A budget can be one of your best defences against sapa and a trusty tool in your journey to wealth creation — no matter how much you earn. But do you know exactly how to create a budget? Well, that’s what we are here to help you figure out.
You can create a budget by setting a realistic budgeting goal, deciding on a budgeting period and reviewing your income for that period. Then, you’ll need to list and label your expenses, set a spending limit and savings goal and adjust your budget.
How to create a budget: 10 simple steps
In this article, we’ll show you how to create a budget that works in Nigeria. Afterwards, we’ll share some practical budgeting tips that will help elevate your financial game. Let’s go!
1. Prepare all the tools you’ll need to create a budget
You’ll need pen, paper and a spreadsheet or budgeting app. You might also need to open your spending or bank app to review your income and previous expenses.
2. Set a realistic budgeting goal
This step might seem odd, but having an end goal in mind can help you make an amazing practical budget. Decide on the purpose of the budget and write (or type) it down. For example, you could create a budget for spoiling your significant other and name it “To Spoil My Boo”.
3. Decide on a budgeting period
Your budget can be daily, weekly, monthly or even one-off. It doesn’t matter. The most important thing is to set a period that works for you and your lifestyle.
4. Review your income for the budgeting period
Write down your salary, wages, allowances and every other source of income you have coming in. Add them all up and note it down in your notebook, spreadsheet or budgeting app.
5. List your expenses for the period
Write everything down — from your gym membership and data subscription to groceries and “chop life” money. You can use your payments or banking app to review the previous period’s expenses, if you have trouble remembering everything.
6. Label your expenses as fixed or variable
Fixed expenses are unavoidable and include electricity bills, food and health insurance. Variable expenses, however, are more flexible and include items like your Netflix subscription and gym membership.
7. Calculate your budget surplus or deficit
You can do this by subtracting your overall expenses from your total income. This step will help you decide what items to remove or add to your budget. You can also use it to determine the minimum (or exact) spending amount you need for your budgeting period.
8. Set a spending limit
You can apply the 50/30/20 rule when setting a spending limit by allocating 50% of your income to your needs and 30% to your wants. The remaining 20% should go into savings, investments and debt servicing.
9. Create a savings goal
Saving is essential to any budget, and we recommend simplifying the process using PiggyVest to get returns of up to 35% — depending on the plan you use. You can save any amount, but putting aside 20% of your income is a great place to start.
10. Make adjustments to your budget
The purpose of a budget is to give you control, so don’t be afraid to tweak things if your original budget isn’t working for you. In fact, we recommend reviewing your budget as often as possible to ensure it fits your spending habits and income level.
It’s that easy!
Tips for budgeting in Nigeria
It’s no news that budgeting is excellent and beneficial. However, surging petrol prices, CBN-driven monetary policies, and even the student loan saga can make budgeting in Nigeria a stressful affair. We are here to help!
Here are some helpful tips for creating a budget in Nigeria:
- Track your income and expenses. Tracking every part of your finances can help you understand your money and aid your budgeting efforts. Still, keeping a detailed record can be exhausting, so we recommend using Pocket by PiggyVest to ensure you always have access to detailed records.
- Create a realistic budget based on your income and expenses. Don’t try to copy someone else or set unattainable goals. For example, you might need to allocate more money to eating out if you’re too busy to cook.
- Set up an emergency fund. This fund may or may not be separate from your savings and should help you cover unexpected expenses without disrupting your budget. You can use PiggyVest’s Flex Naira feature if you don’t have an emergency fund.
- Always prioritise essentials. Your needs must always come first when you’re creating a budget. For example, getting a new phone when your rent is due is not a great idea.
- Automate your savings. Using apps like PiggyVest can be a game-changer if you’re creating a budget since they help automate stressful aspects and offer juicy interests. For example, You can use the PiggyBank autosave feature on PiggyVest and get up to 10% annual interest.
- Invest in vetted opportunities. We recommend investing as soon as possible, but it’s a great idea to start after you’ve built a sizable emergency fund and paid off high-interest loans. You can use Investify on PiggyVest and earn up to 35% annual interest on your funds.
- Seek professional advice. Finances can be tricky, but you can make the most of information on high-quality blogs (like the PiggyVest blog) and YouTube channels to succeed.
Follow these tips, and you should be able to make the most of your money even if $1 exchanges for ₦1,000.
Note that the steps we shared above are for creating personal budgets, and might not necessarily work for other types of budgets. Still, the steps are handy and tailored for the Nigerian experience, so you can try creating yours right now!
This article has all the information you need to create your budget today. However, we’ve also included some extra tips and valuable insights to ensure you build financial intelligence while you’re at it.
A note of caution: While budgeting can be super effective, some common mistakes (like setting unrealistic goals) can affect the impact of your spending plan or even discourage you from budgeting. Avoid them!
The articles on the PiggyVest Blog are developed by seasoned writers who use original sources like authoritative websites, news articles and academic journals to perform in-depth research. An experienced editor fact-checks every piece before it is published to ensure you are always reading accurate, up-to-date and balanced content.
- Harvard Business School Online: How To Prepare A Budget For An Organization: 4 Steps
- CNBC: How to create a budget in 5 steps
- Bank of America: Creating a budget
- Moneysmart: How to do a budget