Categories
Finance and Accounting

Creating a Budget Masterplan for 2021

Budgeting is an aspect of Personal Finance that literally makes people shiver in fear😁 This is because it forces people to face the reality of their finances, and only the courageous can do that. Hence, people usually neglect it altogether. For this reason, I will not go into the “boring” intricacies and technicalities of budgeting – the part that scares people. I will keep this as simple and interesting as possible. My aim is to help you understand your need for a simple budget for your personal finance. 

WHAT IS A BUDGET? 

A budget is an itemized summary of intended expenditure coupled with expected revenue for a length of time. Simply put, it is an estimate of income and expenditure for a period. Cambridge dictionary defines it as “A plan to show how much money a person or organization will earn and how much they will need or be able to spend.”  You may define it as “A list of all planned income and expenses, a plan for saving and spending for the near future.”  From the definitions above, you can see that a budget is not something you create off-hand. It ought to be a written plan (on a piece of paper or PC). 

WHO NEEDS A BUDGET? 

There are different types of budgets for different people and situations. A budget can be created for an individual, a household, a business, an NGO, a State, a Nation, etc. Wherever a person or a group of persons make use of money on a regular basis, there is a need for a budget. 

TYPES OF BUDGET 

A simple Google search will give you many kinds of budget, making you more confused. However, I have classified budgets into 3 types, namely: 

  1. PERSONAL BUDGET – For individuals, families and households. 
  2. BUSINESS BUDGET – For NGOs, SMEs and companies.
  3. ADMINISTRATIVE BUDGET – For schools, churches, LGAs, states, nations and other administrative systems. 

Also, budgets could be classified as SURPLUS, DEFICIT or BALANCED. 

It is a SURPLUS Budget when your income exceeds your expenditure for a set period. This should be everyone’s financial goal. This implies that there is more money for savings, investment and other things you want.

It is a DEFICIT Budget when your expenditure exceeds your income. Unfortunately, this is the situation many people find themselves in. They always run out of money to fund their expenses. This calls for a red alert as radical measures must be taken to remedy this situation. You need not worry though. You will know how to solve this problem by the time you are done reading this article. 

Lastly, a Budget is BALANCED when your income equals your expenses.

WHY YOU NEED A BUDGET FOR 2021 

I could list a thousand and one reasons why you need a budget. You might even know more. You may have learnt them in your Accounting or Economics class in Secondary School and may have attempted questions on them in your final external examinations (WAEC, NECO or JAMB). But what stops you from implementing them? Lol. 

Perhaps, the most important reason you need a budget is that “Human wants are unlimited while the resources to meet them are scarce.” Sounds familiar, right? Yes, this is what you were taught in Economics. In addition, there are a lot of things, people and circumstances competing for your money. They want to take it away from you however they can – legally or illegally (Ask the victims of failed Ponzi schemes😂).

Unless you create a budget, which is basically a PLAN on how you want to spend your money, it is easy for these “human wants” to take your money away and leave you in poverty. If you experience the frustrations of not having enough for the things you need or begging for the necessities of life, you will realize you need a budget. I hope you don’t get to this point. Instead, realize that a budget is critical to financial control. 

In summary, having a budget is important because it ensures that you have enough for the things you need (and things that are important to you) however and whenever you need them.

KEY ELEMENTS OF A BUDGET 

When drafting a budget, there are certain things you must take into consideration, namely: 

  1. INCOME: This is the amount of money that comes in weekly or monthly. This includes all your sources of money – both passive and active income. 
  2. FIXED EXPENSES – These are the expenses that don’t change easily as they are paid regularly (monthly). Examples are rent, insurance premiums, taxes, debt payments, interest payment on a loan, child support, etc.
  3. PERIODIC EXPENSES – These are expenses that are less frequent. They come in periodically or unexpectedly. Examples are car repairs, home maintenance, gifts, appliance repair, loans, etc. 
  4. VARIABLE EXPENSES – These include every other thing that you need for daily living. They are called “Variable” because they vary from time to time. They include food, utilities, phone bills, TV subscription, gas, fuel for car and generator, clothing, education, medical bills, transportation, entertainment, name them. They are usually the most difficult category of expenses to track because they fluctuate a lot. When trying to fix your deficit budget, variable expenses are usually the first place to start trimming. 

