Happy 2022!

It's a brand new year and it's time for..

🎉 N E W Y EA R R E S O L U T I O N S ! 🎉

I'm just kidding.

They don't work and I'll forget about them probably after this weekend.

With our already so busy lives, finding motivation to sit and look at cells and columns in a spreadsheet to budget.. is a huge waste of time.

Resource partitioning

In the animal world, resource partitioning is the division of limited resources by species to avoid competition in an ecological niche. (Read more here if this topic interests you)

Photo by Sid Balachandran / Unsplash

Drawing parallels to the context of personal finance;

1. Resources = Salary/income
2. Species = Expense categories
3. Ecological niche = Your overall state of personal finance

So, instead of tracking every single purchase that you make, partition or allocate different percentages of your salary for different categories of expenses.

Determine your categories first

You could keep it simple - Food, Transportation, Entertainment, Bills, Miscellaneous

or

Go deeper - Groceries, Dining, Transportation, Subscriptions, Bills, Investments, Charity

It's your call.

But personally, I keep things as broad (or few) as possible so I do not need to worry too much about the minutiae of my allocated categories.

Here's an example of how my own categories look like, assuming a take-home salary of $3,000 per month.

Expense categories with conservative cash allocations respectively.

🌱

If you're living in a city (like me in Singapore), chances are you do not need to travel far to find food or own a personal vehicle to get around. Take advantage of these to save money and put them into financial instruments instead.

And yes, there's cheap food here in Singapore. You could get by with just $10 a day.

Isn't this budgetting?

In a sense, yeah.

But the key is execution.

Personally, I have multiple credit cards and bank accounts and everything is automated. And for each category, I've got a dedicated card or account to draw from. Here's some insights;

• Transportation : a dedicated debit card only for public transportation. Every month this card is automatically reloaded with a specific amount with the use of scheduled bank transfers (allocated like in the table above)
• Investments: I personally use a roboadvisor and with an active GIRO arrangement, my roboadvisor automatically debits a specified amount on specified days in a month to dollar cost average (DCA) into my investment portfolios
• Entertainment and Subscriptions: a dedicated credit card just for these expenses. These include subcriptions like Disney+, Netflix or Spotify and entertainment such as a trip to the water park on a weekend with the family. This credit card has a hard limit set, so I do not overspend on this card.

Just a few examples worth mentioning, for different methods of payment.

At the end of every month, my credit cards debits automatically the amount from my bank accounts every month - a full payment always, so I do not incur interests on my outstanding credit card bills.

Perspective from the undergrowth

You will need multiple credit cards and bank accounts to try this method.

It's not as scary as it sounds especially if everything is automated. I do not;

• Worry about late bill payments, because everything is already automated
• Worry about how much I have spent daily
• Worry about overspending because limits have been set

If you are budgetting now, this will feel weird initially but once you try, you'll never look back. This is simulated freedom!

Like plants, it does not think about how much water/sunlight/nutrients it has consumed daily. It automatically partitions and allocates resources to different parts (roots, stem, leaves) without thinking.