How to plan your spending with a budget

It's far too easy these days to find ourselves spending on things we never intended – a bit here, a bit there, and there's nothing left to help us get ahead financially.

A budget (or money plan) is really just a simple plan for your spending. It can sound like a joy-killer at first, but it’s actually a big help in making sure you spend on what you really want. Essentially, your money plan:

  • Helps you steer your money and stay confidently in control
  • Shows what money you expect to receive and how you expect to spend it
  • Helps you flow your money towards your goals
  • Is one of the best tools for getting the most out of your money and getting ahead. 

A budget helps us feel in control, instead of just wondering where our money went. It can mean the difference between being able to plan ahead versus always having to go into overdraft between paydays.

Who should budget?

Budgets are for anyone who is managing money coming in... and going out. Most of us who have to make choices about our money can benefit from a budget. It's not just for anyone having difficulties making ends meet.

A budget helps us feel in control, instead of just wondering where our money went. It can mean the difference between being able to plan ahead versus always having to go into overdraft between paydays.

Do you typically spend more or less than is coming in? 

If you spend less…

You can use a budget to work out how much you can save each payday and flow this towards what you want. We call this ‘paying ourselves first’.

If you spend more…

You can use a budget to see where that extra money is going, and how much you are spending on your debt. You can also see if there are ways to spend less or earn more.

Good budgeting makes it easier to manage your money and reach your financial goals.

How to build a budget

To create a budget, start by adding up how much money is coming into the household (your income), and how much is going out (your spending), then work out the difference.

Making a plan for your spending is easy with our budgeting tool.

Try Sorted’s budgeting tool 

You will either have money left over (a surplus) or not enough money to cover your spending (a deficit). The aim is to make as much of a surplus as possible so you have money left in your pocket to save for your goals or pay off debt faster.

What you’ll need to build your budget

A budget needs to be accurate or it won’t work. Here’s what you’ll need.

  1. A record of your day-to-day spending. Your online banking will show most of your spending, but receipts from shopping and bills from the past three months can also come in handy. These will show your regular expenses like rent or mortgage, car loans, pay-later options, personal loans, credit cards, rates, phone, power, insurance and subscriptions like Netflix or Spotify (as well as the other things that are easy to forget about – like Uber Eats).
  2. A list of your annual costs. These are things you pay for less regularly like vehicle registration and warrant of fitness, medical expenses, gifts or holidays.
  3. Your income information. This will be any after-tax money you have coming in, such as your pay, benefits or allowances, NZ Super or interest earned on savings.
  4. Your savings and investments. This includes details of any regular savings you already have. Making a spending plan should help you increase it. 
Budgets need to breathe! A tight budget is harder to stick to, so it’s important to be realistic about how much we need. And everybody needs some fun money! (Coffee? Concerts? We’ve all got purchases that make us feel good.)

Tracking your spending

After setting a budget, it’s important to see how it’s working. You’ll need to track your expenses and see if you are sticking to your plan. Try a spending diary or use an online tool or smartphone app. Then you can adjust your spending as needed to stay on track.

Guide to money tracking

Making the most of your income

Budgeting isn’t just about watching our spending. How much we earn also affects whether we have money left over for saving towards our goals or paying off debt. So part of our plan needs to include goals for growing income, too.

People’s needs typically increase over the years. And if our income doesn't grow, we effectively earn less each year just because of inflation (when prices go up and our dollars buy less).

The Careers New Zealand website has broad salary information for different types of jobs.

Online job sites and salary survey reports also show what someone in your position with the same experience and skills should be earning. You can also contact recruitment agencies to find out what similar roles are currently paying.

Getting budgeting help

Need help with creating a budget or making ends meet? Reach out to MoneyTalks on 0800 345 123 – even anonymously if you like – for personalised help.

Budgeting FAQ

Do I really need a budget?

A budget is really just a plan for your spending – it’s a big help in making sure you spend on what you really want. It's far too easy these days to find ourselves spending on things we never intended – a bit here, a bit there and there's nothing left to help us get ahead financially. Here's our budgeting tool to help you start your plan today.

What should I budget for?

Your goals, definitely. A budget is simply a plan to flow your money towards what you want, to live your best life. Budgeting helps for many reasons: to make sure we don't spend more than we earn, that we have enough for bills, to make ends meet. But the key thing with budgeting is to make a surplus – to have extra money left over and not a deficit. Once you do, you've got money to aim at whatever goals you'd like to set. Here's where to start your budget.

