Creating a Budget: How to Set Financial Goals and Allocate Your Income Accordingly

Ah, creating a budget. It’s the adult equivalent of eating your vegetables: not exactly exciting, but necessary for your overall well-being. You may think that budgeting is something only accountants and financial experts need to worry about, but I’m here to tell you that it’s actually an essential skill for everyone. In fact, creating a budget can help you achieve your financial goals and live the life you want. So, let’s dive in and talk about how to set financial goals and allocate your income accordingly.

1. Define your financial goals: The first step to creating a budget is to define your financial goals. What do you want to achieve? Maybe you want to pay off debt, save for a down payment on a house, or start investing. Whatever your goals are, it’s important to write them down and make them specific. For example, instead of saying “I want to save money,” say “I want to save ₦500,000 in the next year.”

2. Determine your income and expenses: Once you’ve defined your goals, the next step is to determine your income and expenses. This may seem obvious, but you’d be surprised how many people don’t know exactly how much money they’re bringing in each month or how much they’re spending. Make a list of all your sources of income, including your salary, any freelance work, and any other sources of income you may have. Then make a list of all your expenses, including rent or mortgage payments, utilities, groceries, transportation costs, entertainment, and anything else you spend money on.

3. Allocate your income: Now that you know how much money you’re bringing in and how much you’re spending, it’s time to allocate your income. This means deciding how much money to put towards each expense category. Start with your essential expenses, like rent or mortgage payments and utilities. These are the expenses you can’t live without, so make sure you’re allocating enough money towards them. Then move on to your other expenses, like groceries and entertainment. Be realistic about how much you’re spending in each category and adjust your budget accordingly. Turbomoni app has an excellent feature called myPurse that can help you to digitally categorize, budget and fund your routine expenses.

4. Find ways to save: If you’re like most people, there’s probably at least one expense category where you’re spending more than you need to. Maybe you’re eating out too often, or maybe you’re paying for a gym membership you’re not using. Take a close look at your expenses and see where you can cut back. Maybe you can start meal planning and cook at home more often, or maybe you can cancel that gym membership and start working out at home. Even small changes can add up over time and help you reach your financial goals faster.

5. Stick to your budget: Finally, the most important step in creating a budget is sticking to it. It’s easy to create a budget and forget about it, but if you want to achieve your financial goals, you need to be consistent. Track your spending regularly and make adjustments as needed. If you overspend in one category, see if you can cut back on another. And don’t be too hard on yourself if you slip up occasionally. Budgeting is a skill, and like any skill, it takes practice to master.

Creating a budget is a crucial skill that can help you achieve your financial goals and live the life you want. By defining your financial goals, determining your income and expenses, allocating your income, finding ways to save, and sticking to your budget, you’ll be well on your way to financial success. So go ahead, create that budget, and take control of your finances. Your future self will thank you.