Every step you make in life counts; no matter how big or small it is, it will still count, either positively or negatively, and the choice you make today will define who you will be tomorrow.

An American Author- Gordon Hinckley, once said ‘’you can’t build a great building on a weak foundation, you must have a solid foundation if you’re going to have a strong superstructure.’’

That said, let’s talk about budgeting which is the only way to build a strong foundation for financial stability. Allocating money appropriately and following a budget can help you practice basic money habits.

A budget is simply a spending plan that takes into account estimated current and future income and expenses for a specified future time period, usually a year.

Having a budget keeps your spending in check and ensures that your savings are on track for the future. It also helps you set long-term financial goals.

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Before drawing up a budget, track your expenses so as to know where your money goes. A proper budget starts with knowing where your money is going. You can use a tracking app to track expenses such as food, airtime, and rent, among other expenses.

You also need to determine your priorities as they act as the guide when budgeting. So how should a Sh 50K and below budget look like?

Taxes and Statutory Deductions

Every employed person should account for their taxes, and failure can cost you extra charges. If you are employed, you also incur the tax PAYE (Pay As You Earn) charges, alongside NSSF and NHIF deductions.

You can use the KRA PAYE calculator here for the specific amount you earn. For Sh 50K earners, you will remain with around Sh 42,900 income after tax.

Savings

According to the 50:30:20 budgeting rule, 20 percent of your income after tax should go to savings. This means if your salary is Sh 50k, then about Sh8,580 should go to savings.

If you cannot manage this amount, you can easily start lower and build with time. But it is good to keep pushing yourself. Also, check on any unsettled debt, which needs to be cleared under the 20 percent allocation.

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Budgeting for Needs

Needs should take 50 percent of your income after tax because these are the things you cannot live without. They include housing, utility, transport, and food.

Housing will, most likely, be your most significant need and should take 30 percent of the 50 percent. This is a rule of thumb that is often recommended – but the lesser you can spend on housing, the better.

This means that your rent should not go beyond Sh12,870 for the month. Following the 50:30:20 rule, on a Sh50k budget, your needs should not exceed Sh24,450.

With rent costing you Sh12,870, the rest of the needs must fit within the remaining Sh8,580.

Budgeting for Wants

Wants should take 30 percent of your income after tax. They include things like clothes, shoes, entertainment, holidays, etc.

While you may be tempted to spend your money on unnecessary things, having and sticking to a budget can keep your spending in check and assure that your savings for emergencies and longer-term goals stay consistent.