Budgeting 101: How to Create a Practical Personal Budget

A look at how how to prepare a financial budget for yourself

A good personal budget should include an emergency and savings fund. The best strategy in personal budgeting is to keep track of past spending and take keen note of the loop holes. Personal budget items such as housing, food, groceries, clothing, and personal care are considered basic. However, without being keen, other important, but not necessary items may creep into our budgets. Such items would include debt repayment, entertainment, and household shopping.


In Kenya today, most people are spending on discretionary expenses such as bank overdrafts, credit card charges, asset finance loans, development loans, car loans among others. In fact, credit cards and bank overdrafts top the list of these expenses and sad fact is, these borrowings are rarely spent on valid emergencies as they should, but on convenient wants. 


Quick and instant loans services have found a thriving market to feed. According to the Central bank of Kenya, over Ksh 260 Billion was transacted in the month of November 2016 through mobile money transfers.


Household shopping is a key item on our budgets. However, a lot of unnecessary and impulse buying is associated with it. Shopping malls coming up even within our residential areas encourage impulse buying for many people. It has become almost impracticable to visit the local markets and food joints as these malls have all these services under one roof. 


To manage the expense on household shopping, the simple vegetables and groceries can be bought from our local markets instead of the shopping malls. Electronics and other household items can be bought from select dealers. You can be on the lookout for offers to enjoy a bargain. It is also advisable to write down a list of items you intend to buy before you go out shopping.


Entertainment and leisure are also items topping the list of personal budgets. The key contributing factors to poverty in Kenya currently are alcoholism and gambling. This can be partly attributed to peer pressure and social media influence. From Instagram to Snap chat, Facebook and Twitter, conversations revolve around the coolest and most hype places to hang out or visit, the coolest gadgets to have, fun activities to engage in and the likes which do not come by cheaply. 


Spending more than is required is the pressure that some people have had to contend with to remain relevant among peers. Most expenses on credit cards, Mshwari loans, and other mobile loans can be traced to payments made to coffee shops, restaurants, hotels, shopping malls – merely leisure and nothing serious.


when coming up with a personal budget, keep in mind exactly how much is coming in and how much is going out. It may not be easy to come up with fixed a budget, but the hardest part would be sticking to it. 


Poor personal finance can cause serious financial constraints to both individuals and families. Be keen to pay your debts and in good time as late payments or defaulting to pay gives you a poor credit report and accessing loans in the future may difficult or impossible. 

Marriages and families may be broken; property and assets may be repossessed by financiers all due to poor financial planning.


It is recommended that not more than 30% of your income should go towards debt repayment and about 20% should go towards savings. 


If cutting back on some of these expenses is not working, as it should, you could also strive to increase your income gradually. Learn to pay cash, as this will minimize your spending on the credit cards. When working on a budget, share this with all members involved such as your spouse and family because you may be working on a budget yet your souse is spending you into unnecessary debt.



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