How to start a budget and why it's important

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.

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.

What is a budget?

A budget (or money plan) is really just a simple plan for your spending.

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. 

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 – give it a try!

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.

If you usually spend less than you earn…

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 usually spend more than you earn…

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.

A good budget can make it much easier to manage your money and reach your financial goals.

What you’ll need to build your budget


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).


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.


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.


Your savings and investments

This includes details of any regular savings you already have.

Making a spending plan can help you increase your regular savings to help you get ahead over time.

The best budgets keep getting better

Keep tracking your spending 

After setting a budget, it’s helpful to track your spending to see how it’s working. This way, you can see what's working and refine it over time.

You could try a spending diary or use an online tool or smartphone app. Setting up different bank accounts to manage your budget can work really well too.

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.

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.

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 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.

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 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.

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.


Don’t know where to start?

Check out our 6 steps Get Sorted programme to get you on track.

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