However, planning a family budget in Nigeria goes beyond tracking spending habits and keeping receipts. Here are four steps to planning an effective family budget.
1. Set financial goals
This is the first and most important aspect of planning a family budget. You must first have an end goal before setting on a journey. Think for a while on the financial goals that align with every member of the house, then write them down. You may need to negotiate with them but make sure to set goals that everyone agrees to, else it’d be difficult to maintain the budget.
The goals you set are the targets that’ll help build your plan. Determine the amount you’d need to reach each goal, and how you wish to accomplish that goal. Examples of goals you can set are to get out of debt, save towards your children’s future education, retirement planning, or saving towards buying a house. Make sure to set short-term, medium-term, and long-term goals.
2. Evaluate your current financial situation
The next step is to evaluate the financial situation of your family by tracking your income and expenses. Make a list of your household income sources and recurrent expenses and their amounts. Then, track your expenses for two to three months, to understand your family’s spending habits. This gives you a clear picture of your net income and possible expenses to budget for.
3. Prioritize needs over wants
Once you know how much you have and what your goals are, choose a budgeting method that works best for you. As you track your finances, you’d notice the categories you do not need (or where you need to trim costs). To create an effective family budget, it is important to prioritize needs over wants and cut off the excesses in your expenses. This will allow some excess cash that you can save. Consider using the 50-30-20 budget rule to manage your finances.
4. Allocate funds
Start allocating funds to the essentials before moving on to the nice-to-haves and non-essentials. Fixed expenses are easier to list since the cost is usually the same month-to-month. For variable expenses, you’ll need to do some math to find the average.
5. Build your savings
Every family needs to have savings; a stash of funds towards meeting a financial goal. Even if you’re focused on paying off your debt, make sure to open an emergency fund and save three to six months of your family’s living expenses. Afterward, you can then start saving a particular amount each month, and invest your savings in a safe, high yield investment instrument like www.overwood.ng.
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