Your path to financial freedom

Sick of hearing the ‘b’ word? Unfortunately, budgets get a bad rap, with many believing that they stop you having fun with your money.

The truth is budgets help you to enjoy spending by giving you greater visibility of what you can spend, while ensuring you have the essentials covered. 

Basics of budgeting

The aim of a budget is to spend less than we earn, so that we can use the money left over to reach our goals. This is what’s called having a surplus. When we don’t have money left over, that’s what’s called a shortfall – where we’re spending more than we earn.

For our budget to work it needs to be accurate. It’s important to include all the details about our income and spending in our budget. Here’s five things to keep front of mind when creating your first budget:

1. Start with the essentials
   This means food, shelter, clothing and utilities
2. Tackle debt
   Especially high-interest loans like hire-purchase or short-term loans
3. Schedule spending
   Time expenses like rent or utilities so they arrive around the same time you get paid
4. Create a budget buffer
   It’s important to have a bit of money set aside to cover unexpected expenses
5. Have goals
   Highlighted in ‘Setting yourself up for success’ is the importance of having goals to motivate us to stick to our budget

Keep on top of your finances

Unfortunately, you can’t simply ‘set and forget’ with a budget. There’s a few thing’s you’ll need to do to keep on top of your finances: 

1. Continue to track your spending
2. Set a date to review your goals and budget
3. When you achieve a goal:

- celebrate!
- then start on the next goal

Ready to take the first step? Sorted’s budgeting tool can help you take control of your finances. Visit sorted.org.nz/tool/budgeting-tool for more information.