Knowing your paycheck has been freshly deposited into your bank account makes spending easy, but saving at the same time isn't hard to do too. It's all about striking a balance.

Every morning, Billy goes to work in the city centre. He is doing well for a person his age - a 28-year-old analyst at an investment firm, bringing home a steady, tidy sum of $7,000 each month.

As someone who loves being around people, he goes out for dinner nearly every night after work and travels with like-minded friends at least once every quarter. He also has a penchant for leather shoes.

It is all fun and games until you realise, on closer look, that there's an issue with Billy's lifestyle: He lives from paycheck to paycheck, with little savings in his bank account. Such a situation is a risky one to be caught in, especially in these uncertain times.

For someone like Billy, spending the money he earns is much easier than saving or investing it. But you don't want to be caught off guard with no savings when an unexpected event happens, like when you fall sick or have a family emergency. You don't want to be held prisoner to an empty bank account when you are planning for a wedding or a new house either.

Budgeting is key. More importantly, it is doable. But how?

The 50-20-30 rule

One of the most clear-cut ways to manage your earnings is through the 50-30-20 rule. This means setting aside up to 50 per cent of your take-home pay on essentials - anything from mortgage payments and utility bills to transportation and groceries.

Then, put 20 per cent into savings and investments. Of this, 15 per cent can go into your investments and retirement savings, while 5 per cent can be saved up for a rainy day. A good ballpark for an emergency cash fund would be a sum that can sustain you for three to six months, in case you lose your income.

The remaining 30 per cent can go towards your lifestyle needs, such as shopping, holidays, hobbies and entertainment. Your choice of upgrading your lifestyle experiences should be factored in here as well, be it the Michelin-starred meal you're choosing over a simple and affordable family restaurant meal, or the choice to buy a Mercedes over a more economical Nissan.

The rationale behind this allocation is simple: To limit overspending and pre-empt under-saving, which, in turn, leads to greater financial stability.


Set your goals

Of course, the 50-20-30 ratio can always be modified to suit your individual needs. When you have a specific goal in mind - such as buying your own home at 32 years old, or a $2 million nest egg at retirement - you can tweak the ratio to map out a realistic way to reach those concrete numbers.

Managing your wealth with a goals-based approach forces to you look closely at what you need and think about how you can get there. In short, it can result in greater success.

Also consider ways to maximise your approach to saving, spending, and investing. The Maybank Privilege Save Up Programme consolidates deposits, payments, and investments into one platform for customers to maximise interest earned while reducing administrative headaches. For instance, someone who makes a GIRO bill payment, invests in a unit trust, and makes a purchase using a credit card all through Maybank can earn an interest rate of up to 3 per cent a year.

That said, these strategies mean nothing if you don't track the numbers. In any type of planning, discipline is always important.


A balancing act

To be clear, there is nothing wrong with spending. Even when it comes to wants such as the latest iPhone or a vacation, it's okay to spend on something that makes life more enjoyable. This makes the process of saving more worthwhile too.

The key to real financial freedom lies in performing that delicate balancing act between spending, saving, and investing. All it takes is some planning.

the bottom line:

Manage your money the smart way by allocating how you spend, save, and invest your salary.

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