How to create a budget

Most of your money will fall into these four buckets:

• Income — what comes into your account
• Expenses — fixed or regular costs that tend to be the same amount or predictable each time, such as rent or mortgage, power, water, insurance, rates, subscriptions
• Variable spending — transactions that change in amount and frequency such as groceries, eating out, entertainment, shopping, petrol and sports
• Savings — anything you're not spending that stays in your account/s.

Go through the last full month and note the following:

• What you get paid, and how often — e.g. $5,000 each month
• The total of your fixed or regular expenses — e.g. $3,000 each month.

You might have some fixed expenses that you pay yearly, such as a vehicle WOF or rego, insurance, rates or AA membership.

Add up your yearly expenses, divide by 12, and include the number in your monthly expenses. For example, if annual expenses are $3,600, this divided by 12 is $300, so we can update our expenses number to $3,300.

Understanding what you're currently spending on food and fun will help you set your budget numbers.

• Go through the same month of transactions and note down the total of your variable spending — e.g. $1,700.
• Work out if there's anything leftover. In our example, $5,000 minus $3,300 expenses minus $1,700 variable spend leaves $0 leftover or saved. We've just been breaking even.

Adjusting your regular outgoings can have a big impact. Some fixed costs are just that though — fixed.

Look for easy wins, such as:

• Subscriptions — are you still using them all?
• Health insurance — have you claimed everything you’re eligible for?
• Bank fees — paying for things you don’t need? See our tips to reduce bank fees.
• House bills — could you get a better deal? See powerswitch.org.nz.

In our example, let's say we switch power providers to save $20 a month, stop paying $20 yearly in bank fees, and cancel our least‑used streaming service.

This alone saves $500 us a year, or $41 a month. We can bring our expenses number down from $3,300 to $3,259.

Go as deep as you want to go here. You can either:

• Split your monthly variable spending into categories, like groceries, takeaways, clothes shopping, petrol etc. and total up each category.
• Work with your total monthly number — you might be able to spot some patterns at a glance and this might be enough for you.

The important thing is to get a feel for any habits you want to change. This is where we can be intentional going forward and any reallocate spending that we'd rather channel into savings instead.

You might not have much room to play with and that's okay. Pick one area to work on for a few months, and this might change as you start to form intentional spending habits. You might straight away see how you could save $200 a month.

Create simple savings categories based on what matters to you, such as holidays, Christmas/birthday gifts, replacements/upgrades (for when you need a new fridge or washing machine). Start an emergency fund if you haven't already.

For example, you might come up with something like this.

Every month I want to save:

• Trip to Fiji = $70
• Football next season = $20
• Supporting whānau = $70
• Christmas gifts/hosting = $30
• New dishwasher = $40
• Emergency fund = $50
• House deposit = $150

Total savings goals = $430.

In our example, we've now got:

$5,000 income minus $3,259 expenses minus $430 savings goals equals $1,311 leftover for variable spending on food and fun.

Compared to our current spend of $1,700 a month, this means slowing down by $389 a month, or less than $100 a week. With the habits we committed to changing in point 5, we think this is achievable.

What did you get? Does it feel achievable? Increase or decrease your savings goals until it feels realistic that you'll have enough money day-to-day, but that you'll also make strides with your savings.

Once you're happy with the balance, ka pai, you've created your own budget.

Now you've got this on paper, you need to make sure your bank accounts are going to follow suit.

Setting up savings accounts with automatic, recurring transfers into them means the hard work happens in the background without your constant attention.

It's time to:

• Make sure you're using the most suitable account types
• Set up new accounts with goals if you need to
• Set up recurring transfers into these accounts after payday.

Once that’s done, whatever’s left is yours to spend — guilt‑free.

See how to set up your accounts for success.