ERT: 4:05mins
When’s your pay-day? 23rd, 25th, 28th, 30th, 6th of the next month, whenever a client pays? It’s funny how I’ve been in alllll these scenarios at different points in my life (hashtag: SmallGirlBigGod).
As we all countdown to pay-day, it is important to note that no matter how much you earn, in whatever currency you earn it, you will not be wealthy (legally) till you take control of your finances.
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I’m not sure anyone ever has enough money (Bill Gates doesn’t count, please), the major difference between ‘boxed up’ people and broke people is the financial plans and decisions they make.
When we say ‘broke’, we usually mean ‘without money to spend’, but in the real sense of it, being broke really means that if you lose your primary source of income today, and you cannot maintain your current lifestyle for the next 6 months… Ponder on this, we’ll talk about it another day.
I used to be constantly broke (the type of ‘broke’ we all know), so broke my broke’ness started on the pay-day itself, it was at the point I had to ask for a loan from my mum (who is a civil servant) that I lent myself some brain. I started to save diligently quite alright but ended up spending all my savings on travelling (which is my indulgence), so I went back to being broke and knew I had to fix something.
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 like to think I have a better grip on my finances now, and here are 5 unusual ways I have been able to achieve that:
BREAK IT ALL THE WAY DOWN – as a new budget’er, chances are that you are tempted to lump many expenses in the month together under one item. What this does to you is that you either overestimate or underestimate. When you underestimate, you end up using money for other activities for something else. Let me give you an example: I helped my 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:
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‘Housekeeping = N70,000’, when we broke down the components of these costs, this is what we had:
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*all costs here are estimates
With the differences in these balances, he would have had to use money for other essential things to cater to these needs that are just as essential, and this would have frustrated his budgeting efforts.
EMPTY YOUR ACCOUNT INTO ENVELOPES– Give every kobo a name, assign it to 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 particular 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.
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 for one thing, on another thing. When you draw a budget and leave your money in one place, within the first week of pay-day, you go out, spend money, see your account balance and think you still have money, so you keep spending, and end up broke by mid-month. Allocating your funds, help you manage impulse spending better.
PS: if you are in some personal debts, it is important that you settle them as soon as possible.
CHOP YOUR HAIR OFF – I suffer from a severe case of wanderlust, which means I need to go away for some time, every once in a while (I blame Lagos for this); but as a girl, it is expected that your hair remains on-fleek at all times. However, I realised at some point that I was spending sooooo much money on weaves and braids that I really couldn’t afford to travel and save at the same time, so I chopped off my hair. That way, I was able to save a large chunk of money (and time, in fact) from not having to buy weaves. I still go to the salon twice a month and some hair-days are better than others, but I look and feel great most of the time. My hair, was the disposable pawn (fancy shoes, bags and clothes too), while travel and savings were king and queen if you know what I mean.
What is that ‘disposable pawn’ that is feasting on your income? Please do away with it. If for example, you have a 9-5 job and absolutely cannot live without data/YouTube/Netflix/Instagram, but you can live without Cable TV, do you want to do away with that or cut it down so you can use the money for something that really affects you? Do you want to cut down on your ‘champagne popping’ budget so you can maybe buy a property? It all boils down to what is really important to you.
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 ‘misbehaviour’ is the type that happens to people on extreme diet plans, they get frustrated and gain all the weight they lost.
That said, see below a template of my monthly budget, (some variables change here and there month-in, month-out). The items in bold are items I sort out before anything else, I always pay my future-self first:
AUGUST income
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SEPTEMBER expenses
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COST
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God’s Tithe
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My offering
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T fare
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Food
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Salon
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Short term savings – (fairly accessible for major exigencies or sometimes just Trips)
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Recharge/data
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Miscellaneous (accessible for minor exigencies or wants. You needn’t spend this cost every month though)
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Rent (even if your rent is N300,000, and you earn N600,000 per month, it is easier to save N50,000 every month towards your rent than to withdraw N300,000 at one go. I don’t pay rent at the moment, so this is just another pocket of savings for now)
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Mum
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Long-term savings (since it is likely that my short-term savings might end up going into a sweet return-ticket deal, I save 25% of my income in this pocket that is virtually inaccessible). There are so many investment options you can explore for your long-term savings. Empower your money so it can work for itself.
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Dad
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Toiletries
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Give (I allocate some money every month for charity purposes after I exhaust this, I’m sorry no amount of ‘aunty, happy weekend’ will make me drop any money. I simply cannot afford it. I lend my friends money though)
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Shoes
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Adventure (monies for Crust and Cream, cinema, etc., are hosted in this pocket. Again, when it finishes, my auto-response is switched on to ‘I’m sorry, I cannot afford it’)
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Sister X
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1 Travelling suitcase
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TOTAL (this total must be equal to your total income (salary, monies you’re being owed, side hustle income, etc.) for the month
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SET UP A REWARD SCHEME: Reward yourself when you reach certain savings goals. It is OK to treat yourself once in a while, 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.
Finally, financial freedom is definitely more than just being able to afford emergencies with a minimal 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 actually being rich.
Unity and Faith, Peace and Progress.
xx
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