BUDGETING simplified.

 

A Gallup poll done last year on Americans found that only 32% of Americans actually have a personal budget. That means 68% of Americans don’t have a budget at all. They have credit card debts, mortgages, school loans, and spending problems, but they don’t budget. 

I am sure the stats for Nigerians will be far lower and worse than that.

What many don't know is that poverty is a mindset. Our leaders embezzle our money because they are poor in their minds. Nigerians are poor because they don't seek knowledge to improve their mental status and by extension, the world around them. We don't read or apply sound principles in our daily dealings.

We budget every year but our budget for any particular year comes out around the middle of the year. That is the budget for 2014 will be passed only in June, when the year began in January. No wonder things don't work.

Back to personal finance...there are two ways to live on a budget:

1.        Set a fixed budget first, then follow it strictly- work within it,

2.       Set a flexible budget, as a spending guide then work around it

There is really no hard and fast rule about living on a budget.  Some use a paper and pen, others use MS Excel or some other sophisticated budgeting software such as YNAB app, Quicken, GNU cash, Pear budget, Personal capital, or Mint. 

But the most important thing is to know why you need a budget, set/tailor one that is unique to you, and follow it.

Some authorities advocate the Envelope system whereby you label different physical envelops with the different categories your expenses occur in e.g. Food, Petrol/transport, Charity, Entertainment, etc. Even the app YouNeedABudget (YNAB) uses this system.                                                                       

When the money you put in an envelope finishes, then you have exceeded your budget for that category.

Salary earners and others who have a regular fixed income, use a fixed budget (method #1) above, while most business people who don’t have a fixed income use method #2. They set their budget for succeeding month(s) based on their average income from previous months.

Before starting out, take note of your major source of income, and use that as the guide for your major expenses/bills. 

Then budget your entertainment and other expenses according to your other sources of income.

It is important you know how much of your income is regular and what percentage of that will go to saving, paying bills, giving to charity and then entertaining yourself. That is why you need to track your expenses for at least 3 months.

While it is good to have more money/income sources, it is better to be a good manager of what you have presently. When you are able to manage a little effectively, then you will have more, and be a great manager of that too. Many Nigerians want to have great wealth, but most are not preparing themselves to handle it effectively when it comes.

There are problems that come with having no money. But truth is that there are more problems that come with having a lot of money. Start to live by a budget today.

Keep tab on this blog for more budgeting tips in the months to come.