Budgeting is very important if you want to have any savings at all. One of the key things to come to terms with as a woman, is that, money is never enough. So if you don’t have a budget and watch your spending you will find that you have nothing to show for your hard work.
There are two ways to spending wisely, spend according to what earn or decide how much you spend every month then find ways to force your income to match your spending.
1. Income-Expenses Budgeting Method
This is a 50/30/20 budgeting method which says devote 50% of your income to needs, 30% to wants and 20% to savings and debt reduction.
So you have to look at your income “how much do you make?” then base your spending on what you make, this approach is the most popularly budgeting method used by people.
The pro: It ensures that you live within your means
The con: You have to cut cost (rather than increasing income) and this might feel like you’re dieting, i.e. financially and can be hard for some people. This approach is best for salary earners who have a steady income.
2. Expenses-Income Approach
This approach is less common, but it works. In this approach, you have to make a list of things you spend money on on a daily basis, then instead of cutting out anything, you have to figure out how to make enough money to meet your expenses as well as have savings.
If for example you spend money on;
- House rent
- Foodstuffs and groceries
- Insurance and tax
- Household supplies
- Retirement savings
- Home, car repair and emergency funds savings
And you spend NGN100,000 per month, but you’re currently earning NGN90,000 instead of cutting anything out of your expenses list, your target should be how to earn NGN150,000 or NGN200,000 per month. This way you can cover your expenses and still have some money left over to save.
You might decide to have a side hustle to increase your income or having an investment, you might even decide to start applying for jobs that’ll pay a higher salary.
This approach focuses on “generating more money to meet your expenses” instead of “cutting your expenses to meet your income.” But do not use this approach until you’ve actually found ways to make more money. And ensure that both your spending and savings increase with every pay raise.
The pro: It empowers you to double your hustle and make more money to meet your needs so instead of cutting cost, your attention is on making more money.
The con: It can lead to extravagant spending unless you intend to save a bigger percentage of your income.
It’s best for business-minded people who can dive into various fields and people who have multiple ways where they get money from.
PS: Did you like this post? Please share with your friends too.