Ask real people — or the internet — for financial planning tips, and observe how quickly the word BUDGET comes up. A good number of Nigerians understand the basic principle of budgeting, but do we really know what makes a budget?
And no, your shopping list with prices affixed is not a budget. Maybe in some way, it’s a mini-budget, a shopping budget, if you will. But an expense budget is a lot more all-encompassing. A budget is a financial plan or template that helps you keep track of your income and expenses. And the point of a solid budget is to help you achieve your financial goals and plug all holes that cause you to overspend.
But creating this budget is only one-half of budgeting. There are many other aspects of budgeting that we often neglect, which in turn hinder the efficacy of our budgets. So if you’re someone who has tried budgeting once and quit because it did not work for you: keep reading.
Below, we’ve highlighted seven budgeting mistakes you may have been making:
1. Not putting your budget down in writing
Your budget should not only exist in your mind. Despite your best intentions or efforts, relying on your mind alone makes your finances impossible to track.
A visual representation is the game changer you need in your budgeting journey. Why? For accountability sake. Aside from recurring bills, writing down your budget is particularly helpful for documenting one-off expenses to give a more accurate overview of your weekly/monthly/yearly spending.
There are a number of tools you can use to create your budget: from a simple notepad to spreadsheets to ready-to-use budgeting templates on the internet. If you’re someone who rarely spends cash, your bank or PocketApp transaction history can help with the exact cost of things.
2. Setting unrealistic goals
Your budget will only do what you tell it to do. So, if you set the expense bar too low, be prepared to financially contort yourself to scale through. Set the bar too high, and you fail to meet your future financial goals.
Your budget should be created to accommodate your current lifestyle and future money goals. Ensure that it fits like a glove. Your budget on a ₦200k salary should not be the same as your friend who earns ₦500k, or the one who earns ₦100k.
3. Not following up with your spending:
Budgeting is not a one-time activity. An accurate budget takes months, sometimes even years, of tweaking. You should regularly update your budget to account for unplanned expenses, new bills, and even inflation.
Another upside to keeping tabs on your spending is that it will help you see all the unnecessary purchases or subscriptions that you could stop or cancel to save some money on. This keeps the guesswork to a minimum and improves your budget in the long run. So, work on writing down every single expense, big or small.
4. Having a rigid budget
We know that the point of a budget is to help achieve financial discipline. But contrary to what you may believe, your budget does not have to choke. Since the cost of living does not care for you and your tight budget, you should leave some wiggle room within your budget in order to have a decent quality of life.
Wiggle room means money for miscellaneous purchases and there are a myriad of things that belong in this category: A treat, for the dedicated foodie; going out, if that’s your thing; emergencies, even though nobody wants those; impulse buying, if you can’t resist a good sale. You’re more likely to meet your savings goal when you factor in sundry expenses such as these.
5. Not factoring in saving
Major side eye. What’s the point of budgeting if you’re not saving a dime? The first thing you should do once you receive your earnings is to save towards your target (or like we say at PiggyVest, pay yourself first). Unless you don’t have any saving goals, in which case, you should create one.
Always save before you spend. Never fail to top up your Piggybank once the alert drops. If you struggle with setting aside money after you earn, Autosave will be your best friend!
6. Not cutting costs
“All my expenses are absolutely important.” Are they, though? Or do you just not have a budget? When you start religiously tracking your spending, you’ll be surprised at the number of black holes you’ll find.
To fix this problem, start by discarding any recurring subscriptions you do not need. Release yourself from the shackles of peer pressure. Eat at home, please. Consider cheaper alternatives to the brands you’re used to. And very importantly, learn to say no.
7. Budgeting alone
External factors will always attempt to influence your budget. Trying to attain financial freedom when surrounded by people who couldn’t care less about your goals is pointless. They’ll find a way to undo all your progress.
Unless you live somewhere in the endless vastness of Mars, it’ll be in your best interest to inform the people around you about your budget. Talk to your roommates, friends, family, or partner about it. You may not be able to successfully motivate them to join you, but at least they will understand your choices and not inadvertently push you to overspend.