Reading about creating a budget can sometimes seem far removed from reality, like a theory. In Budget 101, we talked about what you should consider when creating a budget but you didn’t get to see an example in practice. If you’ve not read the last post, this is a standalone post. We will walk through the process of creating a budget for a hypothetical Nigerian woman.
Case study
Introducing Anita, a 28-year-old single Nigerian woman living in Lagos. She works as a digital marketer at ABC Company, Yaba, earning ₦300,000 after taxes. Anita lives alone in a single-room self-contained unit in Surulere, Lagos.
She has two younger siblings and occasionally sends her parents money. She has heard about budgeting but never really budgeted her money before. Anita always thought it was too extra. But deep down, it’s because she’s low-key afraid to face the reality of her financial situation. She has been getting by with her salary and hasn’t been saving consistently, even though she knows it’s important. She has just ₦280,000 in savings.
Lately, her salary does not cover all her needs anymore. The cost of food and services is rising fast. She knows she must do something and is making moves to get a better inflation-adjusted job. But in the meantime, she has decided to try budgeting. She has read the post on tracking expenses and now has one month of tracking data.
After also reading the first budgeting post, she has decided to give budgeting a try.
Setting a Budget Number
For Anita, this one is easy; she earns a monthly income. She will be using her salary after taxes are removed.
Budget Number: ₦300,000
Decide the Savings Amount
This one is tricky. Ideally, Anita wants to pick a savings rate of 20% per month (₦60,000), but she is worried that the rest of the money (₦240k) will not be enough to cover her for the month. She wants to get her savings to at least ₦500,000 and more if possible, for peace of mind’s sake.
But what if her mum or siblings ask for more urgent help, or want to borrow money? What if she has an emergency? She decides once and for all to start with a savings rate of 10% at least for now, and adjust accordingly next month. If she survives comfortably, she will increase it to 15-20% as time goes on. She’s determined to be consistent with saving and wants to pick something sustainable.
Verdict: 10%
Savings number: ₦30,000
Money left in budget: ₦270,000
List of Fixed Expenses.
This is where her tracking data from last month comes in. She’s going to look at it and try to determine which bills she pays consistently, every single month.
- Transport – ₦32,000
- Electricity – ₦10,000
- Data – ₦10,000
- Netflix – 4,000
- Airtime – ₦1,000
- Eggs – ₦4,000
- Bananas – ₦1,000
- Snacks – ₦2,000
- Hair – ₦10,000
Total Fixed Expenses Estimate: ₦74,000.
Money left in budget: ₦196,000
List of Variable Expenses
According to her tracking data, she spends the most on food items and household items. She’s starting to see how important tracking is and is determined to do more of it to get insight into her past spending behavior. She now understands that the more data she has, the smoother budgeting will be.
Last month, she spent ₦45,000 on food items alone and also spent almost 9k on household items like insecticides, a knife sharpener, toilet cleaner, and tissue paper. She spent ₦10,000 on black tax: the usual culprits for black tax in the past were her mom, one of her siblings, and that one cousin. Miscellaneous expenses like bank charges, POS fees, and random nice things at the market also factor in at 5K.
- Food items: ₦45k + 5k buffer = 50k
- Household items: 9k + 1k = 10k
- Miscellaneous: 5k
- Black Tax: ₦10,000
Total Variable Expenses Estimate: ₦75,000.
Money left in budget: ₦121,000
List Upcoming, One-time, or Irregular Expenses.
- The first one that came to her mind was her rent at ₦700,000 per year.
- She has to replace her skincare products every six months. Estimated at ₦80,000.
- Her best friend is getting married in six months. She has to pay for aso-ebi of 30K, gele 5k, tailor ₦15k, and a hotel room for one night at ₦12K.
- She believes she must take a professional digital marketing course that costs ₦100K. She wants to pay for it in four months so that she can put it on her resume and look good to prospective employers.
Anita would have to break the cost of these expenses down to a monthly cost in order to add it to her budget over the coming months before their respective due dates.
Rent:
₦700,000 ÷ 12 ≃ ₦58,300/month.
Skincare Products:
₦80,000 ÷ 6 ≃ ₦13,300/month
Close friend’s wedding:
| Aso Ebi (6 yards) | ₦30,000 |
| Gele | ₦5,000 |
| Hotel (one night) | ₦12,000 |
| Tailor | ₦15,000 |
| Total | ₦62,000 |
₦62000 ÷ 6 ≃ ₦10,300 monthly.
Online course:
₦100,000 / 4 = ₦25,000 monthly
Total Irregular expense estimates per month: ₦106,900.
