A budget identifies total income and how it is spent - it's a useful tool for setting financial goals, whether it be taking a trip overseas, saving for a first home or becoming mortgage-free.
The current environment of low interest rates provides an ideal opportunity to review spending and channel extra savings into paying off debt.
The urge to 'buy now' is strong: TVs and many other consumable items have become progressively cheaper, providing options to upgrade with interest-free terms. Spending on insignificant items and conveniences can be justified, with less consideration given to the total amount.
Research shows that many people support having a budget, but fewer are able to stick to one.
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The 2013 ANZ Financial Knowledge and Behaviour Survey reported that 78 percent of adult New Zealanders had financial goals, but less than a third (34 percent) had a plan in place to achieve a one-to-five year goal. In the three months prior to the survey, 28 percent earned as much as they spent, while 20 percent earned less.
Mark Wilkshire, chief marketing officer of Kiwibank, said that currently, New Zealand has some of the lowest mortgage rates ever seen in history. If people can forgo spending some of their extra money and put it into paying off their loan, they can use this period to really get ahead.
"By putting interest savings back in [to the loan], the average customer has the opportunity to save $100,000 over a 25-year loan. For example, on the current [Kiwibank] two-year fixed rate of 3.65 percent, people are $100 per fortnight better off than they were a year ago," he said.
While not all borrowers will currently be in a position to take advantage of the low fixed rates, if you're buying a home, coming off a fixed rate, or if part of your loan is on a floating rate, putting extra cash in now could amount to significant savings in interest.
Kiwibank confirmed that just under half of their credit card customers repay the outstanding balance in full at the end of each month. If you have a credit card with an outstanding balance, competitive low interest rates provide the opportunity to shop around and channel extra cash into paying off the balance.
Pinning down extra spending
Identifying where extra money is going can be as simple as trawling through recent bank statements, looking at where you're spending most of your money and ways to cut down on those bills.
Anything that you didn't need to buy or no longer enjoy (including any direct debits for services you're no longer using) can also be reviewed.
Glenda Irwin, mindfulness coach, said mindfulness can give people the knowledge they need to choose new habits.
"Being frivolous with money satisfies our desire for light relief, however some purchases may act as a 'bandaid' for other things, such as a stressful workload or relationship challenges," she said.
This is where a regular mindfulness practice can be of benefit.
As a starting point, Irwin suggests that people put pen to paper and mind-map what they value in financial stability and what it means to be financially independent.
"Take a 'big picture' look at why you want to knuckle down to financial literacy and identify any crossovers to other parts of your life. For example, it might make sense to forgo a coffee habit or reduce social spending for other reasons," she explained.
According to Irwin, being mindful to prioritise long-term financial goals is best reflected in the old adage, "take care of your pennies and the pounds will take care of themselves".
"Think of each moment you spend being mindful as a penny, or dollar. Both your bank account and your most precious treasure - your mind - will benefit greatly from this approach," she said.
Creating a separate savings account
Identifying fixed expenses, frivolous spending and awareness of the types of situations that may lead to overspending can help to form a picture of how much you could save.
Lynda Moore, co-founder of Money Mentalist, said that types of purchases that could be classified as 'frivolous' are varied. Aside from the usual daily coffees and sales splurges, examples include high-end pet food and toys, Uber and Uber Eats.
Moore's top tip for staying focused on saving (once fixed expenses are identified) is to move savings out of reach.
"The best way to stay focused on reaching a financial goal is to open a separate bank account," she said.
"If you find it too easy to dip into it, open a savings account with a different bank and give the account a nickname that really resonates with you and your goal.
"For example, for a travel goal, call it the 'Fiji Family Fun account'," Moore suggests.
Setting a financial goal
As with any goal, if you're saving for something specific, it's important to have a motivational goal and to keep it top-of-mind.
If you're new to financial goal-setting, Moore suggests starting small and making it fun.
Using a travel goal as an example, Moore suggests starting with deciding when you want to go, gathering costs and dividing the total up into the number of weeks until your nominated travel date and setting up an automatic payment from your main bank account into your savings account.
"If you're visual, create a vision board; if you're a numbers person, create a graph so you can see your savings grow. Have an accountability buddy to help you stay on track (find a frugal friend to help with this)," she suggested.
"Every time you say 'No' to spending money, transfer what you would have spent into your savings account."
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An example of a smart financial goal that incorporates an element of fun, Moore shared a personal example.
"Having deferred our four-week holiday for a year, I decided to combine my holiday and fitness goals and opened a new savings account, nicknamed 'Steps to Vietnam'. Using a Fitbit, I based my savings on the number of steps I made each week, transferring 10 cents for every 100 steps," she said.
"I calculated that based on my existing number of steps, I could reach my savings goal in twelve months. I achieved it in nine months."
With awareness of how much you're spending, why you're spending it and using this information to set - and achieve - your financial goals, you could be significantly better off financially... and perhaps in other ways, too.