Setting up your budget: a New Zealand guide

Budgets always seem SO BORING. I’ve spent so many hours looking at spreadsheets, trying to procrastinate with a bit more Facebook or a bit more chocolate. But once I made my first budget and saw how much (actually how little) was left over, it became my go to tool to start planning out my life.  I’d like to be able to afford the odd holiday and I’d LOVE to be able to have a bit stashed away for a rainy day and without my budget, I just couldn’t make either of those happen.

Now budget rule number one: having a budget doesn’t mean to you have to cut out all the fun.  The secret is to allocate some of the fun stuff INSIDE your budget so you always know you can afford it, without accidentally missing out on paying for some big bill. Now I get that this sounds a bit Monica Geller of me, but the goal is to have less stress and more fun.

I’ve got some other ideas to share about making money less stressful that I’ll share in later posts, but for now, let’s get your budget rolling.

First off, decide what time frame you want for your budget. I prefer to do a weekly budget because I have a terrible memory and can’t remember what I spent on things a couple of weeks ago at the start of the month.  But sometimes, especially if you get paid monthly, it might make sense to make your budget monthly or fortnightly. I’m going to use weekly as an example here.

Budget Step One – List all your expenses

Try to think of every single thing you spend money on. Write them all down in a list or use a spreadsheet to make the maths easier.

Make sure you remember:

  • Things you pay for each week – like rent, mortgage, groceries, petrol, buying lunches
  • Things you pay for each month – like power, phone, internet, gym memberships
  • Things you pay for as needed throughout the year – like things that come up each school term, hair appointments, vet bills, dentist bills
  • Things that are usually only once a year – like car rego, some insurances, sports subs

If you’re doing a weekly budget, convert all the amounts to a weekly figure. If you’re converting monthly to weekly, you can just divide by 4 for your expenses because it will work out each one is a teeny bit more that you need, which is a bonus at the end of the year.

Budget Step Two – look through your bank accounts and credit card bills

Take a look at what you’ve actually spent over the last few months and work out a rough amount that you’d need for spending. remember, setting a budget shouldn’t feel like a punishment, you’re just working out exactly what’s coming in and what’s going out.

Add these things to your list too. You might like to group them so you have one amount each week for ‘spending money’, or ‘eating out’.

Budget Step Three – list debt repayments

If you haven’t already included them, make sure you write down any debt repayments. If you have a student loan and the repayments come out of your pay, don’t add these in again. Also, it makes most sense to not include your mortgage in here, just keep your mortgage under your main expenses list. Debt repayments might include:

  • Hire purchases
  • Finance cards like Q card, Farmers card, or Flight centre Mastercard
  • GE finance
  • Personal loans
  • Credit card repayments
  • Car finance payments
  • Money that you’re paying back to friends and family

Budget Step Four – List your income

On another list, write down all the money that you have coming in. Make sure you write the after tax amounts.

For wages, write down the ‘take home’ amount that you actually get in your bank account after everything else has been taken out (aargh).  At the moment for me, there is not much on this list, it’s literally just ‘wages’. But other people might have things like:

  • Child support
  • Interest
  • Rent or board (coming in)
  • Airbnb income
  • Business income
  • Side hustle income
  • WINZ payments
  • Superannuation or pension

Budget Step Five – Add it up

This is where things can get weird.  But don’t back out now. Add up all your expenses and debt repayments to get a total of Money Going Out.  Add up your income list to get a total of Money Coming In.

Then dun, dun, dun, do Money Coming In MINUS Money Going Out.

You’ll be left with a number which may be positive (yaaay!) or zero, or could be negative.

Whichever number you get, you now know SO MUCH more about your finances and you can start to make a plan to work towards what you want.

If your number is zero, or positive: awesome, there is some left over.

Now it’s time to check:

  • Is there enough left over for the things you want to do (holidays, save for a new car, save towards a house deposit, etc)?
  • Are there things you could do without, to move more quickly towards your goals?
  • Do you have any debts (not including mortgage)? These are costing you money in interest. Could you find any room in your budget to pay these off faster?

If your number is negative: a bit scary, because you’re spending more that you earn.

Take a quick look back over your budget and figure out:

  • Is there anything you can cut back on?
  • Are there things that you could do without for a while?
  • Do you have unused things at home that you could sell?
  • Is there any way you could increase money coming in?

If you’ve got debts (not including a mortgage) then if you can free up any extra money to pay these off, you will be likely to save loads over the long run.

So that’s it – a basic budget.

The next couple of posts cover some popular ways to go about paying down debt, setting up your finances so you can relax, making a plan to save and enjoy the extra dollars, and automating your money (less jobs = yuss).

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