Budgeting is an aspect of personal finance that 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 finances and how to navigate budgeting even with an unstable income.
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.
From the definition above, you can see that a budget is not something you create ‘in your head’. It ought to be a written plan (on a piece of paper, Phone 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, or a Nation. Wherever a person or a group of persons makes use of money regularly, 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:
Personal Budget – For individuals, families and households.
Business Budget – For NGOs, SMEs and companies.
Administrative Budget – For schools, churches, LGAs, states, nations and other administrative systems.
Also, budgets can 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 to Create a Budget For 2026
I could list a thousand and one reasons why you need a budget. You might even know more. One of the most important reasons you need a budget is that human wants are unlimited while the resources to meet them are scarce.
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 (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).
In summary, having a budget is important because it ensures that you have enough for the things you need (the important things), 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:
- 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.
- PERIODIC EXPENSES – These are less frequent expenses. They come in periodically or unexpectedly. Examples are car repairs, home maintenance, gifts, appliance repair, loans, etc.
- VARIABLE EXPENSES – These include every other thing that you need for daily living. They are called “Variable” because they fluctuate over time. They include food, utilities, phone bills, TV subscription, gas, fuel for the car and generator, clothing, education, medical bills, transportation, and entertainment, among others. This is usually the most difficult category of expenses to track because it fluctuates a lot. When trying to fix your deficit budget, variable expenses are usually the first place to start trimming.
- 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.
How To Draft A Simple Budget
In order to draft a budget successfully, you will need some basic tools, namely:
- Pen, Notebook and Calculator for the manual route.
- Excel sheet or Budgeting apps for the digital route.
Steps To Create A Budget That Works For You
- 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.
- 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? How will you invest?), your amounts (How much do you need to save?), and your deadlines, you can create a budget which doubles as a roadmap to achieve your goals.
- 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.
- 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.
- EXECUTE: Finally, get into action. Your aim should be to spend exactly or below what you have budgeted.
How To Create a Budget With Unstable Income
Let’s say you work as a freelancer or in a field where you only get paid when projects or jobs are available. Some months might look great, while others yield almost nothing. Keeping a budget, or more accurately, sticking to one in this situation, requires a lot of flexibility and a commitment to frugal living.
Here are some essential tips to get you started:
1. Keep Your Monthly Expenses at the Bare Minimum
To start, track your expenses for the past one to two months. Next, write out a realistic budget allocation for each item. Make sure this allocation is trimmed down to the ‘T.’ The goal is to set a minimum threshold: if anything is removed, you’ll be living poorly; if anything is added, you might end up borrowing before your next paycheck. Focus especially on trimming down your variable expenses, such as dining out or non-essential shopping.
- Implement Zero-Based Budgeting (The Proactive Approach): Instead of just tracking where your money went, decide where every dollar of your expected minimum income will go before the month begins.
- Targeting Variable Expenses: This is where you have the most control. For example, challenge yourself to cut your grocery bill by 10-20% through meal planning, buying in bulk, and cutting out non-essential items like high-cost snacks.
Cancel any service (streaming, apps, gym membership) that you don’t use at least once a week or that isn’t absolutely necessary for your work.
2. Separate Your Saving and Spending Money
Once you have a solid budget that details what you need to run comfortably for a month, you need a system for separating your money.
It’s best to automate this process as it is tempting to dip into savings for extra “chop life” spending, but this separation helps you save not only for the unknown future but also for unforeseen troubles.
3. Set a Minimum Savings Amount or Percentage
Because your income is unstable, you need to prioritize saving consistently. Based on your average income over the past few months, set a percentage or a fixed amount that must always go directly into your savings account, for example- save 10-15% of every single paycheck. It doesn’t have to be a huge sum; the consistency of the action is what truly matters for long-term financial health.
4. Save Unexpected Income in an Emergency Fund
Sometimes, money comes in from unexpected sources, such as gifts from friends or family. Too often, we spend this surplus on things we can’t properly account for later. Instead of doing that, get into the habit of saving all income that comes in beyond your core expected earnings. This money is perfect for boosting your crucial emergency fund.
5. Avoid Lifestyle Creep
The biggest danger of a good month is immediately upgrading your lifestyle. Saving unexpected income prevents “lifestyle creep,” where increased income leads to perpetually increased spending, trapping you on the unstable income treadmill.
How To Stick To Your Budget
The thought of sticking to your 2026 budget from January to December should not give you goosebumps.
Simply follow these guidelines:
- Place your budget somewhere you can see every day.
- When you feel like giving up, remind yourself why you created the budget in the first place.
- 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 can join our community for the needed support and accountability.
In summary, taking charge of your finances in 2026 begins with having a structured budget. Now that you have learned these, it is time to put your knowledge to work so that 2026 will be a remarkable year for you.