If you have ever received your salary and, somehow, a few weeks later wondered, “Where did all my money go?” you are not alone.
This is one of the reasons I believe budgeting is so important.
A budget is not about restricting yourself from spending money. It is about deciding what you want your money to do before it disappears into random expenses.
So, how do you actually create a budget?
1. Know your income
Start with the money you actually receive.
If you have a salary, use your take-home pay rather than your gross salary. If you have side income or irregular income, work with a realistic estimate rather than assuming that every month will be your best month.
The goal is to know exactly how much money you have available to work with.
2. Look at your current spending
Before deciding how much you should spend, find out how much you are actually spending.
Look at your bank statements, mobile money transactions, receipts or wherever you normally spend money.
How much goes to food?
Transport?
Rent?
Bills?
Shopping?
Entertainment?
Family support?
Debt?
Don't judge yourself while doing this exercise. Just look at the numbers.
You need the truth before you can make a better plan.
3. Separate needs from wants
Not every expense has the same level of importance.
Your rent, basic food, transport to work and essential bills are different from eating out, entertainment or buying something simply because you like it.
This doesn't mean wants are bad.
You are allowed to enjoy your money.
The point is to know the difference so that you can make intentional choices.
4. Give your money a job
Now decide where your income should go.
Some money will cover your current life.
Some should go towards savings.
Some may go towards debt repayment.
And some can go towards your future goals and investments.
You can use a budgeting method such as 50/30/20, zero-based budgeting, or another system that works for you. There isn't one budgeting system that magically works for everyone.
5. Track what actually happens
This is the part people often skip.
Creating a budget is one thing. Following it is another.
At the end of the month, compare your plan with what actually happened.
Did you spend more on food than expected?
Did you save what you planned?
Did an unexpected expense come up?
Use that information to improve next month's budget.
And remember: your first budget does not have to be perfect.
Your budget is a tool you improve as you learn more about yourself and your money.
A budget is simply you telling your money where to go instead of wondering where it went.
