When’s your pay-day? 23rd, 25th, 28th, 30th, maybe even the sixth of the next month… or perhaps whenever a client pays? Whatever the case is, we all have a payday, and how we spend that pay determines, to a great deal, if we are coasting or panicking to your next paycheck.

As we all countdown to pay-day, it is important to note that no matter how much you earn, in whatever currency you earn, you will never be wealthy till you take control of your finances. One way of staying in control is drawing up a budget and sticking to it.  

Learning how to stick to a budget may seem like a daunting task, but it doesn’t have to be. A good budget helps you track where your income is going, so you can control it. I’m far from being wealthy, but I like to think I have a better grip on my finances now. Here are a few of them:

 

GIVE EVERY KOBO A NAME – alias break it all down. As a new budget’er, chances are that you’ll be tempted to lump several expenses planned for the month together under one category of spend. What this does to you is that you either overestimate or underestimate. When you underestimate, you end up spending more on some activities, leaving less than enough for the others. Let me give you an example: I helped a friend put a budget template together a few months ago, when we started the exercise, he had lump sums like:

‘Fuel/car = N25,000’, when we broke down the components of this cost, this is what we had: ‘Housekeeping = N70,000’, when we broke down the components of these costs, this is what we had:
Fuel       21,000.00
Tollgate       10,000.00
 TOTAL       31,000.00
Generator                    20,000.00
DSTV                    16,000.00
Laundry                    12,000.00
Security                    15,000.00
Groceries/Foodstuff                    35,000.00
Cway                      6,000.00
Cleaner                    10,000.00
Electricity                    10,000.00
 TOTAL                 124,000.00

With the differences in these balances, he would have had to spend substantially more to cater to these needs that are just as essential, and this would have frustrated his budgeting efforts.

 

EMPTY YOUR ACCOUNT INTO ENVELOPES– name physical envelopes or create digital ones by “creating GOALS on ALAT” and assign them a purpose before the month begins. I always advise people to sort out all their expenses as soon as they receive an inflow of funds. You may not need to pay a bill till the 17th of the month, I advise that you put that money away into a ‘pocket’ where you can take it from when it is due. At ALAT, you simply stash it and earn some interest on it. I’ll say that’s ‘winning’.

I use envelopes, physical envelopes. I have an envelope for cash items like Food, T-fare, Salon, and Miscellaneous; I then use my Bank accounts (or bank products like ALAT stash, Fixed Goal, Flexi Goal, CASA) to pocket funds for other items in my budget, and once monies in these envelopes finish, I know that’s it for the month. After allocating all the funds to various elements in my budget, my income account looks empty.

What this does for you is, you don’t end up spending money planned for one project or activity on another. Allocating your funds help you manage impulse spending better.

 

SAVE FOR SUNNY DAYS – don’t ever only save for rainy days, save for sunny days too. Every month, I make provision for some ‘flex money’. Trust me, you can live on a budget and live well in the moment. Yes, you may need to delay gratification on many occasions, but you also don’t want to feel deprived just because you are living on a budget. The moment you start to feel deprived is the moment you start to ‘misbehave’; you know this ‘misbehavior’ is the type that happens to people on extreme diet plans, they get frustrated and gain all the weight they lost.

 

SET UP A REWARD SCHEME: Reward yourself when you reach certain savings goals. It is okay to treat yourself occasionally, provided you plan for it in your budget. And when/if you go over budget, don’t beat yourself up. This is a marathon, not a sprint. Analyze where your mistakes were made, fix them, and give it your best shot next month.

Financial freedom is more than just being able to afford emergencies with the minimum dent on your account balance. It is knowing that you don’t have to worry about retirement. It’s the freedom to quit your job to do something you love, even if means getting paid less. Financial freedom is the destination, being financially responsible is the vehicle that takes you there. Building wealth is impossible if you’re living salary to salary. Don’t base your life on ‘looking rich’ rather than being wealthy.

 

Credit: Priscilla Adeboye, Our In-house Principal of Budget College