When the word ‘budget’ is mentioned, the first thing that comes to mind is creating a financial list for where your money should go to.
Deciding to create a budget is a great step in the right direction, but sticking to a budget is something you should be deliberate with.
As major operators in the personal finance space are prioritising budgeting on the list of financial management, they agree that sticking to a budget is the hard part but there are ways to manage it.
Doing a quick case study from Nigeria’s predicament of endless debt piles and severe economic downturn, individuals can see the real struggles that exist in sticking to a budget.
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The problem with Nigeria overshooting its budget in expenses is a peculiar thing many are experiencing in their personal budgets too, especially with the rise of macroeconomic shocks, headwinds and inflation.
These shocks have presented new problems such as the naira redesign policy which has left the nation’s citizens cash strapped.
Right now the struggle with paying for goods and services has caused an increase in Point of Sales charges by over 100 per cent. Many Nigerians have continued to groan under this circumstance.
Lead Coach at Smart Stewards, Mrs Sola Adesakin, tells The PUNCH that, “In the world of finance, either on a personal or business level, a lot of things are outside your control more than the things you will have within your control.”
As the above applies to budgeting, things like inflation, emergency bills from health related events have an overlapping effect on budgeting.
Adesakin advises that individuals should stick to the things they can control such as income, and what they spend money on.
More so, at this point in the nation’s economy, sticking to a budget has become a necessity to avoid unnecessary financial chaos.
According to Money Africa, creating a budget is an essential step in achieving financial stability and achieving your financial goals. But there are simple ways to ensure individuals stick to their budget.
Identify your income
The first step to sticking to a budget is being realistic and that is by identifying how much you earn at the end of the day. Any individual who creates a budget without taking cognisance of earning power is setting himself up for failure.
Money Africa says, “Start by identifying all sources of income including your salary, bonuses, and any other income sources.
“Next, make a list of all of your expenses including fixed expenses such as rent, utilities, loan payments and variable expenses such as groceries, dining out and entertainment.
Money Africa adds that, “Your budget is not set in stone, and it is okay to make adjustments as your income and expenses change. Regularly review your budget and make changes as necessary to ensure you are staying on track with your financial goals.”
Prioritise your expenses
Spending money is inevitable but what a budget ensures is that individuals are expending money on worthwhile endeavours.
It explains that individuals should, “Pay your essential expenses first such as housing, utilities and debt payments before allocating money to discretionary expenses.
“Discretionary expenses are the expenses that you can choose to spend on non-essential things like entertainment, hobbies, vacations and luxury items. These are not essential to your daily living, and you have the ‘discretion’ or choice to spend or not spend your money on them.
“You should also allocate money to your savings goals such as an emergency fund, retirement savings, or a down payment on a home. Set realistic goals for your spending and savings based on your income and expenses. Make sure your goals are achievable and align with your long-term financial objectives.”
Check financial statements
Never undermine the power of your financial statements. These financial documents give you a first look at specific details of your expenses. From the airtime bills, service charge, Point of Sale fees to other bills.
Financial statements also give a hang of all income, maybe in the form of gifts, a debtor paying back and other revenue streams.
A report by Fintech saving and investment platform, Cowrywise, says that gathering all previous financial statements like your bank statements, utility bills, purchased data/airtime notifications, can help in managing a budget effectively.
It notes that budgets are not meant for documenting total aggregate expenses but to help manage amount expended and block leakages.