Managing my personal finances

Over the years, as i learn more on how to manage my personal finances, it became more fun to me. Regular savings have become a habit and i have opened several bank accounts to allocate my money respectively. I have a spending account, an investment account, an emergency fund account and a monthly savings account.

This is how i allocate my money:

1) Allocate around 6-9 months of my expenses into an emergency fund account.
An emergency fund is important in case i need the money urgently. This is strictly for use during emergency time when i have not enough cash.

2) 60% of my monthly salary to my investment account
This account is used to buy stocks of companies or invest in funds

3) 15% of my monthly salary to a savings account for higher interest.
This account is to earn higher interest rates than a normal savings account. There is no lock in period and i can take out my money anytime. This also serves as an opportunity fund where if a stock market crashes, i have extra money to buy undervalued stocks. I use this fund to donate to charity also.

4) The rest of 25% for spending account
If there are leftovers in my spending account, i can accumulate to a certain amount and spend on luxuries. I pay the premiums for my insurance policies from this account also.

As i have more money over the years while working, it gets more and more exciting to see my account balances grow. Saving money is part of my life now and i do not find it hard anymore. When i first started out, saving money was hard as we're more prone to spend more money. I learnt that in order to have a financially free life, one thing we must learn is to have delayed gratification. This means paying myself first by saving and then spend the rest. Living a simple life helps a lot too. I prefer life to be simple although i do spend on luxuries like eating out at restaurants or travelling. But still those luxuries can be done at low cost if planned properly.

Many people spend money first and then save. This is why most people find it hard to save money as most of the time they do not have much left over after spending. It takes discipline to put aside a fixed percentage of your income for savings before you even start spending. I use a free service provided by DBS bank to auto transfer money out to my various investment and savings account once my income goes in. This saves me the hassle of transferring manually every month. I do not even have to monitor where my money goes. Everything is automatic.

As my investment account grows, i can invest more easily. Investments make my account grow and there are dividends from stocks also. Money is constantly flowing into this account. I will let money in this account to compound over time and this will help me achieve financial freedom in the near future. You may be wondering why not spend some of the investment gains and dividends from stocks? I do not think i should do that as the purpose of investment is to grow the money. If i do want to spend more, then i should try and increase my income so that i have more money to spend in my spending account. If i am able to increase my income, then i don't even have to save that much anymore.

Managing our personal finances is important. I set financial targets for myself to make sure i'm on track. You can read it in my goals tab. The journey towards financial freedom is a journey in itself. You have to plan the road or else you'll get lost or get off track. This road is an exciting one and i hope to update you of my progress in years to come. I have been inspired by many people who have walked this road and accomplished what they set out for. They have shown that it is possible. If more people know how to manage their personal finances, more people can benefit from a lifestyle of financial freedom. We can get out of the rat race and truly enjoy life, not just working for money for the rest of our lives.

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1. How the rich manage their money that the poor and middle class do not - Part 1

2. My Goals

3. Investing basics - How do I start investing?