Your life has changed, has your budget?

priorities change with age           (Photo: AI)                  

Although budget templates are widely available, simply copying one does not guarantee financial success. According to financial literacy expert Patrick Wameyo, a budget is personalised when every activity and amount allocated to each item reflects your priorities and financial goals.

He advises viewing budget templates as guidelines rather than standard tools that apply to everyone. As financial priorities change with age, responsibilities and circumstances, a budget that worked for someone aged 35 may no longer be appropriate 20 years later.

“For example, if I pick a budget line like transport, how I prioritised my transport at age 35 doesn’t reflect today’s situation 20 years later. My view of schools and, as a result, associated expenses of school fees, transport and child allowance have shifted too,” he notes.

The percentage of spend on school fees should be about 3 per cent of your income, yet the percentage spent is acceptable at age 35 compared to age 55 for a child of similar age and has also shifted.

It will tend towards 1 per cent for the older parent because they are likely to have high net disposable income.

Age, family structure and personal circumstances are therefore important considerations when creating a budget, alongside income.

“A young single mother aged 30 won’t approach the same budget item like an agemate who is single even if both are pursuing similar goals over a similar timeline,” he says.

He adds that the starting point for any budget should be determining disposable income from all sources, followed by categorising outflows into three areas: God and tax, yourself and other people.

An honest assessment of one’s spending habits is also important before creating a budget. He encourages people to conduct a self-review to develop greater awareness of their financial behaviour.

“Taking an honest self-review enhances self-awareness. There is no glory in celebrating poor habits wired into your mindset which can be eliminated,” he recommends.

Wameyo explains that financial goals should then determine how money is allocated. The activities listed in a budget should be items that, when achieved, contribute towards the achievement of comprehensive financial goals.

This also means that a budget should be aligned with a person’s values and priorities. It’s not about distributing income across different spending categories without a clear purpose.

When money is limited, he advises people to prioritise their needs while moderating their spending on wants to create room for savings.

Substantial savings for younger people, he says, can support investments that generate additional income through dividends, interest and profits, while allowing them to benefit from the time value of money as they age and their financial commitments increase.

“Watching waste with the existing expense lines releases extra money towards priority items. This is achieved by reviewing how we buy, not just what we buy,” he says.

He also cautions against using flexibility in a budget as an excuse for overspending. While budgets should adapt to changing circumstances, consistently allowing spending outside the plan can undermine the purpose of having a budget in the first place.

Overspending is first a state of mind.

A personalised budget will also differ depending on whether someone is single, raising a family, self-employed or retired. The guideline percentages allocated to different expenses vary according to these circumstances.

For people with irregular or unpredictable incomes, he says that the budget categories themselves don’t necessarily need to change. Instead, the timing of purchases should reflect the flow of income.

Irregular expenses such as school fees, holidays and annual insurance payments should also be accounted for through specific budget lines and allocations.

He reiterates that as income and life circumstances change, the budget should evolve accordingly. An expansion in circumstances will require adjustments to the amount allocated to particular expenses.

“A budget should be reviewed regularly. Wameyo recommends sharing it with a financial professional who can question some of the allocations and provide an objective perspective.

Personality and spending style also influence how people manage money. Personality shapes character, while a budget provides the financial framework within which that character operates.

He advises people against comparing their budgets or lifestyles with those of others. Personal goals, he says, establish personal boundaries, making self-awareness an important part of financial planning.

A personalised budget can reduce financial stress by helping people live within their means. However, sticking to a budget needs more than writing down numbers.