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How to create a financial plan and start to master your money

The starting place of mastering money can be as simple as working out a financial plan and setting some goals. We look at the benefits of money management and how to get started.

5 minute read

Being in control of your money and setting clear financial goals are the foundations of mastering your money. Creating a financial plan can help you feel more secure, may reduce money-related stress, and could improve your overall sense of wellbeing.

While each person’s plan will look different, here are some basics that can help you on your path to mastering your money.

1. Understand where your money is going

Look at all your accounts (including credit cards) and examine how much you are spending, and what you are spending it on. It’s a good idea to start by looking back over a three-month period, as month to month expenses can fluctuate but over a longer period you’ll start to see trends. Download your statements and list each expense under a category such as groceries, eating out, clothes etc. Having a microscopic view of where your money goes will help you determine whether there are any changes you could implement to help you be more effective with your money. Sometimes those seemingly harmless trips to the dairy can add up to a larger expense than you realised.

Some Internet Banking providers and apps also provide spending insights which can show you which categories you’re spending your money on. For example, BNZ has an Activity Tab on Internet Banking where you can see your spending activity broken down into categories as well as your cashflow.

2. Create a budget

Having a plan for how you want to use your money is one of the best tools for mastering your money and working towards your goals. Try not to think about it as something that restricts you but rather something that allows you to be in control. There are lots of ways to create a budget and Sorted has some great tools to help you get started.

As a rule of thumb, a budget should be simple to follow and stick to. Start with listing out your income, followed by your fixed expenses such as rent and/or mortgage payments, utilities, debt repayments, and then your variable expenses such as food and transport costs. Make sure you allow a reasonable amount based on what you learnt in step one when you analysed your expenses but also where you know you could spend less. Then (assuming your budget allows) allocate yourself a general spending and savings allowance. Be reasonable, allowing yourself some money to spend on wants rather than needs will help you stick to the overall plan you have set.

3. Build an emergency fund 

Depending on your financial situation, you can either start building this now or wait until you have paid off any debts you may have. By setting some money aside to cover one-off expenses you can ensure you don’t rely on an overdraft, personal loan or credit card in times of emergency - having to borrow money in a hurry can come at a high cost. Start by setting a small savings goal, maybe $500 - $1000, whatever feels achievable for you. Build it up from there. Savings accounts can earn interest while you save, helping to build up your emergency pot even quicker.

Long term, aim to have an emergency fund that can cover three months’ worth of expenses. That’s a lot to bite off in one chunk so set small milestones that you can tick off along the way and sense the satisfaction of achieving these alongside the peace of mind of having an emergency fund.

4. Consolidate and pay off debts 

Understand the balance of any debts you have and what interest rate you are paying. Once you understand your debts you can start to tackle them and there are a few different approaches that you can consider. Tackle the highest interest debt first (paying this debt off first may cost you less in the long term) or pay off the smallest debt first and then use the money you were putting towards those repayments to build momentum and pay off other debt faster.

You could also consider options such as a personal loan or a home loan top-up for debt consolidation (putting debts into one easier to manage loan). In all these options you will need to keep up the payments on all your debts and use whatever additional funds you can allocate (based on your budget) into repaying the debt as soon as possible. 

Do you have any debts that are behind in payment?  If so, put payment plans in place to get these up to date as soon as possible, if needed contact the organisations you owe money to and make a payment arrangement.  

5. Check in on your KiwiSaver

Retirement might feel like a long way away, but the sooner you can start saving for retirement, the greater the potential benefit of compounding investment returns over the long term. As your KiwiSaver could potentially be used as a deposit to purchase your first home it's something you may want to be paying attention to as early as possible.

Firstly, check if you are contributing to your KiwiSaver, and find out who your KiwiSaver provider is if you’re unsure. You can find this out via the IRD, either through logging in to your online myIR Portal (you’ll need to create a login if you don’t have one already), or by contacting the IRD directly. Then determine which KiwiSaver fund is right for you. You can also compare different KiwiSaver funds using tools provided by Sorted.

6. Define your goals  

Once you have your foundations in place, it’s time to consider your short and long-term financial goals. Perhaps it’s purchasing a home, going travelling, or saving for a wedding. Sit down and set some goals, and then research how much you are going to need to reach that goal.

Once you know your numbers it can be really motivating to start to find ways you could reach your goal sooner, such as implementing money saving hacks like making your own lunches instead of buying them, or finding new ways to generate income. You could think about selling items you no longer use or taking on some extra work. It’s good to have some short-term milestones that you can tick off to keep you on track to achieve your longer-term goals.

7. Measure your progress

Checking in on your budget, debt repayments, earnings, and expenses monthly will help you to feel empowered about the progress you are making. Keep in mind, a financial plan isn’t a quick fix – some of your goals may take years to reach. But the important part is to stick with it and measure your progress to provide encouragement along the way. 

Your financial plan could see you better off in the long run

Having a financial plan provides you with a clear picture of where your money is going and can help provide you with the focus and drive to reach your goals. So, coming up with a plan now could improve your financial position in the future, and give you peace of mind in the meantime. 

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This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article. Any opinions in this article are not necessarily shared by BNZ or anyone else. References to third party websites are provided for your convenience only. BNZ accepts no responsibility for the availability or content of such websites.

BNZ Investment Services Limited, a wholly owned subsidiary of Harbour Asset Management Limited, is the Issuer and Manager of the BNZ KiwiSaver Scheme. Download a copy of the BNZ KiwiSaver Scheme Product Disclosure Statement at bnz.co.nz, or pick up a copy from a BNZ branch.

Investments in the BNZ KiwiSaver Scheme are not bank deposits or other liabilities of Bank of New Zealand (BNZ) or any other member of the National Australia Bank Limited group. They are subject to investment risk, including possible delays in repayment. You could get back less than the total contributed.

No person (including the New Zealand Government) guarantees (either fully or in part) the performance or returns of the BNZ KiwiSaver Scheme or the repayment of amounts contributed. National Australia Bank Limited, the ultimate owner of BNZ, is not a registered bank in New Zealand but a licensed bank in Australia and is not authorised to offer the products and services mentioned on this webpage to customers in New Zealand. BNZ Investment Services Limited uses the BNZ brand under licence from Bank of New Zealand, whose ultimate parent company is National Australia Bank Limited.

No member of the FirstCape group (including BNZ Investment Services Limited) is a member of the NAB group of companies (NAB Group). No member of the NAB Group (including Bank of New Zealand) guarantees, or supports, the performance of any member of FirstCape group’s obligations to any party.

[1] https://retirement.govt.nz/news/latest-news/financial-stress-impacts-mental-wellbeing/