Structuring goals
Goal-based budgeting
Building a budget around outcomes, not just categories
Most budgets are built around categories — rent, groceries, petrol, subscriptions. That tells you where money goes. It doesn't tell you whether money is going anywhere useful.
Goal-based budgeting flips the sequence. You start with what you're trying to achieve, work out what it costs, and then build your spending around that.
How it works
Start with your goals. Be specific.
- "Save a house deposit" is a goal. "Save $80,000 in four years" is a goal you can build a budget around.
- "Pay off my car loan" is a goal. "Clear the $14,000 balance in 18 months by paying $830 a month" is actionable.
- "Build an emergency fund" is a goal. "Save three months of essential expenses — $9,000 — by the end of this year" gives you a number.
Once you have specific goals with dollar amounts and timeframes, work out the monthly contribution each one requires. That amount becomes a non-negotiable line in your Total Budget.
What's left after goals and essentials is what's available for discretionary spending. The budget is built around your future, not just your present.
How to set it up in SortMe
Use the Budget feature to find out what your surplus could be before adding non-essential and discretionary spending targets. Your surplus value needs to cover your Goal Allocations first and then discretionary spending.
To figure out what each goal requires monthly, head to the Goals feature and follow the steps to create a Savings or Debt Repayment goal. If the total required allocation for you goals tips your Budget into a deficit you will need to adjust the goal amount or timeline. You can also trim your Budget targets if the numbers allow it.
Top tip: trying to achieve too many goals at the same time can be counter productive. The rule of thumb is that you should clear all bad debt - starting with the ones costing you the most in interest payments. There's no point in directly money away from debt repayments towards savings or investments, if the return on those savings and interest is less than the interest you are paying on your debt. Which in the case in the majority of circumstances.
Why it works better than category budgeting
Category budgets are easy to game. If you're slightly over in one category, you shift money from another and call it even. Nothing is connected to anything that matters.
Goal-based budgets create accountability. If you underspend on a goal contribution this month, you know exactly what you've traded off — and by how much your timeline has shifted.
Prioritising competing goals
Most people have more goals than money. A useful order of priority:
- Modest buffer fund $1000
- Employer KiwiSaver match (contribute enough to get the full 3%)
- High-interest consumer debt - get rid of bad debt.
- Emergency fund of three to six months of expenses
- Longer-term goals — home deposit, investments, appreciating assets, travel
This isn't a fixed rule, but it's a reasonable starting point for most people.
When to get advice
If you're juggling a mortgage, KiwiSaver, children, and medium-term goals simultaneously, goal prioritisation gets complex quickly. Naked Finance can help you build a plan that sequences it correctly.
These articles are financial education, not personalised financial advice. For advice specific to your situation, talk to a licensed financial adviser.