Budgeting is an essential ingredient in managing our personal finances.A lot of people today wonder what happened to their salaries because often times they do not have a budget for the income but just take the expenses one at a time.One of the benefits of having a budget is that one must have predetermined the priority to give each category of expenses.
The first step is to set your goals.Your goal could be saving up for a project, liquidating an existing debt, taking up a mortgage,saving up capital to start a business,buying real estate,etc.The next step is to determine your monthly net income.This is arrived at after deduction of tithes and other deductions like NHF,etc.The next step is to review your past monthly expenses,rationalize and put them into categories like food, automobile expenses, electricity, phone,medical, school fees,rent,etc. By the nature of our local system, things like rent are prepaid annually.This must be considered in your budget.You can create a sinking fund account where you deposit the equivalent of your monthly rent.Same can be done for school fees.There are policies offered by insurance companies that are specifically for things like these.
Below is a list of generalized budget categories and recommended percentages.The categories or percentages may vary from individual to individual.
FOOD[20%]
The cost of food locally is a bit on the high side.So depending on some factors including the number of mouths to be fed, the food budget shouldn't exceed 20% of your monthly income.Some tips on how to save on food include:
*Shop for food in bulk at the local fresh food depot in your city.
*Always shop with a prepared list.
*Contrary to once held belief,shopping at the large grocery stores at the malls is a lot cheaper and they also sometimes offer customers discounts and many have a customer loyalty scheme.
RENT[30%]
Rent in our cities today are quite on the high side.However we should try not to exceed 30% of our income on rent.For those who receive annual rent allowance from their employers,it is a bit easier to make the bulk payment required by the landlords.For those not so lucky, they can take up a policy with one of the insurance companies who offer such products and pay in the equivalent of your monthly rent which is determined by dividing your annual rent by 12.
SAVINGS[10%]
Not less than 10% of your monthly income must go to savings regardless of the situation.This based on the principle of pay yourself first.Not having a savings culture will lead to a borrowing culture.Having the mindset of saving will help you cut frivolous expenditure on lifestyle and entertainment.The best way to save is to have direct deductions on your monthly income by your employer[outside pension]..However, this service is not offered by most employers locally.A good alternative is to take up a savings policy with a reputable insurance company and place a direct debit on your account.If you lack the discipline to consistently set aside a percentage of your income monthly, then you will never ever be financially independent.
MEDICAL EXPENSES[5%]
Some employers cover their employees medical expenses.For those not so lucky, you can set aside not more than 5% of your income for medical expenses.
CAR MAINTENANCE/TRANSPORT
One way to save on your car maintenance expenses is to find a good and reputable mechanic which is not an easy task nowadays.But we can do this by asking for referrals from friends and colleagues.Fuel is another portion of car maintenance which have gone up lately because of the partial removal of subsidy on fuel.One can also take public transport from time to time to reduce expenditure on fuel and avoid nagging traffic jams.So it is really hard to put an exact percentage on this category but you can determine how much will be budgeted by reviewing past months expenses.
ENTERTAINMENT/RECREATION[5%]
Recreation is a necessary part of life.This include visits to cinemas,parks,events and shows,etc and even subscription for cable television.However not more than 5% of your monthly income should be spent on this category.
MISCELLANEOUS[10%]
All items that did not fit into the other categories should come here.This could include phone expenses,blackberry charges,clothes,dry cleaning,internet,electricity,water bill, security levies, etc
BALANCE
Total up your budgeted expenses and subtract from net income.If you have anything left,fantastic.If not, you will need to cut down some of your expenses to have a good financial bill of health.
For free consultation and free budget template call 08039286522 or email hillcrestpro@gmail.com
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