Budgeting

A budget is a plan for your future income and expenditures that you can use as a guideline for spending and saving. The key to spending within your means is to know your expenses and to spend less than you make. A good monthly budget can help ensure you pay your bills on time, have funds to cover unexpected emergencies and reach your financial goals. Most of the information you need is already at your fingertips. To create or rework your budget, follow the simple steps outlined below to get a clear picture of your monthly finances. You can also use our free online budgeting calculators below to budget for certain specific purchases or events.

1. Add Up Your Income
To set a monthly budget, you first need to determine how much income you have. Using the worksheet at the bottom of this page, write a dollar figure next to each relevant income source. Make sure you include all sources of income such as salaries, interest, pension and any other income, including a spouse's income if you are married. When you enter your salary, be sure to use your take-home pay rather than your gross pay. Items such as Mandatory Provident Fund (MPF) contributions are usually deducted from your gross salary by your employers. If they are not, remember to include them as another expense. If you receive money from somewhere not listed, enter the source along with the amount under "other income".

2. Estimate Expenses
The best way to do this is to keep track of how much you spend for one month. The worksheet below divides spending into fixed and flexible expenses. Fixed expenses are those that generally do not change from month to month, such as rent and insurance payments. Flexible expenses are those that do change from month to month, such as food or entertainment. If some of your expenses for one or more categories change significantly each month, take a three-month average for your total.

3. Figure Out The Difference
Once you have totaled up your monthly income and your monthly expenses, subtract the expense total from the income total to get the difference. A positive number indicates that you are spending less than you earn – congratulations. A negative number indicates that your expenses are greater than your income. This means you will need to trim your expenses in order to begin living within your means.

Well done – you have created a budget. The next step is to track your budget over time to make sure you are sticking to it. If you find you are not able to follow your budget successfully, it may mean that your plan is not flexible enough. It can take revisiting your budget a few times to find the balance that works for you.