A Guide To Personal Budgeting

Personal budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Personal budgeting is simply balancing your expenses with your income. This guide to Personal budgeting would help you better understand your financial needs and create a personal budgeting template.

Personal budgeting is essential, especially if you want to buy that new phone, concert tickets for your favorite musician, or new footwear without going broke right away. Following your budget will enable you to take care of your necessities and goals while preventing debt or getting you out of debt if you already have debt.

You don’t need to be incredibly good at mathematics or accounting to create your personal budget, nor do you need to sacrifice buying some things you still want to buy through the period of your budget.

WHY PERSONAL BUDGETING IS IMPORTANT

Making a budget can help you make sure you have enough money to pay for all of your expenses and the things that are most important to you without necessarily going bankrupt in the process.

You could unknowingly be placing yourself in a difficult financial scenario if you don’t understand your cash flow. Take the time to understand your cash flow. You can only manage without it for so long before you run into difficulties financially. Everyone should create a personal budget, regardless of your financial strength.

HOW TO PREPARE A PERSONAL BUDGET

1. Write out your monthly income:

Your total monthly revenue is entered here. If your monthly income fluctuates, take the average for the last five months. That would give you a rough idea of how much you earn, and also would help you in other areas like figuring out how to improve your income. Check this post on our guide on how to improve your personal income.

2. Write out all your debts:

Here you need to detail every debt you have, without exception. Include your monthly payments here if the payment arrangement is a monthly one.

3. Fixed expenses:

You should include your anticipated monthly expenses here, such as those for petrol, food, utilities, rent, and other costs. If you are unsure about the amount, just average the amounts you spent on each fixed cost over the previous five months, and if you do not have this figure, then use a rough estimate and then start keeping records from today.

4. Fun:

Going out, clothing, subscriptions (Netflix, Spotify, DSTV, etc), shopping. List them all. Do not skip any

5. Future:

Here you list all financial goals you want to achieve, a new car, a new house, a new phone, a vacation, etc. This will guide you towards saving to achieve these financial goals. It is very difficult hitting a target that is not there in the first place. So set the target and list it.

Ensure you’re not overspending and do not spend or list items unless they are really important. For instance, if a car would only make you spend more without giving you any real value, then it really should not be on your list in the first place.

6. Miscellaneous Feferife:

This is for unplanned spending that can come up throughout the month. You could call it miscellaneous. During the month, some things you didn’t plan for can come up, and this part of your personal budget should cover that. If you do not plan your personal budget properly, then most of your spending will fall here and you would not be able to get a proper grip on your expenses.

After listing these you should have a very detailed budgeting template you can use for your budgeting plan. Now looking at this, it will become very easy for you to understand where to make a cut to save you money, and where to add a little more budget to get a desired result.

Although many individuals believe that budgeting is not for them, it is a fantastic tool for managing your cashflow. Here is a collection of budget myths. These are fallacious reasonings that prevents individuals from managing their money and allocating it wisely.

MYTHS ABOUT PERSONAL BUDGETING

1. “I don’t need to budget“

Having a hold on your finances helps you manage your earnings to their maximum potential. If you’re not struggling with income, a budget can help with investments and savings.

2. “I’m debt free“

It’s amazing to be debt free, but how do you plan for emergencies and unexpected events? Being debt free is great, but You need to budget!

3. “Budgeting is for the rich“

Like Nigerians would say, “na person wey get money dey budget”, this means, “it’s the rich that budget”. This is false! Budgeting is for everyone, whether rich or poor, you can benefit a lot from budgeting.

4. “I don’t want to deprive myself“

Budgeting doesn’t have to be all work and no play. You can still have fun while sticking to your budget. You should be able to afford movie or concert tickets and a night out on the town unless your budget is really limited. The amount of money you have available to spend each month remains unchanged as a result of tracking your spending; all it does is show you where that money is going.

5. “I have insurance already”

Your insurance would never get you the levels that your wages put you on. There are also scenarios that your insurance cannot cover, in those scenarios, you will be left stranded.

6. “I don’t have discipline”

There are several savings solutions available now that provide automatic savings. You set an automatic transfer to your savings account as soon as you get paid, once a week or even every day. Also, you can lock your savings for a specific period of time, so you are not able to spend them until when you know you will need them.

7. “I don’t like Maths“

Thanks to the unlimited supply of software and apps that we have now, you don’t need to calculate or do any mathematics to budget. All you have to do is input your income and expenses. These apps are safe, secure, and easy to use.

Here are 5 budgeting apps and software in Nigeria that can make Personal budgeting easy for you;

1. Goodbudget, The Goodbudget app allows users to track their household’s spending using the “envelope method.” The “envelope method” means that each month, users allocate a certain amount of their income into categories (or digital “envelopes”) labelled things like groceries, rent and debt payoff.
2. Monefy, Monefy is a personal finance application that makes money management easy. The app is designed to streamline expense tracking and help you save money.
3. Mint Budgeting App, This app is one of the budgeting apps you can find for budgeting because it does the budgeting itself. Once you connect this app to your bank account, it uses your details to help create a personalized budget.
4. Spendee, Manage all your money with ease from one place with Spendee. Track your income and expenses, analyze your financial habits and stick to your budgets.
5. You Need A Budget, automatically syncs to your bank accounts, credit cards and investment accounts once you link them to the app. Unlike other budgeting apps which usually categorize your spending for you.