Costs, cuts and consequences

Inflation, recession, rate hikes, consumer debt: terms that seem all too familiar nowadays. New Zealand (and the world) has been experiencing what’s widely termed a “cost of living crisis”. Ever-increasing essential costs such as groceries, utilities, mortgage repayments and rent can feel like they’re eating into our household income — especially if you haven’t had a pay rise recently. In times like these, many are simply focusing on getting by.

But when the amount you’re saving (or better, investing) decreases as a result of having less discretionary income, there can be long-term consequences. From a practical perspective, what can we do to combat rising costs, and be able to save more to help grow our financial future, rather than simply surviving the “now”? Here are some small changes you can make to save on everyday expenses, from finding the best deals and providers, to cutting back on unnecessary costs and doing a little planning to help you spend smarter.

Power and other utility bills are obvious costs to tackle, given their proportion of household spend. There are some great resources out there to help – Powerswitch.org.nz, an independent website run by nonprofit Consumer NZ, allows you to compare power providers – so you can understand whether making a switch will save you money. Other ways to decrease your bill include decreasing the amount of electricity you consume at peak times and choosing your heat sources wisely (electric blankets are great; fan heaters not).

Sometimes “bundling” your utilities, such as power and wifi or wifi and cell phones under one provider can reduce your bills, as providers reward your loyalty. It just takes a little time and research – hello, Google. Other ways to reduce your internet and/or phone bills are choosing wifi plans with lower speeds, or using lower-cost “no frills” providers. Don’t be afraid to change utility providers as often as suits you; do an annual review and shop around as appropriate. Just beware of any conditions attached to some “new customer” deals to avoid penalties.

Groceries are a challenge, with Stats NZ reporting a 12.5% increase in food prices in the year to June 2023. It sounds obvious, but flexible meal-planning and shopping the specials to take advantage of, say, a certain meat at half-price can seriously save you money; even better if you can freeze extras for later. Comparing retailer prices can help you find the best deals (try the Grocer app), and online shopping makes it easier to avoid impulse buying. Adding in some meat-free meals a week can also help – there are plenty of vegetarian proteins such as beans or falafel which are often cheaper per serve. Avoiding lunches out – and keeping it simple when preparing your own – can save you significantly; it’s all about a little planning.

Mortgage repayments are one of the biggest household expenditures. If you are a homeowner, ensure you shop around for the best rates when the time comes to re-fix your mortgage; the extra hassle can definitely be worth the interest savings. Using a good mortgage broker could save you time and they can sometimes give you access to better rates. Paying your mortgage fortnightly rather than monthly (and keeping payments at half the monthly amount) can also save on interest costs, given you’ll effectively be making an extra monthly payment each year and paying your loan off faster.

Finance-related fees can add up quickly (and quietly!). Check the account fees your bank charges, and explore fees-free accounts. Unless you’re disciplined with your credit card, it could be a lot easier to avoid using it altogether – saving you the interest charges, and temptation to spend money you don’t have. KiwiSaver fees can have a significant impact on your long-term savings, despite not being a specific bill that you pay (fees get deducted from your balance, meaning they’re easy to ignore). A management fee difference of just 1 percent per annum, while sounding minor, can make a significant difference to the long-term balance of your investment. According to Sorted.org, a 40 year old earning $70,000 with a KiwiSaver balance of $50,000 will pay over $24,000 in fees at 1.16% (the average annual fee for a growth fund). Compare this to paying $6,500 over the same period with 0.29% fees, and you get a $17,500 difference.

Your cost of living is of course more than just food, shelter and utilities.Taking a little time to review where you are at, and understanding all the areas you could potentially save can seriously help make a dent in your monthly costs. And you could take it a step further by adding up all the money you’ve saved and making a conscious decision to use it to help grow your future wealth. This could be in the form of increasing your mortgage payments (decreasing the total interest you’ll pay), investing in long-term wealth-generating savings like your KiwiSaver, term deposits or investment funds, or actively reducing any other debt you’re carrying.