Starting a mahere pūtea (budget)
You can start a new mahere pūtea anytime, however the most obvious times to do this are when you are experiencing an increase or decrease in your income, or when additional expenses pop up in your life (e.g., new pēpi or buying a whare – congratulations!).
Why should I budget?
Failing to plan, is planning to fail! Without preparing a budget it’s hard to see where your moni is being spent and what you could cut back on. When you know where your moni is being spent, you can then evaluate and prioritise what you do with it. It can mean the difference between being able to have a few dollars left over versus having to go into overdraft between paydays.
Not enough moni to cover your spending is called a deficit – you can use a budget to see where your moni is going and see if there are things you can cut down on or cut out.
The moni left over once your bills have been paid is called a surplus, you can use your surplus to then save for your goals, invest or pay off debt.
How to create a budget
- Add up how much moni is coming into the household and how much is going out. Think of everything you need to pay for each week, fortnight, month, and year, for example:
- Rent/Mortgage payments
- Power
- Gas
- Wifi and cell phone
- Food
- Childcare costs
- Insurances – note if you pay these yearly, work out how much it costs each week or month (however you decide to do your budget) then put this away so when the payment occurs you have the moni to pay.
- Subscriptions e.g. Netflix
- Memberships e.g. gym
- Existing debt payments e.g. car finance
- Make a plan for your spending with a budget tool – you could create your own or use an online tool, Sorted have a great online one that breaks down all of your expenses into categories and offers budgeting tips and tools Budget planner » Sorted
- Using your budget, you can see how much you have left to save and invest.
A good budget
- Again, consider your annual costs, things that you pay for less regularly such as your car’s warrant of fitness and registration, pet care, medical expenses and holidays.
- If you are able to, also include in your budget an amount to go into an Emergency Fund to cover any unexpected expenses you haven’t allowed for in your budget.
- Keep tracking your spending – see what’s working and refine your budget as needed.
- Consider a spending diary or spending app.
- Include goals!
A note on emergency savings
A good rule of thumb is to aim for three months’ worth of expenses saved in an easy to access bank account – but depending on your circumstances this number could be a bit overwhelming. You can start small and aim to save an amount that would cover the cost of something in your whare if it needed fixing or replacing (like a washing machine). Once you have reached your goal keep building from there! Having an emergency fund can help you avoid accumulating large credit card balances or bad debts as a result of these unforeseen expenses.
For more tips check out our article on Building an Emergency Fund – BUILDING AN EMERGENCY FUND – Wāhine (whairawa.com)
How to make moni goals
- Be SMART: Specific, Measurable, Achievable, Relevant, and Time-Bound. Write them down, include a dollar amount and a timeframe.
- Think big, for example, saving for an emergency fund, a home or retirement.
- And small! Smaller financial goals may help achieve the bigger goals, such as paying off debt and credit cards.
It may take a few months to get into the swing of budgeting. The more accurate the information you put in, the more accurate the outcome.
Give it a go wahine mā!
The information contained in this document is intended for general guidance and information only and is not personalised to you. It does not take into account your particular financial situation or goals.
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