Hello ladies and Fellas!!! How are we preparing to rock the weekend?
I know it has been a while. I have not had time to do so many things lately because of the pressure of work and preparations for my sister’s wedding (gbedu coming up shortly!). These days I feel used up body, soul and spirit, and most times by the time I return home I am too exhausted to do anything productive. Anyway, let us shift the attention away from me to the topic of the day – Personal Budgeting.
Personal budgeting is important because it helps you know how much exactly you earn and how or on what exactly you are spending your earnings. Recently I have found a need to have a proper budget because I needed to save for a big project ahead and what I had was not nearly enough to cover half of the cost. My younger sister recommended a formula which she got from the book, Secrets of the Millionaire Mind by T. Harv Eker. It is called ‘The Jar System’.
The key to managing your finances properly is to assign percentage of your earnings to various categories of your needs. Here is my sister’s formula which can be tweaked to meet personal requirements.
FFA – 10%
Financial Freedom Account: Wealth building account you use for investing to generate passive income.
LTSS – 10%
LONG term Saving for Spending: Used for large purchase like car and vacation. Also used for emergency fund.
EDUC – 10%
Education: For personal development
NEC – 50%
Necessity: Everyday expenses like groceries, rent, gas e.t.c.
PLAY – 10%
Play: Used for fun. Anything you enjoy spending your money on. It does not matter what it is.
GIVE – 10%
Give: Charity and Tithe. In my opinion, it is this 10% that makes the other 90% worth it so endeavour to pay your tithe (Malachi).
So here is the formula. You can tweak it to suit yourself. For example you can decide to make FFA 15% and reduce LTSS to 5% if you are not intending on making any big purchase/spending in the nearest future. Like my other kid sister does (www.lapassionvoutee.blogspot.com) you could save on NEC and then add the difference to PLAY.
For those of us in diaspora a cool budgeting application is Mint. This application connects your bank account and credit card and it automatically help you categorize how you spend and show you where you are overspending. Cool stuff yeah?
When I did my budgeting using this method I realised that I spent alot of my earning purchasing fabrics and cooking* – PLAY hence this ate into my NEC causing problems. This is indeed a dilemma for me because how does one desist from doing what you are passionate about?
Kindly note that this is by no means a one-size-fits-all solution to personal budgeting. Hope this is helpful.
*Cooking here goes beyond just cooking to satisfy one’s hunger. It includes aloooooootttt of ‘experimental cooking’.