Budgeting isn’t something I’ve always done. I tried budgeting apps as a student out of curiosity but wasn’t able to stick with it. It seemed like a lot of work only to make you feel guilty about the state of your finances.

I started taking budgeting seriously only once we had a baby on the way. You might have other reasons and hopefully they’re compelling enough to make you want to at least try it out for a little while because it’s worth it. Trust me.

If you’ve ever checked your account balance at the end of the month and wondered where all your money went, then this guide is for you.

What a budget actually is (and isn’t)

A lot of people think that having a budget means restricting your spending and leading a boring life. This couldn’t be further from the truth. A good budget is about having a solid plan for your money. Remember, money is a tool for you to use to help shape the life you want to live.
If you don’t have a clear plan for how you’re going to use this tool, it often ends up being wasted.

You can still get your daily coffees or whatever it is you might enjoy. I want to make it really clear that budgeting doesn’t mean you can’t enjoy life. It simply means you’re being intentional and actively choose how to spend your money instead of letting it disappear in the background.

Why budgeting matters

New Zealand isn’t exactly a cheap place to live. Between high rents, increasing power bills and the cost of fuel or childcare it can be difficult to make ends meet. This is why it’s key to make every dollar stretch further as much as possible.

According the The Millionaire Next Door, wealth is built through disciple and not necessarily flashy income. The millionaires studied in the book all watched their finances closely and reviewed their spending and saving at least once a month. If millionaires pay attention to their money and budget consistently, why shouldn’t you?

How to create your first budget

Here’s a simple approach to your first budget. I recommend Sorted’s budget planner as a great free option. That’s what I started with and found it really good.

Before going any further, log into your bank account or pull up your latest bank statements. This will help you to create an accurate budget.

Step 1: Know what’s coming in

Add your after-tax income, which means anything that shows up in your bank account each month.
This is usually:

• Salary or wages
• Side income (from a side gig like freelancing or selling online)
• Benefits, Working for Families or other regular payments

If your income changes each month, take the average of the last three months to get a baseline.

Step 2: Track what’s going out

List all the expenses you anticipate having this month by category:

• Housing (rent, rates, mortgage)
• Transport (fuel, public transport, maintenance, parking )
• Groceries
• Utilities
• Insurance
• Childcare
• Savings
• Investments
• Pets
• Entertainment
• “Splurge” money
• And so on

They key here is to keep track of all your expenses regularly. Any money coming out of your account (or anywhere else) needs a home in your budget.

For example, to account for any surprises I have an “Unexpected” category for expenses that I didn’t plan for. And with life being full of surprises, there’s usually something in that category every month.

Step 3: Set one or more goals

Think about what you want your budget to do for you. It could be things like:

• Build a $1,000 emergency fund
• Pay off the credit card
• Save for a first-home deposit
• Save for that nice holiday‌

Step 4: Budget to zero

This is also called zero-based budgeting and means every dollar gets a job, whether it’s paying bills, saving, investing or enjoying life. Make sure your income minus expenses equals zero at the end of each month.

• If there’s any money left over, you’re not quite done yet. Any extra money should go towards your goals.
• If there’s not enough money to cover everything, don’t panic. Look for categories where you could cut back, like eating out, subscriptions or entertainment. If that’s not enough, find ways to increase your income. This could be selling unused items, freelancing, etc.

There are other budgeting frameworks out there, but this is the one I recommend because I’ve been using it and seen great results. Regardless of which system you choose, remember it’s a guide not a set of rules. You might want to tweak things as you go based on your situation and that’s ok.

Step 5: Review and adjust monthly

Once your budget is good to go, please don’t just set and forget it. As mentioned before, track all your expenses regularly so that it doesn’t become one big overwhelming task every month.

I like to set aside about 20 minutes every Saturday (it’s a recurring event on my “To-Do” list) to reconcile. This means making sure that the numbers from my bank account match what’s in my budget.

At the end of the month you should have a pretty good idea about your expenses. Did you overestimate some categories or underestimate others? No worries! That’s the whole point of a budget. It adapts to you. It’s your budget after all, not anyone else’s.

Simply carry over your categories and estimates from your previous month and adjust where needed. If you use an app, this might be quickly achieved through templates or similar.

Don’t forget to reflect on what worked well and give yourself a “high-five” if you hit a goal.

While all of this setup might look daunting and time-consuming, I promise it gets easier. Like going to the gym, the more you flex your budgeting skills, the better you’ll get.

Tools and resources

You don’t need anything fancy to get started with your budget–a simple pen and paper is enough. In saying that, some tools might help you do certain things faster or make them more enjoyable (which I value), so here’s a good starting point:

• Sorted.org.nz Budget Planner: a great free tool for beginners
• You Need A Budget (YNAB): a paid budgeting app that uses zero-based budgeting
• Actual Budget: a cheaper alternative to YNAB that requires some technical knowledge to set up
• Spendee: a nicely designed budgeting app that syncs with most NZ banks

Tips for staying consistent

Done is better than perfect

Most people quit budgeting because they expect perfection. Remember, it’s not about getting every number exactly right. It’s about noticing where your money goes and improve your habits over time.

Make it a ritual

Pick a fixed time every month to review your budget. Grab your beverage of choice, involve your partner if you have one and look at what worked and what didn’t. Without any judgement at all. Make any tweaks if you have to and reset the numbers for the next month. Consistency is key and after a few times this will become a habit.

Automate as much as possible

One of the ways to make your financial life a lot easier is to automate whatever you can:

• Use automatic bill payments
• Set automatic transfers to savings or investments
• Take advantage of your banking app if it already categorises spending for you. Most banks provide this these days.

Keep some “fun money”

Nobody said this couldn’t be fun. If you cut out every treat, you’ll burn out quickly and are more likely to quit.
Set aside a small “guilt free” amount each month for whatever makes you happy–no questions asked.

Remember your why

Whether it’s building an emergency fund, saving for a home, paying off debt or just reducing stress, keep your goal visible so you don’t lose track of it. You’re budgeting with purpose after all.

You’ve got this

When I first started budgeting, it wasn’t about chasing wealth but more about peace of mind. To make sure that we would be able to provide for our family and plan for any surprises life might throw at us. I wanted to stop wondering where all our money went at the end of each month. Bank statements only tell you the past, but a budget helps you plan for the future.

Once we implemented our budget and stuck with it, things changed quickly. After a few months I stopped stressing about bills and started to feel in control of our finances for the first time.

If you’re just getting started, start small. Track one month, make a few adjustments and go from there. The hardest part is starting but once you do, you’ll never want to go back. You’ve got this.