Why should I plan my spending?

Using a budget to plan your spending and sticking to it not only helps make ends meet, it enables you to reach goals for the short, medium and long term. Most things we'd like to achieve in life take money, and that money needs saving if we want to avoid too much debt. Once you've got a surplus in your budget, you can make sure it gets saved automatically into separate accounts, where it can build towards what you want. To get you started on thinking about some goals today, here's our goal planner.

Who should make a spending plan?

Budgets are for anyone who is managing money coming in ... and going out. Most of us who have to make choices about our money can benefit from a budget. It's not just for those of us having difficulties making ends meet. A budget helps us feel in control, instead of just wondering where our money went. Here's our budgeting guide to help you start your plan today.

How can I stick to my budget?

It helps to have a plan! To build a great budget that you can stick to, it helps to first know your numbers. By tracking your spending, you’ll start to see where your money is going, and you’ll be better placed to make decisions about where you really want your money to go. The key is to capture everything you spend for a month or two to get your full spending picture. There are several apps designed to track spending on the go. You can also download your past three months of transactions from your bank, which really helps to see the patterns. Here’s more on money tracking.

Who can I talk to about money?

So we don’t follow random money tips from just anyone, it helps to get professional, independent personalised financial advice. (It doesn't have to cost an arm and a leg.) Here's our guide to getting advice. Whichever kind you need, it helps to shop around, meet with a few advisers and find a good fit. For independent financial advisers, see Mary Holm's helpful page. For advice about debt and budgeting, you can discuss your situation – even anonymously – with the team at MoneyTalks, which runs a free helpline. Easily chat online, call 0800 345 123 or text 4029 today.

Are budgeting and planning the same?

The word "budget" can make us feel like our hands are tied, so it's better to think of it as a plan for spending. First up is to see whether you are spending more or less than you've got coming in. If you’ve got a surplus, you can funnel your extra money towards what you want and achieve your goals. To help start your plan today, here's our budgeting tool.

Which budgeting method or strategy is best?

The classic "envelope" or "jar" technique helps give every single dollar a job to do. (Sorted's budgeting tool is a digital version of this.) With this way of budgeting, you add up your incoming money and then divide it into the different categories you need to spend on, like your regular expenses (rent, mortgage, phone, power, insurance) and your irregular ones (like food or petrol, which can go up and down). Here's our budgeting tool so you can start your plan today.

How do I start a budget?

The first step is to add up your incomings – whatever money you have coming in. Next up are your outgoings, including regular and irregular expenses. To build a workable budget, it needs to be as accurate as possible and reflect the typical way you spend money. This makes it easy to see how your spending compares with what you earn. You'll either have a surplus (money left over) or a deficit (when you spend more than you bring in). To help you start your plan today, here's our budgeting tool.

How do I make a spending plan without a steady income?

Incomes can be lumpy when you're a freelancer, depending on the gig or the project. To start, it helps to figure out the minimum amount of money you'll need to meet your expenses. When you've worked out what you need to get by, you then know that what you earn above that amount each month needs a plan. You can set aside a percentage that will allow you to make sure you're working towards your goals, even when your income goes up and down. Here's more for contractors.

How do I budget for a baby?

Congratulations! Making a spending plan for when baby arrives is about budgeting for reduced income, and for the additional expenses that come along, like baby gear. Many couples find it helpful to do a test run on a single income before baby arrives. This gives you an early perspective on your expenses and any adjustments you need to make. Here's more for when you're planning for your new arrival.

How do I budget to buy a house?

Buying a house can take some extreme saving, especially to build up a sizeable deposit. A spending plan (which is what a budget is) helps. It lets you see how much you can put towards a deposit as you earn, and gauge how much you'll be able to build up to buy your home in the years to come. Here's more on purchasing your first home, including government help and KiwiSaver.

How much should I be spending on fun stuff?

Everyone needs fun money to splurge sometimes, so it helps to make it part of your spending plan. Knowing what your limit is also takes the guesswork out of it. There are many rule-of-thumb budgets out there, like the "50-30-20" rule for needs, wants and savings. But what's most important is that you make your plan to suit your circumstances, and include money to splurge with. Here's our budgeting tool to start your plan today.

Should I review my service providers (like power, internet) more often than not?

