When people and businesses start living within their means (revenues), and not beyond, it will usher-in a new era of healthy economy that stems from people investing-in/buying what they can afford. This will lead to increased circulation of money in the economy because people who buy what they can afford will pay promptly, which will in turn lead to increased business activities in the economy.
By Dr. Osaze John Owens
Nigerians are unique in the world when one considers the people’s resilience in the face of the economic turbulence that has rocked the nation for decades.
We are endowed with determination, hope, and zeal.
Hope is positive expectation.
Engaging Nigerians with suggestions/ideas that may help them economically could create the platform for realizing such hope they have.
This article attempts to do just that.
What is economy? Economy has diverse definitions, one of which is the efficient use of resources. But we shall, for purposes of this discussion, see economy through the budget lens.
For our discussion, budget could help you keep your financial eye on your revenues and expenditures to ensure you achieve predetermined fiscal goals.
In essence, a budget is a financial tool. Using the budget can help you become more fiscally disciplined, and thus become a better spender.
Nigerians have the saying, cut your coat according to your size, or cash and carry. Technically, these sayings simply depict the whole idea of budgeting.
Budgeting will enable you to start charting your incomes and expenses, and thus stop the behavioral pattern of continually out-spending oneself.
It will require new fiscal discipline dimensions.
It will mean helping you determine how much to spend from your monthly earned incomes to meet your monthly financial obligations. Also, it may help you start practicing how to save some money from the incomes you make.
The budgeting process could help you to start having a firm handle on your financial future without which your financial situation may be in peril.
A budget is a financial plan, and tool, as stated earlier. Any plan without proper execution is of no use. Budgeting demand proper execution for it to yield the expected benefits.
A variety of budget types exists, but the commonest ones are the line-item, performance-based, and zero-based budgets. For our discussion, we will use the simplified version of the line-item budget.
This simplified version has a process, which can be used by both individuals and businesses. Taking a pen and paper:
Write down all monthly incomes you receive.
Write down all monthly recurring expenses you must pay, like utility bills.
Write down all short and long debts you owe.
Write down your monthly payments for each of such debts in 3 above that must be paid.
Is there any balance after deducting the monthly recurring expense and debt payments?
Such balance, or a fraction thereof, can then be put into savings for the raining days.
There will be need in doing periodic checks of the budgeted vs. actual figures to monitor progress in adhering to the budget.
Ensure that your actual monthly recurring expense and debt payments’ total never exceeds your total income/revenue total.
This process will enable you to start setting your financial priorities, thus ensure financial discipline and freedom. Also, this exercise, if done properly and consistently, will help individuals and businesses to stop the bizarre borrowing (or credit purchase) tendencies that normally put people/businesses into financial crisis.
When people and businesses start living within their means (revenues), and not beyond, it will usher-in a new era of healthy economy that stems from people investing-in/buying what they can afford.
This will lead to increased circulation of money in the economy because people who buy what they can afford will pay promptly, which will in turn lead to increased business activities in the economy.
In part, the recurring cycle of these economic activities will lead to an eventual revived economy. In closing, the key to financial freedom and a healthy economy, using the financial lens, is adhering to a budget.
Dr. Osaze John Owens is a business consultant and President of Boston-based corporate entity, Osa Services, Inc. who writes from Boston, Massachusetts. He can be reached at osaservicesinc@aol.com
