Combined Shape

Lifestyle / 22nd June 2021

How to Budget Between Pay Days

How to budget between pay days in New Zealand?

Without a concrete budgeting plan, your pay can disappear as quickly as it arrived. Whether you get income weekly, fortnightly or on a monthly basis, you need to know where your cash is going. The best plan of action is to track your spending and budget according to your financial situation and goals. How? Consider these simple budgeting tips that allow you to manage your cash between paydays and help you reach your savings goals.

Get ahead on bills

Sometimes budgeting can be as simple as paying your bills for the month. The best-case scenario is paying monthly bills ahead of time to ease your anxieties for the coming months. If you’re living alone, paying bills on your own can be a challenge, and while getting a personal or an emergency loan such as a rent loan can come in handy, you don’t need to resort to debt when paying other important bills.

If you’re financially capable of making prepayments, paying bills in advance can help, but also consider whether prepaying your bills would make sense. If you’re on a super tight budget, you could instead cut back on discretionary spending or to continue paying what’s due for each month on time.

Pay outstanding debt

It may be tempting to spend on your “wants” list first, but the golden rule to budgeting is to pay off debt as quickly as possible. Prioritise paying down debt early, especially high-interest debts. To do this, make a list of all your debts and organise them by balance and annual percentage rate. It makes the most sense to pay off debt with the highest interest rate so that you can free up more cash on your subsequent pays. Incurring less debt and having less interest to pay each month will allow you to gain more financial freedom in the long term.

Create monthly budget categories

After paying off your monthly bills and debt, you can list your budget categories, to track how you’re going to spend the remainder of your pay. This may include miscellaneous categories such as savings for medical bills, emergency fund money, retirement savings, home repair money, car insurance, and more. Don’t forget to include occasional splurges such as eating out or vacation expenses, so that you aren’t surprised by anything when it comes to managing your money. To make things easier, you can use budgeting worksheets, which you can download online for free to help keep your finances organised and on track for each category. Visualising what’s happening each month will better equip you to allocate funds in your budget.

Set aside a budget for savings

If you’re saving for a big goal such as a house, a car, or a business, it’s a good idea to start setting aside money for it now. If you’re in a good and stable place financially, and are debt-free, you may be more capable of transferring a larger portion your income to a savings account. This will help you achieve longer-term investments and bigger financial goals faster and easier.

Extra tip: Try a zero-based budget

Through a zero-based budget, you can allocate every dollar you get to meet your financial obligations and at the same time, reach your financial goals. A zero-based budget entails planning your income down to zero. You do this by assigning 100% of your income to different categories until you’ve used up every dollar. When you plan this way, you can have a clearer picture of how you can utilise every penny of your pay to its highest potential.

Remember, there’s no one-size-fits-all budgeting hack

It’s important to remember that there’s no one-size-fits-all solution that can answer everyone’s financial needs. However, it's crucial to become self-disciplined about your budget, as it can help you obtain financial freedom and help you achieve future financial goals.

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