Having a budget is the act of deciding how much of your money you’re going to spend on one item, how much on another, and so on, before you’re actually in the position of spending the money. Sticking to a budget is the act of following through on those decisions.

Creating a budget isn’t easy, but sticking to any budget is extremely difficult. The trick is to focus on the word realistic. It doesn’t take much research or many difficult decisions to decide that you’re going to spend N50,000 per month on food. But if you’ve never spent less than N100,000 per month on food, you’ll blow your budget right out of the water the first week.

Instead, before you decide on the numbers in your budget, you’ll need to fully assess your current situation, take a hard look at where you can cut back your financial obligations (both large and small), restructure your debt (if necessary), and see whether you can add income. Only then are you ready to decide realistically where every penny will be spent. A budget is a tool, and like all tools, the results you get from it will be determined by how you use it. If you make a realistic budget and stick to it, you can watch your life move forward. If you set unrealistic budgetary expectations and don’t even bother to follow through with them, then don’t think your financial problems are over.

A picture showing Your budget will help you get what you want. and how to set a budget.

Setting Budgetary Goals.

Used correctly, a budget doesn’t restrict you; it empowers you. You’re going to establish a budget because you have financial goals that are not being met. For example, you may want to:

  • Be able to pay all your bills from your paycheck—and maybe have a little left over.
  • Buy your first house
  • Save for retirement but can’t seem to find any extra money to get started.
  • Give more money to your church or to other nonprofits
  • Be your own boss
  • Take a vacation
  • Buy a new—or at least newer—car
  • Remodel part of your house
  • Manage money better to avoid lifestyle inflation
  • Go back to school and begin a new career
  • Get a whole new wardrobe

Are any of these your goals? If so, budgeting will get you there, even if the odds seem impossible right now. Even if you’re stuck in a job you don’t like, desperately want to go back to school or have to take care of an aging parent.

You can meet your financial goals—just as others have done before you. With a good budget, a little patience, and a whole lot of determination, you’ll eventually get there.

What Do You Need to Create a Budget?

An image showing how to create a budget

You might be tempted to answer this question with something clever like “money.” But if you do that, you’re missing the point. Creating a budget isn’t about having money; it’s about figuring out what you’ve got, what you’re spending it on, and how you can realize your dreams.

In order to do this, you’ll need some basic tools.

Payment Solution Providers

You need a payment solution provider that will enable you pay for things in installments. One of which is “Pay Small Small” powered by Kalabash a financial technology services firm focused on developing innovative payment solutions and financial products for Africans, “Pay Small Small” a smart solution to lock down current prices for as little as 25% and pay the balance in installments to avoid the risk of inflation.

Spending and Income Records

One goal you’re going to accomplish as you go through this article is keeping accurate and careful records of your expenses and income. However, it’s possible that you’ve not been doing that up to now.

Assemble all your bills in one place, possibly in a folder or other container so you won’t lose any of them. Most financial advisers recommend keeping your financial records for at least three years. This doesn’t need to be a huge burden; just make sure you keep them sorted and somewhere you can have easy access to them if you need them.

A Computer

Of course, people made budgets in the days before computers, and you can still make a perfectly good one, sitting at the kitchen table with a pencil, a pad of paper, and a calculator. But why not do things the easy way? If you have a good, working computer, put it to work for you. Create a folder marked “Budget” (or something similar) so you know where all your files are going to go. If you have thoughts about your budget and about ways you can save money or extra sources of income you forgot about, note them down and toss them into the “Budget” folder. That way, they’ll all be centralized, and you can get at them easily.

With budgeting, it’s all about getting from where you are financially to where you want to be. And everyone should aim to do that. You have to decide exactly where you’d like to end up and set realistic goals to achieve that.