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Budgeting: How to Write a Budget the Nigerian way

Budgeting: How to write a budget the Nigerian way. How to write a budget. Budgeting. Nigeria budget. personal budget
How to write a Budget

In Nigeria, budgeting is seen as what the government, religious institute and business sectors do. However, we do not see it as a thing a household or an individual can do to be in control of their finances. We understand how to manage our finances and how to manage money. However, we do not know the importance of budgeting and how it can make life easy for us.  We pay our bills, take care of our basic needs, save money and even think of ways to make extra money. But in trying to manage money the right way we forget something really important that can make everything easy for us that thing being a budget

Budgeting has a lot of advantages and importance which we will soon take a look at and learn how to write a personal budget but before then….

What is Budgeting?

Budgeting is the process of creating a plan to spend your money according to my money coach. This spending plan is called a budget. Shortly we will be seeing how to write a budget.

When you budget, you are making financial plans ahead of time. The reason being budgeting allows you to know if you have enough money to do all the things you plan on doing. Budgeting is creating a balance between what you earn and how much you spend.


Importance of budgeting 


As simple as budgeting might sound based on the definition given above, its importance is amazing. Here is a list of some of the major importance of budgeting so it can open your eyes to how a budget can save your financial life.

  1. Budgeting helps you stay out of debt what we call “Bashi” in Hausa around here and settle your debt. You might be wondering how does it do that. The simple explanation is this. When you budget you know ahead of time what your money can afford. This means you know how to channel your resources properly. You see how making a one-time payment on a certain big purchase can make you run out of cash before another paycheck. Which might lead you into taking debt to survive the rest of the month. Avoiding this instance is completely possible when you budget. 

  2. Living according to your means or below your means is possible when your budget. As clearly stated above, creating a budget helps you know your financial strength. Hence you are able to live the lifestyle you can afford. This budgeting importance alone is the reason you can stay out of debt. And be able to become financially stable and eventually grow your wealth. 

  3. Saving money becomes easy when you take budgeting seriously because you can literally budget to save. 

  4. Budgeting helps you stay on track with your spending. One bad spending habit we easily adapt is overspending money and not being able to give an account of what we did with it. That is why when you budget you have the consciousness of your spending.

  5. When you set a financial goal a budget is one of the most important steps to help you achieve your goals fast.

  6. Budgeting will help your family stay afloat and not be financially overwhelmed. 

  7. When you budget you can stay ahead of emergencies in that sense that none will take you unaware and keep you financially unbalanced for the rest of the month.


Types of budget you should know

Here is a list of the types of budgets you can consider personally. This personal budget will give you an idea of what will work for you as a budget. You don’t need to necessarily do them all. Also, these are the types of budgets that will work for you in Nigeria.

 Spending first budget

The concept behind this type of budget is that you spend first then save what is left after. This to me is no budget at all because I consider saving money as important as paying any other basic bills. Plus if you struggle with money habits like overspending then this type of budget is definitely not for you. 

Saving first budget

This type of budget means you get to save money first before you go ahead and spend your money and if you just read what was written in the first type of budget then you know this one would be my favourite. 

50 30 20 budget

The 50/30/20 budget is simple and you would like this type of budget. The concept is that you spend 50% of your income on needs, 30% on wants and 20% on savings. This is a very flexible budget because you can make it work for you. Like personally I do more of 70/20/10, based on my income and needs I’ll only be able to effectively save 10% of my income. I stick to that and consistently save 10%. 

You can make this personal budget very personal by making it work for you according to your income and the magnitude of your problems(needs).

Spending ceiling budget

Spending ceiling type of budgeting is a favourite and if you get the concept behind it you are going to love it too.

A ceiling in economic terms simply means putting a limit, what a certain thing can’t go above or over. So imagine putting a ceiling on your spending. Meaning you create a budget knowing you have a spending ceiling. 

For instance, you say you can’t spend over 5000 naira on a shoe at the moment due to your financial strength. Or when you go out with friends you say the most you will spend on drinks or food is 3000 naira.

Basically, the instances above is a simple example of having a spending ceiling and it is applicable to all your expenditures. 

There are many types of budgets such as zero based budgeting but in Nigeria, we can easily practice these types of budgets.

How to write a budget

Two things are involved when creating a budget, one is your income and the second is your expenses. Now that you know that let's move to the next step which is the simple guide of writing a personal budget for yourself or your family. 

  1. Write down your estimated income or earnings for the month. If you are a worker with a fixed salary then you know exactly how much money you will be having at the months’ end. For business owners without a fixed earning you can write down your average income for the month.

  2. Write down your needs, making sure you include everything you consume on a monthly basis. You have to prioritise this list starting with needs then wants. 

  3. Allocate a cost/price/money to these needs and wants. Like rent - 5k, food - 10k, and utility(electricity and water) - 6k and so on.

  4. Sum up your estimated expenditure and get a total of how much you need to spend to solve your needs.

  5. Compare your income and expenditure to see if they match. If your income and expenditure are equal you have a balanced budget, when then the expenditure is higher than the income you have a budget deficit and in the case of your expenditure being lower than your income you have a budget surplus.

  6. Whatever the outcome might be for you. You can always adjust your budget. That’s the aim of budgeting in the first place to help you plan your money ahead of time and be able to crush your financial goals.   

Things you don’t need to write a budget

Budget planner

As time goes on and you begin to get better at budgeting and you want to improve your budget-writing skills. You might consider getting a budget planner. However, this budget-writing method is for beginners hence anything aside from a pen and paper is not needed

Budget spreadsheet

Perhaps as your income grows and your expenditures grow with it your budget grows bigger you might need a spreadsheet of some sort. But for now, you don’t need anyone. This beginner how to write a budget guide doesn’t need any complicated tool to get things done.

Consider the 50 30 20 budget rule

The 50 50 20 budget is not only a type of budget but a budgeting everyone should consider especially if you are just starting to give budgeting a try.

The simple reason why this rule should be followed is that it is flexible, easy to understand and a perfect money management guide. 

If your income is 50k for instance, following the 50 30 20  budget rule means 25k will be for needs, 15k for wants and 10k for saving. Having in mind that needs are your rent, utility bills, food, health care and transport. 

25k might be too small for all your basic needs so you make an adjustment to the percentage. Make it work for you the best way possible.

To draw a conclusion on Budgeting

One must understand that they need to be ready, disciplined and intentional about making budgeting take their finances to the next level.

Whatever be the thing you want budgeting to do for you as regards your financial life you must do it right, know more about it and put in little work.  

Budgeting is one financial literacy practice we all need to take seriously to manage money big or small effectively. 


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