An Investigation into the Effects of Budgeting on Financial Wellness at Household Level: A Case of households in Lusaka District

Abstract

This study investigates the effects of budgeting on financial wellness at the household level, focusing on households in Lusaka District. Recognizing the critical role that budgeting plays in personal financial management, the research aims to (a) evaluate households’ attitudes towards budgeting as a tool for managing their finances effectively (b) establish prevalent budgeting practices among Lusaka households, and (c) determine the effect of the budgeting practices on financial wellness. Four hypotheses were tested to determine the impact of the different budgeting methods namely, Zero-Based Budgeting, the 50/30/20 budgeting rule, Envelope Budgeting, and Pay-Yourself-First budgeting on household financial wellness. A descriptive correlational research design was employed, utilizing primary data randomly collected from the 384 households from within the seven constituencies of Lusaka district namely; Lusaka Central, Matero, Mandevu,Munali, Chawama, Kabwata and Kanyama using structured questionnaires with closed ended questions. The sample was demographically diverse, representing various age groups, education levels, income brackets, and employment statuses. Data analysis included descriptive statistics to profile household characteristics and budgeting behaviors, as well as regression analysis to assess the relationship between budgeting methods and financial wellness. Findings reveal that an overwhelming majority (96.88%) of households prepare monthly budgets, with Zero-Based Budgeting and Envelope Budgeting emerging as the most commonly used methods. However, only 62.63% of households reported adherence to their budgets, citing unexpected expenses and irregular income as major challenges. Regression results indicate that Zero-Based Budgeting and the Pay-Yourself-First method have significant positive effects on financial wellness, supporting their respective hypotheses. Conversely, the 50/30/20 budgeting rule and Envelope Budgeting showed statistically significant negative relationships with financial wellness, highlighting the limitations of rigid budgeting frameworks. The study concludes that budgeting methods that promote flexibility and prioritize savings enhance household financial wellness.