Think of a budget as a money plan, rather than something that’s going to stop you from ever spending money on fun things again. It’s your chance to take stock of what’s coming in, what’s going out, and to look at tweaks you can make to take the stress out of your finances.

Be realistic

A lot of people have had bad experiences with budgets simply because they go too hard, too fast. It’s a bit like dieting, if you go on a crash diet and only eat cabbage soup and lentils, you probably won’t last long (plus you’ll smell pretty bad). Likewise, if you cut your spending back too far, you’re more likely to fall off the wagon than if you take a more slow and steady approach.

When you’re looking at your spending, think about the things you could realistically do without, but also the things that bring you joy, that you really don’t want to give up. Avocado on toast doesn’t need to be the enemy.

What are you spending money on?

Set aside a couple of hours and calculate your expenses. Go through your bank statements and bills. Be thorough. Guesstimating at this stage means you could have an unrealistic view of what you’re spending.

There will be some fixed expenses that can’t change and have to be paid, like your rent or mortgage and insurances. Others, like phone, internet and power and gas could possibly be negotiated.

Take the opportunity to make sure you’re on the best deals and check out comparison sites like whatsmynumber.org.nz (which compares energy companies) to see if switching providers might be worth it.

Other expenses are more discretionary – things you like having or buying, but don’t necessarily need, or costs that only crop up occasionally. These variable costs can be trickier to trace.

Go through internet banking to see what you’ve spent in the past month, or if you use cash, try and find your paper receipts.

If this is too hard to do retrospectively, try tracking your spending for a month, either by monitoring your internet banking, using an app, or going old school with pen and paper.

What can you cut?

Once you’ve got a clear picture of what you’re spending your money on, look at where you might be able to cut back. You don’t have to stop every single piece of discretionary spending, but hopefully you’ll spot a few things you could do without.

Start by cutting back to a level you know you can achieve – maybe that means taking lunch to work two or three times a week, trying meat-free Mondays, or cutting the gym membership you never use.

Small changes all add up, and more importantly, they form new habits that could lead to bigger changes and savings down the track.

What’s left over?

Once you know how much money you have left over each pay, or how much spending you could trim back, it’s time to work out where you want that spare cash to go.

It might be to pay down debt, or you might want to build up your savings. Try our Goal Tracker, to help you visualise your goals.

Stay on track

It’s worth reviewing how you’re going every few months. If you’re slipping off the wagon, take a look at why, you might need to adjust things. By regularly checking in on how your budget is going, you can make small changes to make it work, rather than just giving up completely.

To make things easier, think about automating your banking, setting up automatic payments to a savings account or credit card, or siphoning off some money directly from your pay into a savings account so it never lands in your everyday account.

Need some help?

If you’ve made a budget and you see a big shortfall between money coming in and money going out, then don’t be scared to ask for help. Give us a call, or, if you want budgeting advice, visit MoneyTalks, which offers free budgeting advice and is run by the national charity FinCap and is supported by the Ministry of Social Development. The Citizens Advice Bureau can also help you find local budgeting services that can help you sort out your finances.

This is intended as general information only. It does not take into account your financial situation and goals and is not personal advice. For advice about your particular circumstances please see your financial adviser.