Lagbaja’s Family Budget (By Mute Efe)

While a lot of us have heard about Goal Setting and may have even taken classes on Goal Setting; not many of us have given much attention to budgeting. However, when it comes to financial goals, budgeting is a critical aspect.

Budget is a broad concept and a little complex. However, I am going to try and make it as simple as possible so you can get a good grasp of it.
Simply put, budgeting is stating how your money will be spent.

Now that will be easy if you already had the money in your account and you are only drawing up a list of how to spend that money. But it is not so.

The reality is that you don’t have the money yet but you still have to plan how to spend the money. So you are drawing up a list of what you will need money for in 2018 and how much money you will need. It is that information you will then input into your financial goals for 2018 so you can come up with a plan on how to get that money.

What are the expenses you will incur in 2018? You have to be detailed. Capture EVERYTHING. Since you are budgeting for the year, you calculate how much will be spent in one month and multiply by 12. To make it easy, put them in blocks.

As an example let’s look at Lagbaja’s family budget for 2018

Home

Rent – N350,000
Feeding – N45,000/month making N540,000/year
Refilling of gas cylinders – N3,500 every two months making N21,000/year
New gas burner – N18,000
Repainting of apartment – N30,000

Bills

Electricity – N3,000/month making N36,000/year
Pay TV – N2,500/month making N30,000/year
Fuel for Gen (30 ltrs/month) – N145/ltr making N52,200/year
Gen maintenance (3 times) – N5,000/maintenance making N15,000/year

Lagbaja Junior

School fees – N150,000/term making N450,000/year
New uniform – N7,000
Books – N12,000/term making N36,000/year
School bus – N20,000/month making N240,000/year
Jr’s school shoes – N6,500
New clothes/shoes for junior – N60,000

Personal Development

Books – N3,000/book/month making N36,000/year
Training class – N10,000/qtr making N30,000/year
One Professional course – N80,000

Toiletries

Tissue paper – Pack of N350/month making N4,200/year
Harpic – N400 per unit/month making N4,800/year
Bathing soap – N400/tablet every 2 weeks making N9,600/year
Toothpaste – N300/tube every two weeks making N7,200/year
Washing detergent – N800/month making N9,600/year
Bar soap – N120/tablet, 3 tablets/month, making N4,320/year
Air freshener – N250/block. 4 blocks/month making N12,000/year

Body Maintenance

Perfume – N5,000/bottle/month making N60,000/year
Body cream – N2,500/month making N60,000/year
Deodorant – N1,500/stick bi-monthly making N18,000/year
Hair cream – N400/cup monthly making N4,800/year
Hair cut – N400 every two weeks making N9,600/year
Wife’s hair-do – N7,000 per month making N84,000/year

Wardrobe

New clothes (Mr) – N100,000
New clothes (Mrs) – N150,000

Major Purchase

Tokunbo car – N2,600,000
Deep freezer – N80,000

Total: N5,255,820

Note: It is better to use an excel spreadsheet when doing this.

Lagbaja’s family budget, therefore, is N5,255,820 (five million, two hundred and fifty-five thousand, eight hundred and twenty naira only).

Please also note that this is just an example. Your budget can be very different. Your wife may be pregnant and due to deliver next year. You have to include that in your budget.
How much is antenatal? How much will be spent shopping for the baby’s needs before arrival of the baby? How much does the hospital charge for delivery? Delivery may be through CS so you also need to factor that in.

Lagbaja and his wife don’t have living parents so there is no budget for them monthly or quarterly. You may still have and need to budget for that as well.

You may also want to budget for your savings as well. Yes, how much will you be saving every month? Also, you budget for your church offerings and tithes. You budget for any and every area you spend money on as well as miscellaneous expenses (3 to 5 percent of total budget).

At the end of the day there are a lot of things that may be in your budget that are not in Lagbaja’s budget and vice versa.

Back to Lagbaja’s Family Budget.
What Lagbaja just did is the easy part. It is known as the draft. It is not final yet. The budget is based on current prices. Inflation will set in and alter the prices so Lagbaja has to budget for inflation, too.
Let’s say he uses 8% as the inflation factor. 8% of N5,255,820 is N420,465.60. He then adds another line item on the budget after Total and calls it Inflation (8%) with a budget figure of N420,465.60.

Total: N5,255,820
Inflation (8%): N420,465.60
*Grand Total: N5,676,285.60*

His new total after adding the figure for inflation becomes N5,676,285.60 (Five million, six hundred and seventy-six thousand, two hundred and eighty-five naira, and sixty kobo only).

Mr and Mrs Lagbaja’s combined income is N4,750,000 but the budget is showing N5,676,285.60. That means expected income alone cannot fund the budget.

It is either the budget has to be adjusted by taking out some things they can do away with or they have to find a way of making more money so they can fund the budget.

Lagbaja has been investing in stocks for some years and he was paid dividends in September, 2017, in the sum of N650,000. He and his wife also have a joint savings of N300,000. They therefore have a total of N950,000 in savings.

N950,000 added to their combined income of N4,750,000 amounts to N5,700,000 which is enough to fund the budget. At this stage Lagbaja can take that budget to be his final budget.

In your case you may need to go back to the budget itself and strike out some items or reduce the quantity until your expected income for 2018 can actually fund the budget.

Better still, you can come up with an idea that will help you get the difference. Maybe you need more clients or you need to provide more services. But it must be concrete enough to rely on.

It is this budget template you then use to track your expenses in 2018. The idea is to spend only on what you have budgeted for so that your spending does not exceed your budget.

Wow! What an exercise. I hope the mathematics was not too boring for you. One thing I can promise you is that it is only difficult the first time. Subsequently it gets easier. I hope you will not just read but also do the work and come up with your own budget for 2018.

If this post added value to you, kindly drop a comment to let me know what you learnt. And if you have any questions, feel free to ask. I will answer as many as I can. Also remember to share this post to add value to others.

Mute Efe,
Facilitator, School for Personal Leadership.

(Mute Efe can be contacted through his Facebook account)

Mute Efe