Saturday, August 9, 2014

Income and expenditure update for the past one year plus

I was curious on how my financial progress was since i embarked on the journey to financial freedom more than 1 year ago. I've not blog or updated on my income and expenditure here before so i thought it might be good time to pen it down today.

I do record down my expenses frequently which enables me to know my progress even from early last year. The chart which i'm about to show you includes my earned/active income, my expenses and my passive or other income. It is on a monthly basis. Here goes:

Click to enlarge

The blue bar is my active income, the red bar is my expenses and the green bar is my other/passive income. I first set out with a mission to invest and grow my money. As stated in my previous blog post on how my financial journey started, i was focused on buying assets that creates cash flow. This is also known as passive income. But, i know some may argue that passive income may not be that passive. After all, you still need to research before investing and this takes a bit of time. But i still think it is more passive than our active income where we put 8-9 hours a day for it. 

It took awhile before traces of passive income can be seen. As you can see from my chart, the beginning of 2013 was without much passive income. It was just me embarking on a savings plan and channelling a portion of it into investments. If you're thinking why there are spikes in my active income in certain months is because of variable bonuses. As you can see, my basic pay is lesser while my bonuses make up a huge portion of my income. I do spend a little bit more on months when i get my bonus but it's still not a lot. Generally, i save more than 50% of my income every month. 

You may be thinking i earn a lot to be able to save that much but the truth is i don't. Then if i save that much does it mean i compromise on my social life and lose out on the enjoyment? The fact is i still eat at restaurants, still go to the movies, still hang out with my friends and still go travelling. There is not much sacrifice on my part. The secret is to plan and budget ahead. Eliminate all the huge purchases and unnecessary expenses and you'll be fine. Also, as i have more passive income coming in, i can actually relax my expenses a bit. I will still be able to meet my targets even though i spend more. This is the benefit of extra money. 

How i budget my expenses

Firstly, i set a target of how much i want to save for that year. Next i estimate my total income and deduct it against the amount i want to save. This will leave me with the amount i can spend. This is further divided by 12 to determine the monthly expenses that i can spend on. Next, i estimate the amount i would need to spend per month. If my estimation is lesser than the amount i can spend on, it's good news for me. The rest can be set aside for unexpected expenses. I set aside about $1000 for these unexpected expenses. It can be a sudden celebration for a friend, weddings etc. This is essentially the pay yourself first principle by saving first and spending the rest instead of spending first and save the rest. 

I hope the above short post will inspire you to plan your finances as well. It will be slow at first but as you continue it, you'll definitely see results later. Have a great weekend and in a few moments time, we'll be celebrating Singapore's 49th birthday together. Happy national day everyone!

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  1. Hi SGYI

    How I miss saving more than 50% savings back those days.

    These days after having kids, it's generally very hard to save to that stage. My savings are declining definitely but I hope its all worth it ;)

    Need a proper plans for the 2nd kids definitely.

    1. Hi B,

      I would think its worth it. Probably the expenses for your son is much higher now as he's still very young. Anyway, can i ask how much you roughly spend for your kids expenses?

  2. Wow! 50% of monthly saving of your active income is very impressive. Also, like the way you approach the saving i.e. from yearly view instead of the monthly view.

    1. Hi Richard,

      I think i'm able to save 50% of my income because i'm still single. Things might change in the future. Then, i'll have to work out another plan. Actually, i set a 4-5 years target then zoom down to yearly and then to monthly. It has worked well for me so far and enable me to plan for the long term.

  3. Hi SG YI,

    This is very inspiring even to an old git like me. I am sure you will be able to inspire many more people, especially the younger people, people of your generation. Gambatte! :)

    1. Hi AK,

      I'm glad you're inspired as well ;)

      I was once inspired so I carry on to inspire others. I do hope I can make a positive impact in the society and people's lives as well.

  4. Keep up the good financial habits!

    1. Hi Winston,

      Will do! We're on the same purpose to impart good financial habits.

  5. Hi SGYI,


    From what I see and understand from the graphs, it's more like 75%!

    Things can only get better and it's a matter of time before you meet your financial goals.

    And I am inspired! ;)

    1. Hi 15HWW,

      Oh yes its about 75%. I've actually set aside more money to spend from last month onwards. I can spend more and still reach my target. :)

  6. Hi SGYI,

    Well done! But do be mentally prepared that in the future, this kind of savings rate might not be applicable anymore. I know you know it, but it might still come as a shock later lol

    The interesting thing that I do is that instead of looking at how much I can save from my income, I work the other way round. I look at how much I want to save, and then decide how much I should earn instead. My income is varying, so this approach suits me better :)

    1. Hi LP,

      That's why I'm finding ways to increase my income as well. I know expenses will definitely go up in the future.

      Good approach you have. I like the idea of increasing income too. But still, we don't have to be too obsessed with money. Living a simple life makes us more happy in the end.