It's pretty competitive in the world of companies who provide us things like power, internet or phone service. But when one of them suddenly lowers their prices, we might not hear about it. So it helps to review our providers at least once a year. Because new players and new offers come along regularly in these industries, we could save hundreds by reviewing and switching to better deals out there. How much difference would it make in your budget?

What’s the best way to track my expenses?

When it comes to tracking money, the key is to capture everything you spend for a month or two to get your full spending picture. There are several apps designed to track spending on the go. You can also download your past three months of transactions from your bank, which really helps to see the patterns. Here’s more on money tracking.

What are some budgeting methods to manage spontaneous expenses?

Budgets are for spontaneous people too! The trick is to have money for those spur-of-the moment expenses as part of your spending plan. Knowing what your limit is takes the guesswork out of it, but it also gives you the flexibility you need. What's most important is that you make a plan that’s right for you. Here's our budgeting tool to start your plan today.

How much rent can I afford?

Rent will probably be your biggest ongoing cost when you’re flatting. You can look online to get an idea of typical rents in your desired location. Then, using our budgeting tool, you can work out how rent will fit into your overall spending plan. You’ll also typically need to plan to pay a bond of up to four weeks’ rent, plus two weeks’ rent in advance, so you’ll need to budget to save up. Ideally it would be good to keep your rent to 30% or less of your entire budget, and all your living expenses to 50% or less, but that’s not always possible.

Joint or separate bank accounts? What’s better for saving and budgeting?

More couples these days seem to be managing their money separately, which is good for each person’s autonomy and independence, but not necessarily for communicating. It’s so important to communicate well about money in a relationship. And while it’s only natural to have differences of opinion, getting on the same page brings many opportunities to get ahead financially that we wouldn’t have on our own. Here’s more for when you’re planning with your partner.

Am I better off having different bank accounts for savings?

Probably. Having a separate account to funnel your savings into helps it grow and not get mixed in with all your other spending. And the more automatic and out of sight, the better. We’re guessing you’re not just saving for the fun of it, but for goals you want to achieve. Having separate accounts for each of your targets is also useful, not only because you can more easily track your progress, but also in case you need to look at some other investment options for one or other of your goals (like term deposits for the short term, a managed fund for the medium term). Here are more goal-setting ideas.

My income has dropped – should I consider downsizing my home?

Before taking such drastic action, it can help to get an accurate picture of where you are at financially. Review your incomings and outgoings, and look for alternative ways to trim and get through the lean times without having to move. The cost of selling and moving could eat into the amount you’re aiming to save. Here’s our budgeting tool to get a clear picture first.

How can I supplement lost income while managing the same level of ongoing expenses?

Beyond looking for a side hustle to earn more, it may be time to make some cuts. Trying to sustain the same lifestyle after taking a hit to your income can be extremely challenging, and it’s good to be realistic about whether this is even doable. Unless you have an accurate picture of your incomings and outgoings, you could end up in a difficult debt spiral. Here’s where to see your current situation clearly and make a new plan.

When should I think seriously about household budgeting?

As soon as you have incomings and outgoings, as soon as you have bills to pay, we recommend making your spending plan. A plan allows you to steer your money where you want it to go, making sure you’re in control and headed in the right direction. Here's our budgeting tool so you can start your plan today.

What about short-term budgeting vs long-term budgeting?

Planning your spending in the near term is one thing (here’s our budgeting tool for that), but making long-term plans for goals that are decades away, like retirement, is quite another. Even if it feels so far away, it’s never too early to put some plans in place. Here’s where to start when you’re looking ahead and thinking about your future lifestyle.

How do I plan a wedding on a budget?

Congratulations! There are so many beautiful and memorable ways these days to celebrate your wedding in your style, on your budget. Because you can now have multiple budgets in Sorted’s tool, you can easily create a separate wedding plan (or even more than one, to work out different options for your special day). Start by listing every item, from invitations to flowers to the dress. Here’s where to begin.

Does the 50/30/20 budget rule work for everyone?

There are many rules-of-thumb budgets out there, like the "50-30-20" rule for needs, wants and savings. But people’s situations are far more varied, so this one doesn’t necessarily work for everyone. Your needs might not be covered by 50% of your income, or 20% on savings may not be enough – depending on what you’re aiming to achieve. What's most important is that you make your plan to suit your circumstances. Here's our budgeting tool to start your plan today.

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