How To Craft a Perfect Budget
posted on Feb 14, 2020
Looking to improve or craft a brand new budget?
Bank transfer charges, credit card maintenance fees, rising phone bills, emergency funds transfer to a needy relative…wow! Life’s overhead can really chip away at your money!
Compounding the problem is that too many Nigerians are unaware of the impact these expenses can have, as we frequently pay bills by rote without taking time to properly review these charges or evaluate those extra Naira’s impact on our budget.
While these expenditures may seem negligible, they can collectively cost thousands if not tens of thousands of Naira over time.
Luckily, there are some quick and easy adjustments you can make to put an end to your budget-draining financial worries.
For many Nigerians, drawing up a budget is the first step towards effectively managing their finances and reaching their financial goals. Unfortunately, creating a budget isn’t a straight-forward process, because there isn’t a perfect “one-size-fits-all” budget for everyone.
What is a perfect budget for you may not be considered ideal for the next person.
Your perfect budget isn’t about rigidly adhering to a formula – it’s about prioritizing your spending to help you reach your short and long-term goals.
In this post we’ll explore how you can craft a perfect budget that accurately reflects your spending and that can be tailored to become the perfect financial guide for you.
For a detailed introduction to what a budget and other discussions around budgeting, see our previous article on budgeting 101 here
Crafting a perfect budget
If you’ve never crafted a budget before, it’s time to get started!
But first, remember that your first budget need not be a perfect solution; you’ll refine your budget repeatedly until you find the right spending balance.
With that said, create your first budget by categorizing your expenses into;
- Housing
- Debt
- Transportation
- Feeding
- Utility bills
- Other living expenses
- Savings
Evaluate these expenditures against your monthly income and find the weight each category holds in your overall income.
The calculation above will put you in perspective as to where you are spending so much money and where you can cut down to find a good balance between your income, expenditure and savings.
Once you know how much you spend monthly on each of these categories, it’s time to begin crafting your perfect budget.
Your perfect budget should meet the following criteria:
Reflect Your Goals
Don’t think of your budget as a restrictive trap that keeps you from having fun. Instead, think of your budget as a framework that helps you achieve your financial goals.
For example, if your goal is to buy a car in say 12 months, but your housing expenses are too high to do that, consider splitting rent with someone to move more money toward your car purchase and less on housing.
Or if you want to spend some time (and money) on expanding your horizons and travelling the world, reduce your spending in other categories to reflect that.
Be Realistic
A common downfall when building a perfect budget is to create one that is unrealistically restrictive in order to meet your financial goals sooner.
While it may seem appealing to live an ultra-frugal lifestyle to meet your financial goals, this strategy rarely ends well.
For example, you may decide to cut your transportation costs so you can buy a house. But is walking five kilometers to work each day realistic over the long term?
A good compromise may be to take a quick loan that helps you buy a car which will enable you cut down on the other expenses associated with using cabs and public transpiration to your destinations.
Include Leisure Spending
Setting an unrealistic budget can backfire and even leave you worse off than you were before, especially if you don’t include a line for leisure spending.
For example, if your goal is to save N10,000,000 to buy a house, and you cut your living expenses to the bone to put every penny into your savings account, eventually you may rebel against that restriction and go on a spending spree.
A frustration-driven spending spree could leave you worse off than you would have been if you’d allocated just 10k per month to entertainment.
A perfect budget should include leisure spending, along with realistic financial goals.
In summary
While you may have a clear idea of what your perfect budget looks like, if it’s very different from your current budget, you should strive to move toward it in stages. Some things take time.
A sharp change in your spending habits increases the likelihood of blowing your budget, which might cause you to quit budgeting altogether.
Instead, move gradually from your current budget toward your budgetary ideal, changing your spending a little at a time over several months. This strategy gives you time to adjust and improves your chances of success.
However, we cannot play deaf to the reality that things may not always turn out well as crafted, in the simplest form, life may happen at any time and you may be required to pump in a huge sum of money into solving a particular issue – whether it’s in or not in your budget.
That is why Page Financials exists – to help customers attack financial emergencies with fast and simplified loans that are very convenient to repay.
For over 6 years, Page Financials has been providing dependable retail financial services in form of loans and investment opportunities to salary earners and established SMEs in Lagos and Ibadan.
Page also has a payment solution that enables customers send money and pay bills across Nigeria at zero cost of transaction (remember the transaction charges we talked about in the first sentence of this post? Here’s how to avoid those charges).
If you are a salary earner then you might qualify for between ₦200k and ₦5Million naira loan which you can get in less than 3 hours.
To apply, simply visit the online application portal at www.pagefinancials.com/loans.html. You will be able to supply your information and get your loan in less than 3 hours if you get approved.
For further enquiries, you can send an email to customer@pagefinancials.com or contact customer service on 016317243 for further assistance.