HOW TO DRAFT A SIMPLE BUDGET MASTERPLAN 

In other to draft a budget successfully, you will need some basic tools, namely: 

  1. Pen
  2. Notebook or PC
  3. Calculator

STEPS TO CREATE A BUDGET THAT WORKS FOR YOU 

  1. DETERMINE YOUR PRIORITIES: To be frank, even if you were given all the money in the world, you would still wish for a million things. So, since your income is limited, you should arrange your needs and wants in order of importance.
  2. HAVE A GOAL: Once you know your priorities, set financial goals and deadlines for each goal. When you define your goals (What are you saving for?), your amounts (How much do you need to save?), your deadlines (When do you need that money?), you can create a budget – a roadmap – to achieve your goals.
  3. CREATE A LIST: Write down and categorize all your expected income and expenses in vertical order of importance. Don’t forget to divide them into Fixed, Variable and Periodic Expenses. 
  4. HAVE A PLAN: After creating the list, you need to have or create a plan, that is, determine how you intend to meet your needs and what percentage of your income you will allocate to each need. 
  5. CALCULATE: This is the stage where you have to apply basic arithmetic.  Calculate the real figures and determine how much you need to allocate for each expense. Wherever you get stuck, use a calculator. In the end, you should have a lot of figures. 
  6. EXECUTE: Finally, get into action. You aim should be to spend exactly or below what you have budgeted. 

HOW TO STICK TO YOUR BUDGET MASTERPLAN 

The thought of sticking to your 2021 budget from January to December should not give you goosebumps. Simply follow these guidelines: 

  1. Place your budget somewhere you can see every day. 
  2. When you feel like giving up, remind yourself why you created the budget in the first place. 
  3. Most importantly, have an accountability partner – someone to hold you accountable for the way you spend your money. If you’re married, your spouse can be your accountability partner. If you aren’t, your best friend, pastor, parents or anyone you can trust can be your accountability partner. Better still, you may join my SBM Program to have an experienced Financial Intelligence Coach as your accountability partner. 

In summary, taking charge of your finances in 2021 begins with having a Savings and Budget Masterplan. Now that you have learned how to create these plans, it is time to put your knowledge to work so that 2021 will be a remarkable year for you.  

N/B: This article is an excerpt from a webinar which was first published on my Facebook community – Financial Intelligence Forum (FiFo). Join the community to access my past and future publications. 

For an in-depth course on financial literacy and how to manage your personal finance, I recommend that you enroll for LEAD Resources’ Digital Economy Emerging Managers’ (DEEM) programme as more practical measures of attaining financial freedom in the digital economy have been distilled therein.

AUTHOR 

Obot Essiet Jr.
Obot Essiet Jr.

Obot Essiet Jr. is an Associate Solutions Architect at LEAD Resources, a Financial Intelligence (FINTEL) Coach and a Co-founder/COO of Naiyuan Mart, a Chinese-Nigerian procurement and manufacturing company. He runs a blog and a community on Financial Intelligence. He is passionate about helping people journey towards financial freedom through practical financial literacy solutions. Obot Essiet Jr. loves writing, gardening, watching adventurous movies, cycling and playing chess. 

Categories
Entrepreneurship

Small and Medium-Sized Enterprises in Nigeria: Roles, Challenges and Solutions

There is no universal definition for SMEs (Mutula and Brakel 2006, p. 403). Across countries, SMEs are defined on the basis of employment, assets or a combination of the two (Ongori and Lutham 2009, p. 94). According to the European Union (EU), SMEs are micro, small and medium-sized enterprises which employ fewer than 250 persons and have an annual turnover of 50 million euros or less. The Central Bank of Nigeria, in her Monetary Policy Circular No. 22 of 1988, defined SMEs as enterprises which have an annual turnover of five hundred thousand naira (N500, 000) or less.

ROLES OF SMEs IN NIGERIA

Small and Medium-Sized Enterprises form the bulk of businesses in Nigeria. According to a survey conducted by PWC, SMEs contribute 48% of the national GDP, account for 96% of Nigerian businesses and create 84% of employment in Nigeria. Since SMEs drive the economic growth, industrial transformation and export growth of the nation, it is safe to conclude that they form the backbone of Nigeria’s economy. Some advantages of SMEs include:

  1. They serve as the breeding ground for domestic, entrepreneurial capabilities (SMEDAN, 2005; Aina, 2007). They provide employment and income for most citizens.
  2. They facilitate the industrial development of the nation in accordance with the achievement of the Sustainable Development Goals.
  3. They help to reduce the urban-rural income gap.

CHALLENGES FACED BY SMEs IN NIGERIA

SMEs are often faced with challenges that are peculiar to individual businesses. Certain challenges which stall their growth include:

  1. High-interest rates and maintenance costs of credit facilities as well as demands for duly registered collateral obligations.
  2. Inconsistent government policies and bureaucratic holdups in the administration of incentives and support facilities from all levels of government.
  3. Multiple taxes from both the State Government and Local Government.
  4. Poor infrastructure such as poor power supply, bad roads and poor transportation systems.
  5. Unavailability of local raw materials.
  6. High cost of procuring machinery.
  7. Import liberalization.
  8. Export constraints, amongst others.

