set and stick to a budget

Financial Literacy Month Series – Week 3: Set and stick to a budget

Set and stick to a budget. It’s the third week of the Financial Literacy Month. In our first week, we’re challenged to set financial goals and in the second week, understood Saving Money vs. Spending Money and the importance of tracking what comes in and what goes out in order to achieve our financial security.

How is the journey so far? Are you applying these tips and are they working for you? We’re very happy to learn from you – share with us in the comment below. This week, we’re talking about how to Set and Stick to a Budget.

Every great financial plan starts with a sound budget. If you’re trying to pay off bills or save for a dream house, a budget is your first step toward making your financial goals a reality. Follow these steps for setting up a realistic budget that gets you where you want to do.

1. Calculate Expenses.

Your first order of the day is finding out exactly how much you’ve been spending each much.  This should be easy since you spent last week tracking all your expenses to know what is coming in and going out.  Because some expense are intermittent, you’ll get the most accurate financial picture if you calculate an average of six months to a year. Add up everything you spend for the last six to 12 months and then divide by the amount of months, which will give your average monthly expenditure.

Remember that being thorough when you add up expenses is important in creating a realistic budget and sticking to it. A forgotten expenditure really throws a wrench into your savings plan. When you are calculating your expenses, also factor in unexpected bills. A good rule of the thumb is to add an extra 10 percent to 15 percent. So  you have determined that you spend GHS 1,500 a month, add GHS 150 to GHS 225.

2. Determine Your Income.

Once you’ve figured out how much money you need to stay afloat financially each month, it’s time to determine your actual income. Besides your regular salary – workers and allowance – students, get an accurate picture by adding any extra funds that come your way throughout the year, such as cash gifts, sale of items online or via home sales etc.

3. Set Savings and Debt Payoff Goals.

In order to determine realistic savings and debt payoff goals, you must find out if you have a budget shortfall or overage. Do this by subtracting your monthly expenses from your income. If you determined that  you’re making more money than you’re spending, congratulations! This amount can be earmarked for savings and to pay off debt.

But if you determined that you’re spending more than you’re making, it’s time to do some cutting so you have something to save and don’t go further into debt. The best way to figure out where you can cut from your expense is to track your spending and record every expense for a month.

Once you have a clear picture of where all your money goes, be merciless in cutting expenses until your budget is in the black. Cut enough so that you have 10 percent to 20 percent of your income left over each month to add to your savings account. If you are unable to cut a sufficient amount from your budget, consider ways you can increase your income.

4. Record Spending and Track Progress.

The best way to stay on top of your budget is to record all of your expenses and income. Having to input expenses will cause you to think twice before splurging, and it’s especially satisfying and motivating to record when you’ve met a savings goal.

5. Be realistic.

Aim for sticking to your budget most of the time, and you’re bound to reach your financial goals. Breaking your budget occasionally is OK, providing you get right back on track as soon as possible.


Last week, we asked you to track where your money is going. Now that you have that information, you can take on this week’s challenge – creating and sticking to a budget.

  • Now that you know where your money is going, it’s time to write out a plan – a budget – for where it should be going.
  • If you don’t have one, set and stick to a budget.
  • Make any necessary adjustments to your budget to keep on track to achieving your goals.
  • Put your budget to work for you, so you can reach your goal.

Next week, which is the last week of the Financial Literacy Month, we will put everything together. This will help us to properly understand what we have learnt in this financial literacy series and more importantly how to apply it to achieve our financial security.

In the meantime, do you have any ideas, questions, suggestions, comments you’d like to share with us? We’re happy to read them in the comment box below.

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