Have you considered how much of your earnings you cannot account for? Apart from your needs, like groceries, and wants, like a new pair of black shoes, there is another real category called “Unclassified and Uncaptured spending”.
There are many ways to set a budget and to decide how much to spend on a monthly basis, after you have paid yourself.
Paying yourself is the act of immediately deducting an amount from your income and placing this in a savings or investment account. Share on XAn aggressive recommended budget ratio is “10:30:10:50”
- 10% as Tithe
- 30% into a Savings account (which can include an emergency fund)
- 10% towards investments
- 50% towards wants and needs.
After some research, we found that people spend between 15–29% of their income on items they did not budget for and cannot account for.
Unbudgeted spending is any spending you didn’t plan for or budget for because it seemed small or random. All those small amounts spent on credit for your phone, buying magazines, eating out at restaurants, and going to the salon add up to a major chunk of your spending.
Personally, when I started tracking my spending, I noticed a huge amount I was spending that fell into a category I could not directly account for. You know that feeling of pulling N20,000 from the ATM, and you are scratching your head to remember what you spent it on. Thanks to tracking my spending I noticed over time there there were items I was spending on that were not one-off and showed up at least every two to three months.
I tackled this by creating a budget category for items that seem unclassified, non-recurrent, and that eat into your spending. You can only track and manage spending where you know what you are spending on. Let’s walk through an example of a Nigerian budget you can follow and adapt to make your own.
See the example of a Nigerian budget below –
| Per Month | Per Annum | ||
| Income | 500,000 | 6,000,000 | |
| 10% | Less Tithe | 50,000 | 600,000 |
| 30% | Less Savings | 150,000 | 1,800,000 |
| 10% | Less Investments | 50,000 | 600,000 |
| Income Left to spend | 250,000 | 3,000,000 | |
| Budget | 200,000 | 2,400,000 | |
| Unclassified | 50,000 | 600,000 |
So in this case, in one year, Sami, who earns N500,000 per month, can spend up to 20% of his disposable income on unbudgeted spending and, at the end of the year, would have spent N600,000 he DID NOT budget for.
Think about all the things that this money could have been used for? It could have been put into a fixed deposit account earning 7%, used to purchase shares, used to start a side business, or even as an installment payment for a piece of land in an estate.
The point is that this adds up, and it’s best for you to try to close this gap. Understanding where your money goes is the only way to curb your spending.
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