Money left in budget: ₦14,100
Budgeting for Fun and Relaxation
Anita’s idea of fun is the occasional karaoke with her friends, maybe a beach outing here and there, with homemade food or beach-bought drinks, a concert, a comedy show, or a hangout with friends at a nice spot. She picks 20k as her fun budget.
Total fun budget: ₦20,000
Money left in budget: – ₦5,900
Grouping Budget Items
Before grouping, Anita decides to list all expenses she has gathered so far, along with their respective prices, in front of them. She groups them into three categories. Essentials, semi-essentials, and non-essentials.
It was easy for her to select her true essentials. They keep her safe, employed, fed, housed, and financially stable. Rent, transport, electricity, data, airtime, food items, eggs, air, savings, and household items.
For semi-essentials, they are important to her, but they are not essential for her actual survival. Examples: skincare, black tax, friends’ weddings, online courses, bananas, and miscellaneous fund.
The non-essentials are the items that add color and pleasure to her life, but do nothing to stabilize her life or increase future earning power, e.g., Netflix, snacks, and fun budgets. A more thorough budget might decide to break down the food items and the household items, estimate the price for each individual item, and determine which are essential, non-essential, and semi-essential.
| Expense | Amount (₦) | Category | Notes |
| Savings | 30,000 | Essential | Important for her financial stability and her goal to be consistent in saving. |
| Transport | 32,000 | Essential | |
| Electricity | 10,000 | Essential | |
| Data | 10,000 | Essential | |
| Netflix | 4,000 | Non-essential | |
| Airtime | 1,000 | Essential | |
| Eggs | 4,000 | Essential | |
| Banana | 1,000 | Semi-essential | |
| Snacks | 2,000 | Non-essential | |
| Hair | 10,000 | Essential | She needs to look presentable at work |
| Food Items | 50,000 | Essential | |
| Household Items | 10,000 | Essential | Hygiene products keep her sane |
| Black Tax | 10,000 | Semi-essential | |
| Miscellaneous | 5,000 | Non-essential | |
| Rent | 58,300 | Essential | |
| Friend’s Wedding | 10,300 | Semi-essential | |
| Skincare Products | 13,300 | Semi-essential | |
| Online Course | 25,000 | Semi-essential | |
| Fun | 20,000 | Non-essential | |
| Total | ₦305,900 |
Deciding Her Margin of Safety Fund
This fund is supposed to be Anita’s pocket money. It’s there for surprises, emergencies, small wants, snacks, and to make up for slight increases in the cost of some budget items. The problem now is that her total budget is currently 305,900 Naira. That is way over the original budget amount of ₦300,000. She has no money left for any extra spending, so she’s going to have to cut items from the budget. This can go any number of ways.
Anita would like to have anything between 30-50K in her margin of safety fund. She knows the margin of safety fund is important, and is there to protect her from the expenses she can’t see coming.
Cutting Budget Items
If she must cut, Anita needs to start from the non-essentials and work her way up.
Non-Essentials
The options are:
- Netflix: At 4,000, it doesn’t really move the needle. Revisit.
- Snacks: At 2K, it also doesn’t move the needle, revisit.
- Fun: At 20K, should she cut all of it? That seems extreme. That means she would have no fun money for 6 months to accommodate the irregular expenses. A more realistic approach that would prevent Anita from getting bored and going into a spending spree out of rebellion is a slashed fun budget. Budgeting 10K instead gives her at least one outing per month: one/two karaoke outings, one cheap concert, one night out with friends, or two small hangouts.
Semi-essentials
A quick look at her irregular expenses by the month reveals that they cost a lot. They are the most expensive semi-essentials.
Professional online course
The online course for her career at 25K per month is a lot. It’s the largest semi-essential. Depending on how important this course is to her, she must make a decision here: either she scrapes taking the course at all, pauses the course for 3-4 months, or extends the due date for her to take it to 6-8 months. If she keeps the course, then yes, she must further cut either the fun budget or other non-essentials or semi-essentials.
Anita must decide if taking the course sooner rather than later is more important than keeping other items on the budget. Could Anita be overestimating the value of the online course? Is that the only way for her to excel at getting a new job? Could she do free marketing for brands and showcase that on her portfolio or resume?
Could she do practice interviews with friends? Maybe she could simply pay to have her resume rewritten or optimize it by watching YouTube videos or reading blogs? Could she find free courses online and YouTube blogs instead of paying for the expensive course? Is she positive that paying for that 100k online course will make a difference in helping her get a better job?
