Budgeting

A budget is a tool to keep track of money and how it is spent. Making a personal budget can be very useful, to help ensure you will be able to use your money in the way you want to. Budgeting is very easy. Simply add your household income (the amount of money you have coming in), then subtract your expenses (the amount of money going out to pay for things). Whatever is left over after you subtract your expenses is your discretionary income (money for you to use on whatever you want).

 

You will either be in a surplus position (a positive amount of money is left over) or a deficit position (a negative amount of money remains, meaning your expenses are greater than your income). It is important to keep track of this position, and to try to make sure the surplus is high enough to avoid having to go into debt or take extraordinary steps to manage.

 

Before reviewing your budget, you may wish to consider your goals. Think about what you want to achieve and how you will use your money to reach your goals.

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What we need to make a budget:

1. A list of what we spend each week. One way to do this is by saving the receipts for everything we buy in a typical week.

2. Accounts (electricity, internet, cell phone, gas, etc.) and bank statements, ideally for at least the last three months, to give a consistent picture across time. These statements should include things like rent, insurance, credit cards, phone and electricity bills, etc.

3. A list of regular expenses that we pay from time to time, such as medical expenses, gifts, vacations, WOF and REGO, etc.

4. A list of any money we receive, such as salary, benefits, or other government support.

5. A list of the money that is saved regularly (if applicable).

 

It can take a couple of weeks to gather all the information, but it is worth taking care to be accurate. Include even small expenses, such as the cost of an ice cream, a train ticket, parking expenses, etc. Once the information is collected, you are ready to start making a budget.

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The budget also needs to be updated from time to time, so it is recommended to review it regularly. Ideally, you can do this every 6-12 months, and whenever you have a material change in your circumstances (starting a new job, moving house, etc.).

 

In case we lack resources we can:

1. Review our budget, see if there is a way to reduce the expenses we have.

2. Look for mechanisms to reduce our debts and thus reduce interest payments.

3. Seek help from organizations like Work and Income to find out if there are benefits you can apply for.

4. Explore ways to increase our revenue.

5. Ask a financial mentor for help. New Zealand provides this service free of charge in the community. In this link you can explore the different organisations that provide this type of help according to the region where you live: Directory of services that offer financial mentoring

 

For those who live in Wellington, some of the agencies that provide this free service to the community are Wellington City Mission (www.wellingtoncitymission.org.nz), Newtown Budgeting (newtownbudget@xtra.co.nz) and Advocacy Services Inc. and Hutt City Budget and Advocacy Service (www.budgetservice.org.nz).

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In cases where we have too high a surplus, we can:

1. Check if there are some items or areas in which we need to invest more resources.

2. Use this money to pay debts in advance.

3. Save and invest the surplus money.

4. Build up a fund for a specific purpose, such as an emergency fund or a vacation fund.

5. Receive advice on how to increase our savings in the future.

 

Finally, the government website www.sorted.org.nz has been specifically developed to provide free and confidential assistance to anyone who would like help in better managing their budget.