10 Tips for Effective Budgeting
My dad neither smokes nor drinks. Impressive!! you would say. I use to think so also. But recently he told me why he does not smoke or drink. He intimated me that it was an economic decision. He told me that he sat with himself and did the calculation of how much he would need to spend on both in a month. He said the idea that his economy could not support it made him not to bother. Thank God for that; at least my lungs were spared.
My dad had a vision of what he was going to do with his life and he planned towards it. Till date, I have never seen or heard about my parents taking a loan or needing to ask for financial help. I am not humble bragging but I am trying to say that they learned to live within their means and planning was a big part of my family life. In fact, the planning became a problem because from time to time my dad will say “I have a budget deficit”. For me as a child, I cared less, I just felt the man invented a way to escape my demands.
From my last write up, I hinted that a budget is a plan to spend your money. It is your money and you have to plan with what you have. Not what you think you will have. You know some of us plan based on other people’s budget. Yes, we plan our wedding based on what we think Uncle X and Aunty Y will give. We add Mummy and Daddy and many other people. We hope to make some money from the sale of asoebi. Only 40% of those who collected the asoebi paid. As you already know, that budgeting style leads to frustration, anger, loss of social capital and ultimately a bad wedding.
Let’s leave there and go towards our tips for the day. Here are my tips for planning and executing an effective budget:
1. Plan To Pay Off Your Debts: I put this as my first point for a good reason. Never ever be comfortable with debts. It leads to the loss of social capital. When you become a pariah in your social and economic network, you will be depressed (except if you are not normal. Have you met folks who pride themselves in how much they owe?). Many things might happen that you will not like. Save yourself the embarrassment. Money Management 101 — owe no wo/man anything. In the event that you owe, please make it a priority to pay it off; aggressively. Gain your financial balance before taking on other financial endeavours.
2. Plan With What You Have: Sounds rhetoric. Well, if you are in my line of work and practice, you will be amazed at what comes up when you are working with people through their financials. I have seen esoteric plans that do not match what the person has in hand. Please, do ensure that you are not spending more than you make. Balance your budget to accommodate everything you need to pay for. Do not let your lack of planning to become someone else’s headache. Since birds have learnt to fly without perching, hunters have learnt to shoot without missing. Guess what, people have invented new ways to allow you to handle your headache. Headaches are personal and not communal. As my mum would say “Carry your cross vertically because if you carry it horizontally it might just hit me”.
3. Plan With Important Dates In Mind: It takes nine months to have a baby. September is school fees month. January most times is for rent. You run your life and you know when the big expenses will come. Oga/Madam, plan for it. If you have guests in a particular month for a particular reason, most definitely the expenditure for that month will go up. Nothing to worry about. Plan for it. And if you cannot keep the hosting going, please say so. Heaven will not melt. The Jones will just be fine.
4. No Debt Plans: It might sound ludicrous but I have encountered people who have to take on loans and extra-curricular debt on themselves. They actually plan to be indebted. A banker once advised me to take on loans, as it will force my company not to lay me off. I still don’t get it but I am sure some people bought into that philosophy. What am I saying? In all you do, don’t plan to take on unnecessary debt/loan.
If you think nobody cares about you, try to owe a few.
5. Budget To The “T”: Capture all capturables. Budget to zero. “Why” you may ask. Well, telling all your money where to go means you’re in charge of it. You are sending your boys (money) to the battleground. They are going to fight for value in the market place. As such, if you do not plan for all what they will do and accomplish, they will just go to the market place for going sake. This is how consumerism is birthed. In the event that you get some unexpected income in the middle of the month, please save it away. I am sure you have goals you intend to achieve, you can earmark that money for that.
6. Realistic Budget Is It: You need to ensure that your plan is practicable. Remember the SMART in goal setting. If your budget is not realistic then you are deceiving yourself. And that is the worst person to deceive. There is no need planning to save 70% of your income when you know that you cannot live on 30%. The aim here is to balance your budget. If something has to go up, then something else has to come down. If utility bills increase, maybe it will be a good time to reduce some fun things. If the kids' school fees go way up, maybe it might just be time to change schools. You know what I mean.
7. Plan Before The Month Begins: This will help you to think through and capture items on your plan before they starting coming at you. This shows that you are ready before the battle starts. You need to be real with yourself. “Ask yourself: Have I allocated money for my necessities (housing, food, utilities, transportation, etc.)? Have I put money aside for my debt payments, unexpected expenses, savings, and the fun stuff? This will protect you from going into debt further because you won’t rely on credit to pay for your living expenses.” Having an annual budget helps, it allows you to put the big ticket items in perspective.
8. Plan Differently for Every Month: Every month is not the same. Your expenses will go up in the month that you have a baby. Your electricity bills will go higher in the summer months as you will need more cooling. You will buy a lot of gifts in the last month of the year. Every month has its peculiarity.
9. Give Yourself Time: You are on a journey. In the first three months, you might not be able to meet your target as per the budget. You overspent here and underspent there. It’s ok….as long as you are on the journey. After every month always check how you are doing. It is called self-examination. Exam wey you set for yourself. You hear me so.
10. Miscellaneous Has A Place In The Budget: Yes, there are things that spring up from time to time and you must leave some wiggle room for them. Try and make it have a small portion. If miscellaneous is 50% of the budget, then….I am speechless. You are a strong person. I will leave it at that.
I just realized that I have more than 10 tips. I will save it for Part 2 of the article. I would have kept it to myself but I am generous …just like that. I am a good person but very few people know. Yeah. Right.
Hasta la vista. Enjoy the weekend.
You can check other articles I have written on money/finances/ financial intelligence. They are The Money Question 2018 Edition, Saving The Pennies, I’ve Got Money On My Mind, Money & Money Management Skills, 7 Common Money Mistakes and 7 Common Money Mistakes (Part II), 10 Common Money Mistakes (Part III), 8 Money Mistakes (Part IV), Stock Market Investment Basic , Things Not To Do With Money, Yearn…Then Learn To Earn, Find A Financial Mentor and Creating A Budget That Works
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Regards, Gabriel.