Skincare products
She could extend her skin care due date to 10 months. Or explore homemade options for things like an exfoliator or a face mask. She could find cheaper products for skin care, too.
Wedding
Anita could find a way to cut her friend’s wedding expenses. She could find someone to split the hotel costs with, skip the hotel entirely if possible, buy 3 yards instead of 6 yards, find a cheaper tailor, not buy the clothes at all, or not attend at all. This all depends on how important this wedding is to her.
Miscellaneous fund
She could cut miscellaneous funds at 5K.
What She Cut
| Expense | Notes | Before (₦) | After (₦) | Amount Regained (₦) |
| Fun | Slashed by 50% | 20,000 | 10,000 | 10,000 |
| Online Course | Deadline shifted from 4 months to 8 months. Anita determined that the course is a highly acclaimed course in her industry that would definitely make her more impressive to prospective employers. | 25,000 | 12500 | 12,500 |
| Friend’s Wedding | – Spoke to the bride about buying 3 yards of material instead of 6. (₦15,000) – Gele remains intact (₦5,000) – Found a mutual friend to split hotel costs with. (₦6,000) – Tailor stays intact (₦15,000) – New total: 41,000/6 ≃ ₦6,800 | 10,300 | 6,800 | 3,500 |
| Skincare products | Deadline shifted from 6 to 8 months | 13,300 | 10,000 | 3,300 |
| Miscellaneous fund | cut by 100% | 5,000 | 0 | 5,000 |
| Netflix | cut Netflix | 4,000 | 0 | 4,000 |
| Total Reclaimed | 38,300 |
Anita has now reclaimed ₦38,300 from the overall budget.
Total Budget Overall: ₦305,900 – ₦38,300 = ₦267,600
Margin of Safety Fund: ₦300,000 – ₦267,600 = ₦32,400
Money left in budget: ₦0
Anita feels more secure now that she has ₦32,400 for unexpected expenses without having to dip into her savings. If she wants to increase her margin of safety fund further, she would have to find more opportunities to cut.
Final Budget
| Expense | Amount (₦) |
| Savings | 30,000 |
| Transport | 32,000 |
| Electricity | 10,000 |
| Data | 10,000 |
| Airtime | 1,000 |
| Eggs | 4,000 |
| Banana | 1,000 |
| Snacks | 2,000 |
| Hair | 10,000 |
| Food Items | 50,000 |
| Household Items | 10,000 |
| Black Tax | 10,000 |
| Rent | 58,300 |
| Friend’s Wedding | 6,800 |
| Skincare Products | 10,000 |
| Online Course | 12,500 |
| Fun | 10,000 |
| Margin of Safety | 32,400 |
| Total | 300,000 |
The Mindful Naira Commentary: Lessons from Anita’s Budget
This case study shows that a lean budget doesn’t punish you but forces you to review your priorities. Your money is not unlimited, and every Naira must be assigned responsibility.
Intentional Spending
Could you imagine what it would look like if Anita didn’t write a budget and tried to wing it? She’d probably overspend on fun and skincare. She wouldn’t know how to plan ahead for the wedding. When the time comes for her irregular expenses she’d be panicking to pay her rent, or take out a ₦62,000 sum out of her monthly pay to cover the wedding expenses in one go and maybe have to eat worse that month because she can’t cover the full cost of her food items or something
The Power of Forced Prioritization
Anita’s initial budget was over by ₦5,900, not including her desired Margin of Safety Fund. The cuts she made reveal her true priorities as future earning power and community. She cut Netflix, miscellaneous fund, and slashed her fun budgets just to make room for the online course and showing up for her friend’s wedding. She also even left black tax untouched because it is tied to family responsibility which she values more than short-term entertainment.
Making Room for Safety
The best part of this exercise was that she knew the importance of the Safety fund. It shields her from inflation or unexpected expenses like a sudden health bill or a higher than expected utility fee. Without this fund, surprise expenses would have forced her to dip into her primary ₦310,000 savings. Now she has a dedicated buffer that protects her long-term savings goals.
Practice makes perfect
Following along as we do Anita’s budget gives you a glimpse into how an actual budget is created, along with the constraints that you might encounter while building yours.
It’s not rocket science; it’s really just taking the list of expenses and the calculations you have brainstormed in your head and putting it on paper. Prioritizing the most urgent items, and cutting ruthlessly, when needed.
A budget can be perfect on paper, yet it’s only as good as the person following it with discipline. Even when life hits in the form of inflation or very serious emergencies, it’s up to you to go back to the drawing board to regroup with whatever money is left.
Have you drawn your budget yet? What challenges did you encounter?