Nigeria Financial Info, Market Reports



MAKING A BUDGET THAT WORKS

Having a budget is a very important step in personal financial planning. If you have used budgets for some time, you will come to know that budgets are not self implementing. You can ask the Presidency and National Assembly. Having a beautiful budget is an important first step, but implementation is another ball game entirely.

To make a budget that works, the budget must be realistic and workable. By realistic, the budget has to reflect who you are, where you are and where you want to go.
The starting point in making a realistic budget is to define where you are, in terms of your spending habits. To determine this, you have to itemize your daily expenditure to the minutest detail for at least a month (three months preferably). Write it down, every kobo you spend, chips in traffic, dash to your guard, the good, the bad and the ugly. Write it down. This seems tedious and painful. However, if you are willing to pay the price to gain control over your spending, you need to go through t his process, so that you can see where the problem is coming from.

Let's say you went through the torture successfully, and now have the story of your spending habits. If I am in your shoes, I will input into an excel spreadsheet, so that I can display the results in any format I want.

Now this your spending life, spread before you in black and white. You were asking a while back where did the money go? There you have it. If you doubt it, sum it up. Does it add up to your income? Then you spent it



This is a very good place to start. Use this as the template for your budget. Categorize the spending in the format you want your budget. Then use another column to input values of how much you actually want to spend for each item. Of course zero is allowed for impulse items at stores check out that zap your money.

You will need to add new items that ought to be there, that somehow never happened because you left it for the last, and there is always no money left to fund it. For example, after tax, is tithes/offerings/charity, then savings (pay yourself first). It is after you have saved that you pay your bills/debts if any, not the other way round.

By the time you finish this exercise, you have determined where you are, where you want to go, and the process of getting there. Because you know where your money is going, you have a clear idea where to cut back or eliminate completely.

Let's imagine you did not go through this process, and jumped right to writing a budget that expresses your wishes and dreams. This budget balances beautifully on paper. Everything is fine. In reality, you buy chips and fanta in traffic once a while on your way home from work, occasionally buy lunch for parasitic colleagues in the office, take your wife and kids out some weekends to Tastee, buy papers occasionally (you get my drift) etc, and this does not show up in your budget.

There is no way this budget will work. You will be wondering month after month where the deficit is coming from. There will be a black hole in your budget. This is principally because you have not placed all your cards on the table, and declared all your liabilities. 

By itemizing everything, you can easily associate all your expenditure with your budget, and can see how each item affects the whole picture. By leaving something out, you tell your brain these items are extra budgetary items and does not matter to the budget. Reality is, it does.

Making a workable budget starts from determining where you are, and making the journey to where you want to be through delaying gratification, cutting out the fat and waste in your budget and aligning your budget to your goals.



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