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6 ‍Simple Steps to Create a Working Budget‍
6 ‍Simple Steps to Create a Working Budget‍
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Money Management

6 ‍Simple Steps to Create a Working Budget‍

Eunniah Mbabazi
May 16, 2022

Making a budget is the best way to keep abreast of where your income goes each month and a vital step to setting your financial affairs in order. Having a budget can ease the achievement of financial milestones, like developing an emergency fund or saving to buy a piece of land for your home.

While creating a budget may seem daunting, it is not really a tricky undertaking. Furthermore, once you've created one, you would have done a bulk of the work, and you can make minor adjustments as your income and spending evolve. 

There are many budgeting styles you can choose from, and the best thing is that you are free to try all of them out until you settle on the one that is most suitable for you. But before getting into types, let's look at some guidelines to follow for a successful budget.

1. Set Goals as the Foundation for Your Budget

Budgets seem to work best if you bind them to your financial objectives. Without binding your goals to your budget, the budget will most likely fail. 

Having goals is the whole purpose of creating budgets. If you don't work with goals, the entire budgeting process will remain filled with frustration and failure.

While trying to budget, any new person feels frustrated when their estimated expenses seem to be well above their income. Therefore, it will require a lot of sacrifice and time for them to resolve this and get to their goals. Without the effort, one may end up altogether abandoning their budget.

Your financial objectives should relate closely with what you desire to accomplish. This obligates you to budget and save, timelines for spending the money, and the total sum of money you require (including a full breakdown of contributions per period).

2. Prioritising Expenses

After setting out your goals as clearly as possible, you need to assess your expenses. List them in classes of descending priority. By that, I mean your highest priority expense such a high-interest loan repayment should take the top spot on the list.

To prioritise your expenditure, classify them according to needs and wants. Needs should be prioritised higher than wants.

3. Record Expenses

Bits of Advice about budgeting will tell you to start by listing your income followed by your expenses. But it would be great to hold off your income. By working on your income first, you'd be turning your budget-making process into an activity of spending as you can without surpassing your financial resources.

By working it the other way around –without thinking about your income first- you'll take on your expenses from a rational, less emotional standpoint, creating a better outcome. 

On top of that, your budget stops being a math exercise where you're trying to subtract your income to 0 but a tool to prioritise and gauge your regular spending. That, in the end, provides a realistic starting point.

For regular bills like housing, TV subscriptions, airtime and other constant yet regular expenses, sum them up as required. For variable expenses like transportation, utilities and groceries, try to estimate your best figure in those categories keeping in mind other occasional factors that may affect how much you spend. 

Consider factors such as changing fuel prices every mid-month and any events that will require you to spend like birthdays or weddings.

If you are unable to estimate, review your previous expenditures. You can use your M-pesa statement. If your statements are not clear enough, then you should track your spending for at least 30 days to give you proper estimates. 

Note down every spending. It is a daunting task, but it will give you a better sketch of your spending than you could have otherwise.

Read Also: 8 Amazing Benefits of Tracking Your Spending

4. Record Your Income

After getting and calculating your expenses, the next thing to do is to determine what you expect as your monthly income. Keep in mind that we are working with your net and not your gross income.

Net income is the money you actually pocket if you are salaried. If you work in the informal sector or are self-employed where income is irregular, it is best to work with the lowest estimate of your income. 

It's much better to be left with more income than expected than to discover you have less.

Read Also: 7 Ways to Budget and Thrive With an Irregular Income

5. Compare and Calculate

With the estimates of your foreseen expenditures and your expected income, deduct your expected spending from your income estimate.

There is one out of three conclusions for you to make:

  1. If you remain with 0 balance, you live just within your means. In this class, you are living paycheck after paycheck. Please read our article here to help you get out of this cycle.
  2. If the balance is below 0, you live above your means. This class means you cannot sustain your living, and you might end up in a debt cycle if you remain persistent in it. The best thing to do is to revise your priorities. Cut extra spending. If not possible, then you need to supplement your income
  3. If above 0, then you are beneath your means. Here you are well-posed to save extra and achieve your goals much faster. You have enough to contribute to your emergency fund, ensuring your future financial security.

While 0 is the take-off point for whether you are living within, below or above your means, it is more important to think of the retained income in proportionate terms. For beginners, we ideally recommend the 50/30/20 budgeting rule that apportions 20% of your income for savings. 

If after deducting your expenses, you are left with something less than 5% of your income, it can be said you are probably only barely surviving. 

Learn More: Saving For Beginners: Follow the 50/30/20 Rule

6. Identify Areas of Improvement and Adjust Accordingly

As much as the most sensible thing to do would be to cut down some more on expenses, seldom do people think about increasing their income when they discover a negative balance projected in their income.

Increasing your income would ensure that you do not exercise frugality to extreme levels. There are a couple of ways to supplement your income. Some of them can be found here.

Also Read: 8 Ideas to Create Multiple Sources of Income


Budgets can fail for different reasons. Some of these reasons may be hard to prevent, such as a loss of income or unexpected expenses like house repairs, medical bills, and others that can create an urgent need to revise and adapt your budget if necessary.

Creating a cushion of funds can help mitigate unexpected expenses and ease living within your budget. Take a look at our articles that explain how to budget using the 50/30/20 or the cash-only budget.

Eunniah is an experienced business writer and editor. She is also a published author with two titles under her belt; Breaking Down and If My Bones Could Speak. You can find Eunniah on Twitter @Eunnyversal

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