How I did it – Saving 30K before the age of 25 – Final Part

As promised, I said I would write all three parts of my article before I actually turn 25, which isn’t too far away from now. My birthday is extremely close to Christmas, and I guess I could be called a Christmas baby.

Anyway, this year, my greatest gift for myself is the amount of money I have managed to save up over the course of 2-3 years of working full-time. My job pays about the national average in Japan. It isn’t great, but it certainly isn’t bad. But that’s another story.

In part 3 (the final part), I want to share with you guys my budgeting system, and some of my personalized features that may be interesting. Feel free to comment, or use, or change any part of my budget system to suit your own needs. Or if you don’t budget at all, this will hopefully be another entertaining piece of article to read.

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A look at my own budgeting system

How do I save? Well, to start, there are 4 categories to my budget system. I will group each in the following:

Category A – Total Income for the Month
This group includes earned wages, earned interests on deposits, investment
gains, reimbursed travel expenses, and other unexpected income or bonus.

Category B – Total Savings for the Month
-Pay yourself first.
-This is where I pay myself. Currently I am paying myself a value between
40%~50% of my monthly income.
-Your savings will grow faster or slower depending on how much you can pay
yourself before everything else.

Category C – Total Projected Expenses
-There are 3 subcategories in this section:
1. Fixed or committed expenses such as Rent, Taxes, Insurance, Phone, Utilities.
2. Varied expenses but necessary such as Food (groceries), transportation (gas), household items.
3. Varied but not-so-necessary things such as Food (eating out), fun money or entertainment money, and unexpected expenses.

For 1.Fixed-or-Committed Expenses, I try to allocate 40% of my total expenses (spending) to this group.

For 2.Varied Expenses, I try to aim for 30% of my total expenses.

For 3.Varied But-not-so-necessary Expenses, I try to spend another 30%.

Category D – Total Reward Fund
-In this group, I write down things I want to buy or trips I want to take as a motivator for me to save. Of course when buying the items listed in this box, I would exercise good bargaining and price-comparison skills. It is good to be a smart shopper.

Next, putting it all together:


Category A
Total Income

minus Category B
Total Savings

minus Category C
Total Expenses

Equals X > 0
(For Category D)

Note: X should be equal to, or greater than zero in this equation. If X is a negative value, it means that you have overspent this month and that you have a negative cash flow for the month.

Are you still with me? Now, if X is greater than 0, it means that I’ve managed to use less than my projected expenses. Then the entire amount of X is placed towards Category D – Total Reward Fund. As you can see, Category D serves as my motivation to spend even less than my projected expense budget. This is good since it eliminates the need to splurge even with the budget framework.
Category D can also serve as a carryover account for emergencies or other unexpected expenses. An example here is the repair costs or replacement costs of large household items. Note that there is already an unexpected expense subcategory within Category C. So, this is just another backup plan.

Well, there you have it, my complex personal road map to my financial success. Saving takes a lot of self-discipline, and hard work. But if I can do it, so can you.

Happy Saving!