Saving is a choice that won't happen by itself

Getting the right balance between enjoying life now and saving is easy once you understand that saving still allows you to enjoy life, but later.

Saving is just deferred spending and it needs to be broken into time-based spending categories that reflect your goals - the things in life that are really important to you.

For most people, there are four categories of saving: saving for unexpected essential expenses or loss of income (your emergency fund), saving for the things you want to do in the next five years or so to enjoy life (such as travel or home renovations), saving that is applied to getting rid of debt and saving for longer-term goals such as retirement.

How you allocate your money between each of these categories depends on your goals and personal preferences.

There is no right and wrong answer, no magic formula, no-one looking over your shoulder who has the authority to criticise or applaud the choices you make, and no-one other than you who can decide the best approach.

There are just two important conditions to be met.

Firstly, saving is something that needs to be done as a deliberate, considered act and, secondly, you need to understand the consequences of the spending and saving choices you make.

Your first priority for saving should be for your emergency fund, which is your buffer for when things go wrong.

Taking a passive approach to saving simply does not work.

The idea that somehow money will be left over when all the spending is done is pure fantasy.

A determined choice to save needs to be made, with the understanding that the less you save, the less enjoyable your life may be in the future, unless you can find more ways to enjoy life without spending money.

- Liz Koh is an authorised financial adviser. The advice given is general and does not constitute specific advice. A disclosure statement is free. Call 0800 273 847. For free e-books, see moneymax.co.nz and moneymaxcoach.com