Making money is good but if you do not know how to manage it in a way that makes sense, there’s no point. Some of that money management may involve saving, investing, insurance property and assets, or in this case of this week’s blog post: budgeting.
A budget is an estimate of income (the amount of money comes in) and expenditure (the amount of money that goes out) over a set period of time. In other words, a budget helps you stay aware of how much you’re making, how much you’re spending and how to manage both so you don’t end up living under the bridge.
Budgeting also helps you ensure that your money works for you. Because you know how much is coming in and what you’re using it for, you have better control over what you use the money for and how to make it work for you. Here are three tips to get you started and on your way to a better financial life:
- Plan: Budgeting is all about planning. For example, if you want to budget for next month, you have to plan for the money you’ll make in that month, how much you want to spend on food, transport etc. in that month, how much you want to save and so on. It’s like having a map for how you want to handle your money in that month. You know how hangouts that you plan with your friends are usually more enjoyable than those random hangouts that happen? It’s very much like that with budgeting – if you plan, you’ll have a better experience with money, but if you don’t plan you may keep struggling.
- Save, then budget EVERYTHING: Since budgets help you keep track of where your money is going, you have knowledge of how much you can save. Once saving is out of the way, ensure you assign a task to every Naira remaining. Make sure you’re budgeting for food, transportation, clothing, family, investments and everything in between. Every Naira has a job to do and you’re the boss. You tell your money what to do rather than wonder where it went.
- Needs ≠ wants: Learn to differentiate between what you need and what you want. They are different things. You can without wants but you can’t do without needs. Prioritising the things you need over the things you want when making your budget is important if you want to avoid financial disaster. That’s another thing budgets are good for – getting to prioritise what really matters over what can wait.
Of course, you’re not going to become a budgeting expert in a day or even a month. In other words, as you start budgeting give yourself some time to figure it out. Don’t pressure yourself too much and allow yourself room to get it wrong sometimes. Also, budgets are meant to be flexible so it’s okay to change your budget to fit your needs. E.g, you may have a 100K budget this month and a 150K budget the following month. Just make sure that you’re budgeting within your means (i.e what you can afford).
As always, when you win, we win. To the moon!