A young Singaporean adult’s guide to budgeting like a pro

Budgeting isn’t just about figuring out where your money goes. For young adults, especially the Gen Zs and young millennials who are fresh to the workforce, budgeting allows for control over your financial choices and habits, rather than letting your hard earned money run wild and unchecked.

Start developing these habits now, and you’re not just putting dollars and cents away for a rainy day – you’re laying down the groundwork for a life of financial independence, freedom, and maybe even a bit of “treat yourself” moments on the side.

Budgeting tips for young millennials and Gen Zs from a financial expert

AIA Live Better Study 2024 highlights that financial goals such as saving for emergencies, planning for retirement, and accumulating wealth are top priorities for young adults. To help unravel the complexities of budgeting, we turned to Irma Hadikusuma, the chief marketing & proposition officer at AIA Singapore, for expert insight. With over two decades of experience, Irma’s expertise in customer segmentation, product development, and financial planning is invaluable.

“Financial literacy is essential,” she says, emphasising her firm belief that budgeting is one of the most important steps for young adults, especially as they begin their careers. “When young adults start working, they need to develop strong financial habits. This allows them to build a solid financial foundation for the future.”

Common attitude towards spending among Gen Zs and young millennials

For many young Singaporeans, striking a balance between enjoying life and saving for the future is key. Irma notes that young adults in Singapore are increasingly financially prudent. A 2024 article by The Straits Times reports that 88.8 per cent of young adults live within their means each month, with food being one of their primary expenses. Interestingly, higher-income earners are more inclined to use credit cards to manage rising living costs, while those with lower incomes tend to delay purchases.

This reveals a key truth: there is no universal approach to budgeting. Each person’s financial plan is unique, based on income, expenses, and goals. Irma highlights that AIA understands these varying needs and offers innovative solutions in insurance and wealth management to ensure young adults are well-equipped to manage both their health and financial wellbeing. “Young adults need to think about long-term financial security too,” Irma points out. “Getting protected while you’re young is crucial. Insurance should be part of the conversation when planning your finances,” she adds.

Debunking common misconceptions about budgeting

Irma also addresses several misconceptions about budgeting that could hinder financial growth. “One of the most common myths is that budgeting is only for people with higher incomes,” she says. “That mindset can be detrimental. The earlier you start managing your finances, the better.”

Another widespread misconception is that simply saving money will secure your future. Irma explains that life can throw curveballs – like health issues, for instance – that can drain your savings quickly. “That’s why insurance is so important,” she adds. “It’s not just about saving money; it’s about ensuring you’re financially protected for the unexpected.”

An expert’s budgeting tips for financial success

Here, Irma shares several practical and youth-friendly tips that go beyond just tracking expenses for successful budgeting:

• Use your own money whenever you can

While credit cards can offer rewards like miles or cashback, paying with your own money is often a more effective way to control spending. Using cash provides a tangible reminder of how much is left in your wallet, which can help you stay on track and avoid overspending.

• Restrict access to your savings account

Irma suggests keeping separate accounts for savings and expenses. Make sure your savings are not easily accessible to avoid the temptation to dip into them. To grow your savings, consider tools like AIA’s Pro Lifetime Protector, which offers flexibility to withdraw during emergencies while ensuring long-term wealth accumulation.

• Find an “accountability partner”

Whether it’s a parent, spouse, or trusted friend, having someone to share your financial goals with can make you more accountable. Irma also recommends consulting a financial advisor to help you stay on course and make informed decisions.

• Track your spending accurately

Irma emphasizes the importance of tracking all expenses. It’s easy to overlook small purchases, but they can add up significantly over time. Keeping a detailed log of your spending can help you identify where adjustments need to be made.

• Set realistic goals

It’s tempting to aim for big savings right away, but setting small, achievable goals is key to success. Gradually increasing your savings target can help build financial confidence without overwhelming you.

What to avoid while budgeting

While budgeting is essential, it’s easy to fall into common traps. Irma identifies some of the most frequent budgeting mistakes to avoid below:

• Not tracking expenses accurately

It’s crucial to track every expense, no matter how small. Failing to do so can result in overspending and missed opportunities for savings.

• Setting unrealistic goals

Start with modest savings goals that are achievable and build upon them over time. Setting the bar too high can lead to disappointment and abandonment of the budgeting plan.

• Ignoring irregular expenses

Don’t forget to account for one-off or seasonal expenses, like annual insurance premiums or holiday shopping. These costs can throw off your budget if you haven’t planned for them.

• Focusing only on the short-term

While it’s important to address immediate financial concerns, Irma reminds us not to neglect long-term needs, like insurance and retirement savings.

New year, new financial plans

As we ring in the new year, Irma shares that AIA Singapore is rolling out new plans to help young adults with budgeting and long-term financial planning. If you want flexibility and security, look no further than the AIA Smart Flexi Growth and AIA Smart Flexi Rewards plans – they let you save toward your future goals while keeping your premiums manageable.

And if you’re all about protecting your loved ones while building wealth, Irma recommends the AIA Pro Lifetime Protector, a plan that balances protection with financial growth. Irma also shares that AIA has designed the AIA Glow of Life plan to specifically address women’s health and financial needs, whether it’s to address critical illness protection or long-term savings.

Final thoughts

At the end of the day, budgeting isn’t just about crunching numbers – it’s about taking control of your life. Whether it’s building an emergency fund, planning for retirement, or enjoying treats sans guilt, starting now sets you up for a future where your finances work for you – not the other way around.

So, why wait? Start small, stay consistent, and don’t be afraid to seek advice when needed. After all, every great financial journey begins with a single step – and yours could start today.