SOLUTIONS FOR SMEs IN NIGERIA

  1. Provision of adequate infrastructure i.e. good road networks, adequate power supply, good communication and health care system.
  2. Elimination of the multiple taxation system.
  3. Tax holidays and rebates for startups which show initiative by sourcing for local raw materials.
  4. Provision of accessible and well-priced credit facilities.
  5. Effective marketing and distribution channels for SMEs through government agencies like SMEDAN.
  6. Loan availability and attainable payback mechanisms.

Seeing as SMEs are the backbone of the economy, it is expedient to devise means to increase their productivity, with or without the help of the government. Lead Resources offers programmes which educate entrepreneurs on how to access finance as well as manoeuvre the challenges that are peculiar to the Nigerian business climate. For more information, click here.

AUTHOR

Adetoyese Oyedunmade is an Associate Solutions Architect of Lead Resources. She is an Agriculturist by profession and is enthusiastic about entrepreneurship.

Categories
Human Capital Development Technology and Innovation

LEAD Resources Commemorates World Youth Skills Day (WYSD) 2020

On 15th July 2020, LEAD Resources joined YALI and NACCIMA to commemorate the World Youth Skills Day (WYSD). WYSD is designated by the United Nations to celebrate skillful youths who channel their competencies towards causes that benefit the society. By so doing, WYSD creates awareness about the value of youth skills development.

LEAD Resources commemorated WYSD by hosting a seminar themed, “The competencies the youth should develop to leverage on COVID-19 era opportunities.” The speakers at the event were Alhaji Popoola (Ogun State Coordinator, NACCIMA Youth Entrepreneurs) and Mr. Kehinde Sogunle (Chief Solutions Architect, LEAD Resources).

WYSD
LEAD Resources Commemorates WYSD 2020

How to Leverage Your Skills for Growth

Alhaji Popoola was the first speaker at the event. He taught, “How to leverage your skills for growth.” He stated that he was particularly pleased that the event was commemorated at a time where many have lost hope in Nigeria. The aim of his presentation was to help the youths identify skills (often regarded as useless) and determine how to make the contribute their quota by engaging their skills.

He explained that many youths regard their skills as irrelevant for income generation. He gave an example of a friend that loves to iron who established a laundry business that is scaling. Leveraging skills for growth begins by identifying one’s skills. He suggested that youths ask themselves the following questions to identify their skills:

  • What can I do effortlessly?
  • What do I derive joy in doing?
  • What are my parents and grandparents good at?
  • What skill do I believe can make me a better person?

Next, he emphasized the principle of apprenticeship. Submitting to a mentor helps one refine a crude skill to the end that it becomes money-spilling. Everyone needs to follow successful mentors to know the ups and downs to generating income from their skills as well as what made them successful.

He gave the following tips in submitting to mentorship:

  • Understand that building a brand takes effort, patience and determination.
  • Allow your mentor to determine the time-span of your apprenticeship.
  • Note the points that your mentor makes at every opportune time.
  • Determine to be a voice in your choice industry.
  • Avoid bad company and societal influence.
  • Connect with people of like minds.

He informed the youths that his organization, NACCIMA, pools information about relevant opportunities such as:

  • Training with GIZ for the growth and commercialization of tomato and chili pepper.
  • Access to CBN COVID-19 response loan (as well as multiple kinds of loans).
  • Aso-oke textile production in an organization in South Africa.

He encouraged the youths to connect with organizations such as his, play their roles and benefit from the influx of information to develop their skills and/or scale their businesses.

He wrapped it up by emphasizing that in this digital era, businesses become seamless, efficient and worthwhile when digital competencies are integrated in the administration of one’s skills. He said, “If you want to work for the future, learn whatever you need to learn including AI.”

“If you want to work for the future, learn whatever you need to learn including AI.”

Alhaji Moruf Popoola, Ogun State Coordinator, NACCIMA Youth Entrepreneurs

The Competencies the Youth Should Develop to Leverage on COVID-19 Era Opportunities

After acknowledging the efforts of NACCIMA and YALI in raising skilled youths especially in the heat of the COVID-19 pandemic, Mr. Kehinde Sogunle (Chief Solutions Architect, LEAD Resources), the second speaker for the day, took the stage at the WYSD celebration.

He started out by pointing out the fact that following the outbreak of COVID-19, a new era has emerged. Due to the restricted movement of all peoples for over 90 days, it is scientifically proven that this new lifestyle has been formed. He gave examples of how convergences happen online via the use of networking tools as opposed to unnecessary physical meetings.

