Budgeting!! What’s that??
Budgeting — What’s that?
At the close of every year we hear the Federal Government talk about submitting its budget to the National Assembly for approval.
In organisations, we see departmental heads preparing budgets to be submitted to their boards for approval.
But when we come to households and the individual, rarely do we as families and individuals prepare budgets for the future.
So that’s what we want to address today
Families and individuals must begin to see the importance of preparing a budget for themselves
And trust me, it’s not hard at all.
What is a Budget?
A budget is an estimation of your income and expenses over a period of time. Budgets can be made for an individual, a family or a business, as far as money is being earned and spent.
Budgeting simply means balancing your expenses with your income. If they don’t balance and you spend more than you make, you will have a problem. Many people don’t realize that they spend more than they earn and are sometimes shocked at their bank account balances at the end of the month.
So why is a Budget important to us?
1. It allows you create a spending plan for your money.
2. It ensures you will always have enough money for the things you need and things that are important to you.
3. It will keep you out of debt.
4. It keeps you focused on your money goals.
5. It gives you control over your money.
6. It helps you organise your savings for expected & unexpected costs.
7. It provides you with early warning for potential money problems.
8. It enables you communicate with your significant or loved ones about money.
And so much more………
I’d quickly talk about a few things above
When you budget , you are simply listing on side (the left column) your income — which is how much money you make — and on the other side (the right column) your expenses — which is how much you spend.
When I started doing this , it helped me prioritise my spending. It made me put the most important things first — for me feeding, housing, transportation, education, savings, etc, before other things like entertainment and leisure.
Giving you control of your money — a budget is an intentional way of saving and spending money.
It saves you the stress of suddenly having to adjust to lack of funds because you didn’t initially plan how to spend your income. It also helps you decide if you want to sacrifice short term spending like eating expensive dinner everyday in exchange for a long term benefit like buying a Mac laptop.
Keeping you focused on your money goals — a budget helps you avoid spending unnecessarily on items and services that do not contribute to attaining your financial goals. If you’re working with limited resources , budgeting helps you a lot.
Makes you see where your money is going to — with budgeting , you are clear on what money is coming in, how fast it goes out, and where it is going to. In the past, after working in a particular month , I wondered where all my money had gone to. 🤣
Helps you organise your savings — budgeting helps you save. It helps you set aside money for saving. Treating it like just another expense.
I just love budgeting. 😊💪🏼
I always like to be on top of my life.
And you can’t be if you don’t have a budget.
Finally, let’s look at how to prepare a simple budget.
How to prepare a simple budget for simplicity we will be looking at preparing a 1 month budget.
1. Identify your how much you make — for employees, this is easier than for entrepreneurs that might not have a steady income stream. Entrepreneurs can take an average of their income for the past 6 months to come up with what they make every month.
2. Track your spending — begin by listing all your fixed and variable expenses. You could have a notepad to note your monthly expenses. And try not to bulk your “little expenses” under “miscellaneous”. Miscellaneous is a dangerous practice cause it shields you from knowing your true expenses. It has bit me too 😊
3. Set your goals — make a list of all your financial goals you (and your family) want to accomplish in the short to long term e.g. buying a car, paying the annual rent, saving for masters, buying a land, paying kids school fees, etc.
4. Enter all this information into an excel sheet or a notepad. Left — Income and right — Expenses. After this, look at your bottom line. Your bottom line is your most important number in the budgeting process. This number will tell you whether you’re overspending or underspending. You can now start to make the needed adjustments to your monthly expenses in order to live within your means.
Budgeting has a drawback though. For it to work, your must be disciplined and consistent. It doesn’t really save you from bad spending habits. It only gives you a goal and reference to help you stay focused.
Thank you.
