You might think it’s a little too early to start setting up your Christmas budget. But if you want to have zero stress and a hefty fund of savings to pull from by the time Christmas gets here, then guess what? You have to start early. And by early I don’t mean around December 20th. I mean now! You can still enjoy all that this year has to offer while sneakily stashing away money for Christmas.
Now let’s get started making that Christmas budget!
What Is a Zero-Based Budget?
First things first. Before we can dive in, you need a little background on zero-based budgets. The concept is simple: Income minus outgo equals zero.
In other words, if you earn ₦200,000 a month, you want every kobo you spend, save, give, or invest to add up to ₦200,000. That way you know where every one of your Naira is going.
Not knowing where your money is going can really derail your finances. Without a budget, you might look up one day and find you have no money—and no clue about where it even went. That’s why having a zero-based budget is so important all year long, especially when you are trying to keep your Christmas spending in line.
How to Make a Zero-Based Christmas Budget
You need a plan. The Christmas budget is your plan. Here’s how to make one in four easy steps:
1. Write down your monthly income.
What counts as income? It’s simple—any and all money that comes into your household each month is considered income. This should include paycheque, small-business income, side jobs, residual income, and so on. If it’s money that’s coming into your bank account this Christmas season, write it down and add it up.
2. Write down your monthly expenses.
Even though we’re focused on your Christmas budget, that doesn’t mean we can ignore all your normal monthly expenses. Before the month begins, write down every expense you know is coming your way.
Be sure to start your budget with the four walls—that’s your food, clothing, shelter and utilities, and transportation. This includes things like rent, groceries and fuel. After those essentials are covered, continue listing your other monthly expenses, such as cable subscription, data, phones and everything in between. And because your needs vary from month to month, you should make a new spending plan each month.
3. Write down your other expenses.
You know Christmas is in December every year, so there’s no reason to act like it suddenly snuck up on you. Start stashing away money for your Christmas budget now so it won’t feel like it’s hitting you (and your wallet) all at once.
And since we’re gearing up for the end of the year, don’t just think about saving up for Christmas chicken and gifts; and forget all the other merriment that comes along with the season. You’ll probably need things like gift wrap, decorations, and ingredients for all those delicious Christmas dishes you make every year. Does your office throw a fancy Christmas party or asoebi party that you’ll need festive attire for? Add that to the Christmas budget too!
4. Subtract your income from your expenses to equal zero.
Ideally, this number should be zero, but it might take some practice. Don’t be shocked or worried if your income and expenses don’t balance each other out. This just means you need to do something to bring one of the numbers up, the other down, or both. But whatever you do, don’t spend anything that’s not accounted for. If you budget ₦20k for eating out and you’re already at ₦19,500 … Don’t break your plan!
If you’re spending more than you’re taking home, you need to make some cuts so your income and outgo are equal. If you need to generate more money, start a side hustle or sell some things.
Here’s the deal with a zero-based budget: Every kobo must have a name! That means you must have zero naira left to budget. If you fill out every item in your budget and come out ₦1000 ahead (meaning you have nothing for that ₦1000 to do), you haven’t finished your budget. You must assign that remaining ₦1000 to something. Whatever you decide is up to you. But if you don’t give it a name, it will be spent carelessly, and you’ll end up scratching your head over that missing ₦1000 you thought you had.
What If You Have an Irregular Income?
If you have an irregular income—don’t worry. You can still use zero-based budgeting! It’s just as easy to make a plan for an irregular income as it is for a regular one—really! When you budget, base your income on the lowest-earning month from the previous year.
Then list your expenses in order of importance. Make sure you cover the four walls first (food, clothing, shelter and utilities, and transportation).
When you do get paid, take that amount and spread it out over the items in your budget. If your paycheque doesn’t cover everything listed on the budget, that’s okay. Cover what you can. If you get an additional income during the month, pick up where the last paycheque left off.
Benjamin Aduroja
Financial Advisor, Certified Finance Coach & Investment Advisor.
CEO (Chief Enabling Officer),
Cutting Edge Partners,
17/19, Allen Avenue, Ikeja, Lagos, Nigeria.
T: +23470 8132 8873
E: ceo@cuttingedgepartners.com.ng
W: www.cuttingedgepartners.com.ng
