WHICH SHOULD COME FIRST, BUDGETING OR SAVING?

It has been two months of tracking my personal expenses. I have always been lazy at it which was why I embarked on this journey with a few here that downloaded the template and made out time to populate it. 

So can you tell me how much you spent on transportation last month? 

The image above is a snapshot of my expenses tracker. As a foodie, I spent more on feeding and groceries. But that is because I eat out mostly and go to work via staff bus enabling me to spend less on transportation.

There were days I forgot to update my template. But I can say for certain I tracked over 80% of my expenses and despite not having accurate data; I still have more than enough to serve as a basis to budget for subsequent periods. 

“A budget is telling your money where to go instead of wondering where it went”

The goal is to follow this quote by ‘Dave Ramsey’ as a guiding principle. I have gone through my expenses tracker over again and I wish I had directed the outflow of my income appropriately instead of spending money as the spirit leads.

With a budget, I can prioritize my needs and cater to them appropriately. By tracking expenses and following a plan, it makes it easier to pay bills on time, build an emergency fund, and save for major expenses like rent which currently happens to be at the top of my list.  

To be honest, drafting a budget has really been helpful especially now that I am settling into a new environment. The only way to handle this is by prioritizing these expenses and incurring them within my capacity because Lord knows how much I avoid taking loans so I rather save now for the things I need to get later and find a means to survive before then.

And this is why I would like to probe a little further into savings:

Someone once told me no amount is too small to save. Regardless of how little one earns, there should always be a portion that goes directly to saving. Let me reiterate this again, No amount is too small to save! 

I’m glad to have stuck to that notion. The money didn't multiply obviously but it did instill in me a savings culture which I am most grateful for.

 Personally, being financially prudent has been a lifesaver on many occasions, savings financed about 60% of my bills during my coursework; I probably wouldn't be where I am currently if I didn't have enough saved up to travel for my final interview. 

By starting small regardless of your level of income, you cultivate the habit of being prudent over time and having funds to resort to during rainy days.

But how do you retain this habit when circumstances change? A typical example is when you get a new job in a new location. You are immediately faced with so many pressing ‘needs’ to meet and over time, ‘wants’ to satisfy. 

Let me clarify before going further- ‘Needs’ is something necessary to live and function like house rent, feeding & transportation; ‘Wants’ on the other hand are things we desire like luxury shopping, gadgets, etc. 

I don't have a problem with spending on our needs. Most often we have a budget for that and sticking to that is much easier compared to spending on wants. We tend to create a budget only for essential items ‘needs’ while forgetting to monitor how much it is we allocate towards savings and personal expenses ‘wants’ resulting in an impulse spending lifestyle.

It's almost natural to get intimidated to upgrade your lifestyle to suit your current pay grade up to a point we might call lavish spending. Don't get me wrong, upgrading your lifestyle is quite important, you ought to look like a money bag and to compensate for the stress you went through to earn money but the essence is to try not to go overboard.

We are more inclined to increase our spending than savings when there is even a slight increase in our income; so how then can you invest over a long duration when it's almost impossible to save up for medium-term goals?

We won't be diving into an investment just yet, because personally, I am of the opinion to always focus on savings first, before investing. It makes no sense to have to liquidate part of our investment when there is a pressing need or not have an emergency fund set aside for unexpected circumstances. 

And this brings us to the point where I say budgeting doesn't preclude saving. Making a budget should most likely be your starting point and should include a portion allocated specifically towards saving future needs and emergencies. It is essential to also make a list of all necessary running expenses while making little provision for miscellaneous or better still a 5% addition to the budget for instance providing 12k for transport instead of 10k to cover for any increases that may arise (just an easy way of telling you to take inflation into cognizance). 

Another essential line item in your budget is to make provision for personal expenses ‘wants’; by so doing, you decide before time how many bags you want to buy and how much you want to spend on skincare so that way you manage your expenses.

This budget also serves as a guide to building savings and allocating funds targeted toward investment in the later period.

 Thereafter, what you need to do next, is solely up to you. It takes you alone to stay within budget, to be prudent and forward-looking, to not always result in loans, and to live within your means. 

And just like Adekunle Gold said, cut your coat to fit your body!