7 More Tips For Effective Budgeting (Part 2)
It seems my write up on budgeting has been quite useful to a number of people. Thanks for the feedback and also your openness in sharing your own budget tips with me. I have also learnt a lot (unsolicited) from quite a number of people who reached out to me. A teacher never stops learning new tricks. Thank you for enriching my budgeting experience and life.
In my first two write up on this matter (Creating A Budget That Works and 10 Tips For Effective Budgeting ), I gave a background on budgeting and the need for it. In essence, we can summarise it with the famous 50/20/30 budget rule popularised by Senator Elizabeth Warren in her book “All Your Worth: The Ultimate Lifetime Money Plan”. The basic rule divides after-tax income disposable income into the following: spend 50% on needs (the must-haves, bills etc), 30% on wants (some fun money, personal requirements, vacation etc) while allocating 20% to savings/investments (building for tomorrow).
Let me share some more tips on the subject matter:
1. Trend Your Budget: You need to compare your budget and see how you are doing. Merely budgeting and documenting will not do it. Your records are to generate data that can help you to see if you are heading in the right direction. You can trend month by month or compare the same month in different years. Analysing the trend can proffer clues to some nitty gritty that might help in better planning.
2. Don’t Forget To Save: A part of your money is to be saved. There is bread for the eater and seed for the sower. Some part of your money is to be saved for tomorrow while some part is for today’s use. Make saving a big part of your life. If you do, it becomes a habit and when you build on what you have saved, you can start a major venture, if you so wish. As I have always said, the biggest part of saving is not in how much is in the account but rather view it as a habit building strategy.
3. Track Every Expense: This does not make you a penny pincher but more likely it turns you into someone that is in control of his/her finances. After a while, it becomes second nature. I am sure there are times that you withdrew money from the ATM and after a day you cannot account for it. You think the money was misplaced but after adding up some insignificant expenses, it dawns on you how your NGN 50,000 flew away without wings. You spent it. It did not go missing. When you start tracking your expenses, this type of scenarios will be eliminated to the barest minimum.
4. Budget For Your Entertainment: Yes, if you must see movies in a month, then plan for them. 2 night or 3 days per month in the movie theatre is up to you. The one I love the most is planning to give yourself a treat. Save towards it. By so doing, impulse buying will leave you. If you have that special somebody, oh, by all means, the person has to be budgeted for. Birthdays, Anniversaries etc. If you go as the spirit leads, then you are on the highway to poverty. Don’t say I did not tell you.
“Without frugality, none can be rich, and with it very few would be poor.” ― Samuel Johnson
5. Adopt Zero Budgeting: Zero budgeting might sound like a big word but it is really not. It simply means that you need to justify anything that finds its way into the budget. It is more time-consuming than the traditional approach because you need to start from scratch and strategize where your expenses can be cut. Most of us practice zero budgeting at work. And you think it can’t work in your personal life? Try first (said with a Nigerian accent). Read more about zero budgeting here.
6. Plan for Major Procurement: Save towards the time of the year that you need to make major expenses. Save towards Black Fridays. It is an exercise in self-control. Let Black Friday work for you and not the other way round.
7. Use Tech: There are multiple budgeting tools out there. Start from just writing it down in a book. Upgrade to using an excel sheet and then find a free app that can be useful to you. Till date, I have not graduated from Excel. The key thing is to find what works for you. Yes, budgeting is pensive and time-consuming but it helps you to be in charge. Many of these tools (apps) link directly to your bank account and credit cards to automatically download and categorize transactions and they provide a clear picture of how the money was spent.
All in all, you have to get real with yourself. Review your spending habits. That ice cream meet-up, the bottles of soda drinks, these non-essentials that have become necessities could be costing you some serious money. You would never know until you track it.
Be honest with yourself about places you overspend. Take deliberate steps to manage it. Trying to cut life long habits in a day would lead to frustration. You are like those that want to lose weight accumulated over the years in a month. Nwanem, mba!!!! Bobo, kosi!!!!
The aim is to have a sustainable budgeting life that will enable you to be on track with your financial goals. Let’s have a toast …to your financial success.
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, Creating A Budget That Works and 10 Tips For Effective Budgeting
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Regards, Gabriel.
