It is widely believed that if one cannot manage a minor task, they will not be able to handle a larger one, and money is no exception. For many people, rising costs of living have affected their ability to make ends meet as the value of the Nigerian currency has seen a decline over the past couple of years. The situation has deteriorated to the point where a hundred-thousand-naira salary is insufficient to meet the necessities of an average Nigerian and keep their financial stability. Many times, people’s income run out before they receive a glimpse of their next revenue, and they have to eventually rely on loans from either friends of financial institutions; and the cycle goes on and on this way. This is why, no matter how hard many try to stick to a budget, bankruptcy trails behind them.
As alarming and worrisome this situation sounds, there is a way to get around it. It’s simply called budgeting. This may not be entirely new to some of us, however, how do you make your budget work for you.
In very basic terms, Budgeting is the process of creating a plan to spend your money.
When budgeting it’s essential to be aware of common blunders that can be made along the way, whether in the planning or execution phases.
Let’s begin by enhancing our knowledge of budgeting.
It is important to remember that one’s net income is the cornerstone of one’s budget. This refers to the amount of money left after deducting allowances, expenditures, and taxes. To avoid overspending, one should focus more on their net income than their total compensation as this may convey the impression that more money is available for expenditures. These disparities must be understood to efficiently manage one’s income.
So how do I make my budget work? Here are a few steps:
- Properly categorize your expenses:
Essentially, you can split your expenses into two groups to make it easier to keep track of where your money is going:- Fixed Cost
- Variable Cost
Write down your fixed costs. These are costs paid regularly, such as monthly or weekly expenses. Once the fixed costs have been recorded, a list of the variable expenses should be compiled these are items whose prices change, such as gasoline, food, and other goods.
- Follow the 50/30/20 Rule:
An intuitive budgeting approach, that has been proven helpful is to take one’s take-home pay and split it into three percentages: 50,30 20 respectively.Fifty per cent of the budget is given to needs or essentials. These are the costs that can’t be skipped over such as your fixed costs. Thirty per cent for wants, this includes your variable costs. The remaining Twenty per cent should be kept as an emergency fund and long-term investments and savings goals. - Measure your progress periodically:
Your monthly expenses must be tracked regardless of income after adjusting spending on necessities and luxuries. The fixed costs may need to be adjusted if things aren’t adding up. Even if one’s monthly income is only N10,000, it’s critical to find ways to save costs. It is said that a million miles begin with a single stride, and small savings can soon grow into significant sums.
Reviewing each budget is essential for staying on target. This is where many individuals get it wrong, believing that once a budget is in place, everything will be fine. Their funding and expenditures should be reviewed regularly because it’s possible that the expenses will be altered along the line.
To stay within one’s budget, one must exercise self-control. It’s a job that requires conscious effort. There are a thousand chances to try again rather than give up when it comes to budgeting, and this is the most crucial thing to keep in mind when it comes to managing one’s money.
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