Budgeting HINTS FOR A BETTER RETIREMENT
Useful budgeting tips, ideas and suggestions to help you enjoy a long and prosperous retirement.
We are not affiliated with any financial products or funds. We provide free independent financial planning and retirement planning advice. You can Download our free retirement planning guide and learn how to quickly see if you will have enough money for the retirement you deserve.
Budgeting Help Articles
- Are you receiving your rates rebate?
- Latest Massey Expenditure Guidelines available
- The 50:30:20% rule. Does it work?
- Inflation. What does it mean
- Driving your Dollars Further
- You need more $'s than ever
The 50:30:20% budgeting rule. Does it work?
“We have a cost of living crisis….”, ”it’s going to get worse before it gets better…”, “we may need another round of public sector restructuring to get the economy back on track”, “inflation is unlikely to be back under control until 2026 ….”
When we hear comments like these daily, we know it is getting tough out there. There are many internet sites that provide budgeting and saving tips to help make the pay-cheque go a little bit further. Our free planning guide lists common areas where people can save money. An emerging budgeting method is the “50:30:20% Rule”. Some NZ banks even suggest this as a simple way to budget when you are not prepared to put in the hard work and develop a real budget. This budgeting method suggests you separate your spending into three categories:
When we hear comments like these daily, we know it is getting tough out there. There are many internet sites that provide budgeting and saving tips to help make the pay-cheque go a little bit further. Our free planning guide lists common areas where people can save money. An emerging budgeting method is the “50:30:20% Rule”. Some NZ banks even suggest this as a simple way to budget when you are not prepared to put in the hard work and develop a real budget. This budgeting method suggests you separate your spending into three categories:
- 50% - allocated for needs and essential living expenses like rent, bills and groceries.
- 30% - allocated for wants like eating out, and lifestyle costs like going to the gym and buying clothes.
- 20% - allocated to savings, your emergency savings, investing, or making extra KiwiSaver contributions.
They then suggest “when the going gets tough, stop spending from the bottom up”: first the 20% savings (item 3), followed by the 30% line (item 2).
For pre-retirees, this is a flawed strategy, and you will never achieve the lifestyle you deserve in your retirement. Also, this strategy assumes you have no debt. As such we do not recommend it.
But, if you are not yet ready to produce a detailed financial plan for your retirement (which is simple and easy to do if you download our free retirement planning guide), and want to use a basic rule of thumb (which is better than doing nothing), then we suggest you need to refine the rule as follows:
- 50% - allocated for needs, required debt repayments and essential living expenses like rent, bills and groceries.
- 30% - allocated to additional debt repayments, your emergency savings, investing, making extra KiwiSaver contributions.
- 20% - allocated for wants like eating out, and lifestyle costs like subscriptions, going to the gym and buying clothes.
Note: Debt is split between item 1 and 2 in relation to making your contracted repayments in item 1, and in item 2 making additional payments to repay debts faster.
If you are unclear why you need to repay debt faster than contracted, or the difference between “wants” and “needs”, then this rule may still not be suitable for you, as you definitely need to read our free retirement planning guide, or free budget training guide first.
You can download your free guide from our download page here, or buy a printed and bound copy here.