things that you can live without?

3. Change lights in your house to energy saving ones

This one may sound odd, but you will be surprised how much money you can save for your electricity bills by just replacing the lights. I used to rent a house that used old type of light that takes minutes to light up and consumes a lot of energy (20W).

What did I do? I replaced them all with brighter and much more efficient LED (7W) and saw a significant decrease in my bills.

And it doesn’t cost you a penny to do so, there’re companies that replace old lights with LED lights for residential homes through government programs. Find one in your area, they will replace them for free!

4. Shop at wholesale stores

This is particularly useful for food and some items around the house that you need to buy on a regular basis. I tend to go to Costco once a fortnight and buy things like eggs, meat, cereals..etc. in bulk.

Then, I divide each of them into portions and put them in freezer (meat) so they can last longer and I don’t have to defrost the whole thing when I cook!

For things like washing liquid, cleaning spray, it’s also more economic to buy them in bulk.

5. Have more than credit card

Ok, What? Why have more credit cards when you want to save? Bear with me, there’s a good reason to it.

Having multiple credit cards can be a double-edged sword. On the one hand, many people abuse them to spend more than they should and more than they earn. But on the other hand, they’re actually useful for managing your spending.

What you can do is split your expense into 3 groups (excluding rent/mortgage):

• utilities (internet, phone, electricity, gas) and travel (fuel, train tickets)
• food and household items (usually purchased in supermarket)
• anything that’s to be paid online (insurance, subscriptions, ebay..etc)

Your main account only serves 2 main purposes: receive income and pay rent/mortgage. This is where the spreadsheet that we prepared in #1 comes in handy, once you have a rough estimate of how much you spend for each category, use it to set the limit for each of your credit card.

That way you always know exactly how much you spend (and spend on what) and you cannot exceed the limit even when you’re tempted to.

6. If you have investment properties

Planning and searching for investment property is sure difficult, but managing it during a time like this is even harder. Your tenant may leave and you may have to decrease your rent to attract more renters, and worse, interest rates will increase when inflation happens and you will have to pay more for your mortgage.

So be calm, do research on the market and make sure that you get in touch with your broker as soon as possible to refinance with a fixed rate.

7. Read books, and stay healthy

Not everybody loves reading book, but we cannot deny that books are source of knowledge. I got most of my knowledge in life from books more than from internet. Reading books keeps me away from digital devices when I’m not working, I can’t remember the last time I watched Netflix!

For money saving, I highly recommend reading The Richest Man in Babylon (buy Hardcover or Paperback here). The lessons in there are very basic and yet still extremely effective over centuries. If you have recently started working full time and plan to save money for buying a house then there’s no better starter than this.

Exercising does not only help you stay healthy, it also saves you money. I choose to go hiking every weekend and try not to eat out or party with friends as often as I used to do when I had just graduated. I still stay in touch with them and sometimes we still catch up though.

I hope these tips are helpful and not too overwhelming to begin with. It may sound like hard work, but not too hard, all you need to do is get started and try to stick to the plan. Believe me, it’s totally worth it :)

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