Therefore, he highlighted the need to develop necessary competencies to thrive in this new era. He gave the following framework for personal discovery:

Self-Discovery – Self-Development – Self-Mastery – Self-Actualization

He said, “There are two types of people in life: Those who live with purpose and those who don’t.” In addition to the simple steps given by the first speaker, he gave the following steps to personal discovery:

  • Understand why you are here.
  • Identify where you are going to.
  • Have confidence in your convictions.
  • Determine how to arrive there (character and competence).

He said, “Those who create their life purpose are often able to live with extraordinary energy and motivation to overcome challenges.” He gave the example of the situation the Nigerian teachers have found themselves in: the inability to teach in classrooms and get paid. He explained that teachers in this age can thrive by sharing knowledge using new age tools and techniques to leverage their skills.

“Those who create their life purpose are often able to live with extraordinary energy and motivation to overcome challenges.”

Mr. Kehinde Sogunle, Chief Solutions Architect, LEAD Resources

Purpose is an intersection of the following:

  • What you love doing.
  • What you are good at.
  • What the world needs.
  • What you can be paid for.

Furthermore, he taught the concept of the virtual realm. The virtual realm is the realm between the physical realm and mental realm. For example, people wrote on paper tangibly but now write on devices intangibly. The former exemplifies the physical realm while the latter exemplifies the virtual realm.

He made the audience understand that this is the new normal for the new economy, the digital economy. He gave the elements of traditional economy:

  • Resources, e.g. Raw materials.
  • Secondary, e.g. Manufacturing.
  • Tertiary, e.g. Real estate.
  • Quaternary, e.g. Education.

He also gave examples of the elements of the digital economy:

  • Resources, e.g. Big Data.
  • Infrastructure, e.g. Data Carriers.
  • Services, e.g. Software-as-a-service.
  • Customers, e.g. IoT, eCommerce, eLearning.

The Business and Sustainable Development Commission gave a projection that a staggering $12 trillion & 380 million new jobs will be enabled by the digital economy in 2030. Especially in Africa (the continent with the largest and youngest workforce), the youths need to develop the new age skills to create solutions, play in the Digital Economy and make Africa great.

He taught that regardless of what a person studies, he or she can find a niche in the virtual economy. He highlighted that the critical areas and business imperatives that Africans can engage among the 17 global goals:

  • Food & Agriculture.
  • Transport, Infrastructure & Logistics.
  • Health.

Albert Einstein said, “We can’t solve problems by using the same kind of thinking we used to create them.” Mr. Kehinde Sogunle explained that the problems we created in the traditional economy and physical space can only be solved in the digital economy and virtual space.

“We can’t solve problems by using the same kind of thinking we used to create them.”

Albert Einstein, Theoretical Physicist

Furthermore, he encouraged the youths to choose to contribute to the global goals by leveraging technology. He explained that they will get value if they resolve to attain them.

After it was established that accelerated acquisition of knowledge and skills is required, he taught that it is wise to subscribe to the offerings of transition organizations such as LEAD Resources that help raise a new breed of competent youths that can take the world by storm.

He said, “Education + Vocational Skills + Computer Literacy are not enough to guarantee employability and entrepreneurship in the Digital Economy.” He stated that the required competencies for the digital economy are:

  • Digital Literacy.
  • Financial Literacy.
  • Business Enterprise Literacy.
  • Talent Management.

“Education + Vocational Skills + Computer Literacy are not enough to guarantee employability and entrepreneurship in the Digital Economy.”

Mr. Kehinde Sogunle, Chief Solutions Architect, LEAD Resources

He stated that LEAD Resources’ offerings for new age competencies include:

  1. Enterprise Development
  • Access to Finance through Business Enterprise Development
  • Start Up School Nigeria/Scale Up Academy

2. Digital Conversion/Leverage

  • Digital Quotient
  • Digital Economy Emerging Managers’ Programme
  • Digital Economy Conversion Programme
  • Turning Academic Research into Innovation

3. Personal Talent Management

  • Personal Assessment
  • Personal Digital Profiling & Management

4. Successor Generation Streaming Initiative

To learn more about these offerings, click here. He added some other relevant avenues for the youths to upskill such as:

  • IBM Digital Nation
  • Google Digital Skills
  • LinkedIn Opportunity

He gave the ten jobs in highest demand in 2020 and encouraged the youths to explore and acquire skills in these areas:

  1. Digital Marketer
  2. IT Support
  3. Graphic Designer
  4. Financial Analyst
  5. Data Analyst
  6. Software Developer
  7. Project Manager
  8. Sales Representative
  9. IT Admin
  10. Customer Service

Mr. Kehinde Sogunle rounded off with the parable of the sower in the Holy Bible. He encouraged the youths to have hearts that are fertile soils by choosing to develop their skills, acquire competencies and revolutionize their world, one day at a time.

To subscribe to relevant updates and opportunities for youths, click here.