One of the biggest ways to be successful with your money is knowing where your money goes each month.
Every nation including Nigeria begins their financial year with a budget; major organisation/companies are not left out, there is always a budget for everything they do. But when it comes to our individual lives, we tend to run our family expenses without any budget.
One of the most difficult things to do when setting up a family budget for the first time is to figure out how much you should spend in each category. The whole purpose of a budget is to set your spending habits straight and to bring you back into line whenever you miss your way.
Percentages of Household Spending
This is only a guide that will help you to make your own budget; your percentages may vary from our guide due to the size of your family, the area you live in and what your financial goals are.
CATEGORY: Percentage of Overall Spending
Housing (mortgage/rent) 25-35%
Utilities (water, power, & gas) 5-10%
Transportation (car payment, Gas, services) 10-15%
We will be discussing about some of the different categories of the household budget.
FOOD: This category can be relatively small or very large depending on the size of your family, your location and income level. If this is your first time of budgeting then we recommend that you should start by allocating 10-15% of your monthly income on food.
Studies have shown that lower income families spend a lot more money on food as a percentage of their overall budget than that of a higher income family.
If you notice that you are spending more than the budgeted amount of your monthly income, letâ€™s say 30% of your monthly income; you can either cut your spending or get another source of income to supplement your salary.
HOUSING: This category is typically the largest monthly expense; it is advisable to spend a fixed percentage of your income on housing. It is generally recommended to spend about of 25% of your monthly income on rent.
Letâ€™s say your monthly salary is N100,000 per month, then your rent per month should be N25,000, so in a year you should be paying N300,000 for the apartment you live in. But if you are living in an apartment that cost N600,000 per year; this means that you are spending 50% of your monthly income on housing. You can solve this challenge in two means; either you look for another source of income to make up for the balance or you look for a place that would not cost you more than 25% of your monthly salary.
TRANSPORTATION: This category will vary depending on where you live, whether you have a long commute to and fro work, or if you have your own car or not.
This budget should take care of your car payment, gas, car repair and services; it should also include your transport fare if you will be using public transport.
It is generally recommended to allocate 10-15% of your monthly income on transportation and you can adjust as the need arise.
HEALTH: this is one category most Nigerians pays less attention on until they are sick, you may never know when you may need to go to the doctor. We recommend allocating 5-10% of your budget to health.
I would advise that everyone should visit the nearest National Health Insurance Scheme (NHIS) office; they have some nice affordable health insurance packages. One of such package is the voluntary contribution package, with just N15,000 one can be covered for a whole year. But you can still visit any of the NHIS office for the current price and further enquiries.
SAVING: This is one major category of the household budgeting; we recommend allocating 10-15% of your monthly income on saving.
We save for three reasons: emergencies, big purchases and wealth building, so when you budget for savings, you should have the reason while you are saving.
I always recommend you to save your money in an interest bearing account and my preferred interest bearing account is the money market account.
GIVING: This is one area where most Nigerians hardly budget for. Due to the fact that you are working and receiving salary; most of your friends and family members would want to have a piece of that salary.
If you donâ€™t budget well for it, you will exhaust your salary on trying to help every family member in need.
So we recommend you allocating 10% of your monthly salary on giving; once the 10% is exhausted for that month, any family member coming for help should be moved to the next month.
In conclusion, a budget gives you control over your money, and when you create a budget each month, you get the privilege of telling your paycheck where to go instead of wondering where it went.
Before starting your household budgeting you must have the habit of first setting a financial goal for budgeting. You should not just budget for the sake of budgeting only, your goal for budgeting could be to have enough fund saved in your emergency fund account, or extra cash to start a business, whatever it is, you must determine your financial goal.
Olodu keonyedi â€“ is a trained engineer and by passion and personal development a public/motivational speaker, a business coach and human capacity developer, he has a B.Eng degree in Civil Engineering from the University of Nigeria Nsukka, he is a member of Nigeria Society of Engineer and a COREN registered Engineer.
Email: firstname.lastname@example.org Tel: 08037489704, www.instagram.com/sir_keon. www.facebook.com/olodu keonyedi_mentorship