Skip to main content


9 August 2020

Budgeting is Boring, But We’re Talking About it Anyway!

A person using a red calculator

We loathe the regular budgeting tips that are thrown around telling you how much you would have saved if you didn’t buy that daily coffee. Frankly, we think you can have your coffee fix, Netflix subscription, and night out while still hitting your goals and not feeling guilty.

Spoiler alert: You don’t need to sacrifice everything now in order to dramatically change your financial future.

So what do you need to do?

Here are our top tips on how to keep budgeting simple, effective and adaptable to your own personal circumstances. In fact, by doing this you’re far more likely to reach your financial goals, than if you attempted to start with a strict budget regime. Let’s be frank, how many of us are still going to the gym five days a week after those lofty New Year’s resolutions…

The first concept to know

Why is the now, soon, and later approach the best way to think about money? Because it’s simple!

Thinking about your financial situation and working towards your goals does not need to be complicated. You can go about it by thinking through these 3 questions:

What do you need money for NOW?

With this question we mean; what money do you require to live your life right now. How much do you need for food, bills, any debt repayments, your car – things that afford you the basic quality of living you want.

There is no right or wrong answer here, we’re simply encouraging you to know how much you need for your life right now. Once you’ve got that ticked off, you can think about…

What do you need money for SOON?

How soon is soon? Well it really depends. Right now for me, soon is a 12 month time frame. Things that fall into the soon bucket are generally expenses you need to have a savings plan for. Goals or planned expenditure such as holidays, repairs on a house or going on parental leave.

The soon expenses typically need to be saved for in cash (because soon isn’t that far away!) and you will have a reasonably good idea of exactly how much you need.

What do you need money for LATER…

Thinking about later, we mean no fixed plan or fixed need; something that may grow or alter over time. Things that might fall into your later pile; the dream to buy a house, bach or boat, the opportunity to take extended leave and travel, saving for your kids future, or for when you don’t want to work anymore.

Whatever it might be, it’s something that is a future need and an amount that may vary. For example, many people have an idea of when they plan to retire, but very few actually cease work exactly on their 65th birthday. When you’re planning for retirement, in say your 40s, you don’t know exactly what you’ll be doing or how you’ll be feeling about retirement in 20-25 years. So this goal is generally flexible.

Think about it before you get to Later

Many New Zealanders are stuck thinking of only the Now and Soon category (or even just now). In fact, 40% of Kiwis admit living pay check to pay check.

We think that part of the reason for this is that many people see ‘later’ as simply too far away. It’s un-motivating. The idea of investing some money to use 20 years from now is not as exciting as planning your next trip to Queenstown.

The foolproof budgeting rule for your later

Pay Yourself First: Fill the later bucket first and live off the rest. Paying Yourself First (PYF) is one of the oldest and most effective rules of personal finance.

What it means

At its simplest PYF means the following: every payday, the very first thing you do is set aside a regular amount for future you. Before you pay any bills, rent or mortgage, go out for dinner or head to happy hour. Ideally this payment is made automatically (so it literally happens whilst you sleep/work/eat) and you don’t have to think about it.

Can’t I pay myself second?

No! The most common reason people don’t save or invest is that they run out of money by the end of their pay cycle. It’s so easy to do – live for today and continue to swim along between pay days.

That’s why you need to pay yourself FIRST. Treat it like a bill – the most important “bill” you have, because it’s for your future. Having this mentality helps switch your desire to save or invest into a necessity.

The philosophy of paying yourself first came from George Clason’s book, “The Richest Man in Babylon” which was written nearly a century ago. And its message still holds true today – despite how the world has changed. In fact, Nasdaq named it the number one proven way to save money.

The magic budgeting number

We hear you: “How much am I meant to save for future me?” There is no single right answer here. One approach that we do love and that works for many people is 50/30/20.


This is a place for you to get started and then adjust as required based on your life stage. Under this budgeting approach, you’re thinking of your take-home pay in three buckets:

  • 50% – NEEDS (this is the Now). This contains the expenses you need to be able to live safely – housing, water, food, transport, minimum debt repayments etc.

  • 30% – WANTS (this is the Now & Soon). All of your discretionary expenses – so everything from eating out, your gym membership, Netflix account, to your holiday goals or desire to upgrade your kitchen.

  • 20% – PYF (this is Later). Whatever you are working towards for future you comes into this bucket: saving, investing, additional debt payments above the minimum.

Go easy, we’re all at different stages

We understand that some costs might overfill your “needs” bucket and 50% isn’t achievable for all stages of life. If you have kids, a large mortgage or personal debt, or are dealing with life, “needs” might be the biggest — or only — bucket for a while.

It’s even possible that if you’re a city resident, your rent or mortgage payments might be 50% alone.

The point is that the 50 / 30 / 20 split is a place to start. A place to benchmark where you currently are (yes, that means looking at your expenditure) and seeing where you can get Future You as close to 20% as possible.

Has your lifestyle been…creeping?

It’s likely that you’ll make more money in your thirties than you did in your twenties and more in your forties than in your thirties and so on. As this occurs, you need to change your PYF contributions! Otherwise, you’ll be suffering from a classic case of “lifestyle creep”.

Lifestyle creep means that as soon as you start earning more money, you instantly and subconsciously upgrade your life. Here’s Warren to explain:

So now you know to look out for that, you’re benchmarking your spending and thinking about the later, you’re heading in the right direction.

Kernel’s Top Budgeting Tips:

  • Budgeting doesn’t mean you need to stop buying coffee or having dinner out! It’s important that you still enjoy today while having one eye on your future.

  • Start small and increase over time. Don’t make your budget too tight to early, you can increase your savings rate over time.

  • Pay Yourself First. Any amount that you are saving for Future You, put aside into a separate account as soon as you are paid – before you do anything else.

  • Automate it! Money management apps like PocketSmith can help stay on top of your expenses, and categorise where your money is going. Setting up an AP from your bank to investment account is also a great way to keep making investing a priority. Set it and forget it!

  • Minimise Lifestyle Creep – when you get a bonus, pay rise, or unexpected windfall, try and save the majority of it.

Catherine Emerson

Catherine Emerson

Head of Marketing & Customer Strategy



Related articles

Keep up to date with Kernel

For market updates and the latest news from Kernel, subscribe to our newsletter. Guaranteed goodness, straight to your inbox.

© Copyright 2024 Kernel Wealth Limited


Indices provided by: S&P Dow Jones Indices