Happy New Month Sis, is your July budget ready?
Creating and sticking with a budget can be a game-changer. It’s like having a superpower: you can use it to control your spending, so that you can save more money, and use that money for the things you really want.
But first, let’s talk about why it’s important to have a budget. If you’re not saving for something specific—like for retirement or for your kids’ college fund—you might think that saving money is kind of pointless.
Why not just spend your money on whatever you want?
Budgeting is one of the most important things you can do to improve your financial health. It helps you decide what’s important to you, and helps you see how your spending aligns with that vision.
But if it seems like a daunting task, don’t worry: we’ve got your back.
Here’s our foolproof guide to creating and sticking with a budget.
Step 1: Know what matters most to you
First things first: before you start budgeting, figure out what matters most to you in terms of spending. How much do you want to spend on housing? What about entertainment? Does travel matter? To help you figure out what matters most, try this exercise:
– Write down some of the things that are most important to you in life—your family and friends, for example.
– Next, write down some things that are less important but still important—like shopping or eating out at restaurants. Make sure each item has a dollar value attached (and if it doesn’t make sense for there to be one, like “friendship,” make up one).
– Now add up all those dollar values together! That’s how much money you need each month just for these basics.
Step 2: Gather your financial information.
-Write down all of your income sources, including any other money that comes in from friends or family members.
-Make a list of all of your expenses, including rent or mortgage payments, utilities, transportation costs, groceries, and other food costs, entertainment costs (like going out for dinner), clothing purchases, and other personal care costs (like Aso-ebi and toiletries). If you have any recurring bills such as loan payments or car insurance, or health insurance, include those as well.
Step 3: Set up categories for different types of expenses.
Use categories like “Food” and “Entertainment” for recurring monthly expenses; these are considered fixed costs because they don’t change much from month to month based on how much money is coming in or going out. You may want to create separate subcategories within these two broad categories if there are certain expenses that tend to fluctuate more than others—for example, if you usually spend N20,000 per month on groceries but this past week spent N35,000 due to an unexpected expense like an appliance breaking down unexpectedly while another appliance needs replacing, you can create a sub category with the headline ‘appliances’ under the food category.
Step 4: Subtract your monthly expenses from your monthly income.
This is where the magic happens! If this number is positive (that is, if it’s greater than zero), then you’re good! You can use this amount for savings or splurges without feeling too guilty about it. If this number is negative (less than zero), then this means that you will need to cut back on some of your expenses or increase your income in order to stay afloat financially
Step 5: Look for ways to cut back on unnecessary expenses
Review where you can cut back on expenses and come up with a realistic monthly budget for each category based on what you’ve spent in the past month or quarter. If you don’t know how much you spend in certain categories (like food), look back at your bank statements for previous months or quarters so that you can get an idea of how much money actually leaves your account each month for those expenses. If an expense isn’t necessary, see if there’s another way you could save money on it (like taking public transit instead of driving). If an expense is necessary but too much, like rent, you can cut back by getting a flatmate or roommate.
Step 6: Set up automatic savings payments.
There are lots of different apps out there designed to help you create a savings plan and stick with it. Some of them even come with built-in reminders so you don’t get stuck in the “over” or “under” mindset when it comes to spending, they also come with the direct debit and safe lock features where a certain amount is directly deducted from your account on the set date. The safe lock feature helps you to save a certain amount of money for a certain amount of time without you being able to withdraw it. You can see some of these apps as your accountability partner.
Step 7: Repeat this process every month until it becomes a habit!
When it comes to budgeting, consistency is the key to success.
Finally, we all know that an emergency can arise at any time, so ensure that your weekly or monthly budget is fluid enough to accommodate these emergencies.
I will be rooting for you all month long. Yours in financial independence, Temitope.
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