How to Create a Budget For Your Salary in Kenya

Understanding how much money you earn is the first step in creating a budget. Your income might come from various sources like a job, a side business, or maybe even occasional freelance work. Write down all the money you receive regularly. This includes your salary after taxes and any other consistent income you can count on. Remember, it’s crucial to consider the actual money you bring home, not just the salary your employer tells you before taxes.

If your income fluctuates—meaning it changes from month to month—try to calculate an average. Look at your earnings for the past few months and find the average amount you receive. This will give you a more realistic picture to work with when planning your budget. Knowing exactly how much money you have coming in helps you figure out how much you can allocate to different expenses and savings goals.

Once you have a clear idea of your income, it’s time to list all your expenses. Start by writing down everything you spend money on regularly. This includes rent or mortgage payments, utilities (like electricity and water bills), groceries, transportation costs (such as fuel or public transportation fares), and any subscriptions or memberships you pay for each month. Don’t forget about debts you need to pay off, like credit card bills or loans.

Next, consider occasional or irregular expenses. These might be things like medical costs, car maintenance, gifts for birthdays or holidays, or unexpected repairs. Even though they don’t happen every month, it’s important to include them in your budget so you can be prepared when they come up.

RECOMMENDED: How to Budget a 20K Salary in Kenya

Once you’ve listed all your expenses, it’s time to categorize them as either needs or wants. Needs are things that are essential for your survival and well-being, such as housing, food, basic clothing, transportation to work, and essential utilities. These are the expenses you absolutely must cover to live comfortably and take care of yourself and your family.

On the other hand, wants are things that you desire or enjoy but are not absolutely necessary for your basic needs. These could include eating out at restaurants, buying new clothes when you have enough already, entertainment expenses like movie tickets or streaming subscriptions, or luxury items.

Understanding the difference between needs and wants helps you prioritize your spending and ensures that you allocate money to the most important things first. This categorization will be helpful when you start setting priorities in your budget.

Now that you have your list of expenses categorized as needs and wants, it’s time to set priorities. Start by focusing on your needs—the essential expenses that are crucial for your survival and well-being. These are things like rent or mortgage payments, utilities, groceries, and transportation to work. These expenses should take precedence in your budget as they are essential for your daily life.

After covering your needs, allocate funds to your wants if there’s money left over. However, if your income doesn’t comfortably cover both needs and wants, it might be necessary to cut back on non-essential spending. Consider adjusting your wants category to fit within your budget. It might involve making sacrifices in certain areas to ensure your needs are met without causing financial strain.

The best way to allocate funds is using the 50/30/20 budgeting method where you allocate 50% of your income to needs, 30% to wants, and 20% to savings or paying off debt. You can also use the envelope method or any other budgeting strategy.

Ultimately, setting priorities helps you allocate your money wisely and ensures that the most critical expenses are taken care of first. Remember, it’s okay to adjust your spending priorities as your financial situation changes or as you work toward different goals.

Tracking your spending is a crucial part of effective budgeting. Once you’ve set your budget plan, keep a record of all the money you spend. This can be done using a notebook, an app on your phone, or a simple spreadsheet. Record every expense, no matter how small. This way, you’ll have a clear picture of where your money is going.

Review your spending regularly to see if you’re sticking to the budget you’ve set. Tracking your expenses will help you identify areas where you might be overspending and find opportunities to cut back. It’s a helpful tool to understand your spending habits and make adjustments as needed.

Additionally, tracking your spending allows you to anticipate upcoming expenses and avoid surprises. By keeping a close eye on your finances, you’ll be better prepared to manage your money effectively.

Based on your income, expenses, and spending priorities, create a budget plan. Allocate specific amounts to each category of spending, including both needs and wants. Be realistic and ensure that your expenses don’t exceed your income.

Your budget plan should also include setting aside some money for savings or emergencies. Saving a portion of your income is crucial for future needs or unexpected expenses that might arise. Allocate a certain percentage of your income towards savings, even if it’s a small amount at first.

Over time, you can aim to increase your savings as your financial situation improves.
Having a clear budget plan gives you a roadmap to follow and helps you stay on track with your financial goals. Review and adjust your budget regularly to accommodate any changes in income or expenses. Consistency and commitment to your budget plan will lead to better financial stability and control.

Regularly review your budget to ensure it reflects your current financial situation accurately. Life circumstances and expenses may change, so it’s essential to adjust your budget accordingly. For instance, if your income increases or decreases, or if you have new expenses, update your budget plan to accommodate these changes. Flexibility is key to making your budget work effectively for you.

Be ready to fine-tune your budget based on what works best for your situation. Sometimes, you might need to experiment with different approaches to find the most suitable budgeting method for you. Remember, it’s okay to make adjustments as needed to make your budget more realistic and manageable.

Identifying your financial goals is an integral part of budgeting. Determine what you want to achieve with your money. It could be saving for emergencies, paying off debts, buying a car or a house, or investing for the future. Your goals will guide your budgeting decisions and help you prioritize your spending.

Allocate a portion of your income toward these goals in your budget plan. This might involve setting aside a specific amount each month to work towards achieving these objectives. Having clear and achievable financial goals will motivate you to stick to your budget and track your progress over time.

Look for opportunities to cut costs and save money in your budget. Analyze your expenses to find areas where you can reduce spending without compromising your needs. This could involve finding cheaper alternatives for certain products or services, using discounts or coupons when shopping, or negotiating better deals on bills or subscriptions.

Additionally, consider making lifestyle adjustments to save money. For example, try cooking meals at home instead of eating out frequently, carpooling or using public transportation to save on fuel costs, or reducing unnecessary impulse purchases. Small changes can add up and significantly impact your ability to save money.

Once your budget is in place, it’s essential to monitor your spending regularly and stay committed to your financial plan. Keep track of your expenses and compare them to the budget you’ve set. This will help you stay accountable and make necessary adjustments if you’re overspending in certain areas.

Stay committed to your budgeting goals, even if it’s challenging at times. It might take some practice to get used to the discipline of budgeting, but consistency is key. Over time, you’ll develop good financial habits that will help you achieve your financial aspirations and have better control over your money in Kenya.