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Our previous article, ‘The squeeze is on!’ , was that spending restraint would begin to flow through the economy because interest rates would absorb more household income.

Well, the squeeze is still on, and it’s starting to have an impact. We are getting asked the same questions – Are we at the highest interest rates now? Will it get worse? When will they come down? What can we do about it?

Firstly, take a deep breath – most of our clients will be okay – they’ll feel the squeeze, but it will be okay. And it seems to be that reassurance is what our clients need the most.

I went and visited a couple recently and we talked a lot; I gave them a metaphorical hand squeeze and let them know that they, too, will be okay. The biggest advice I can give anyone who is feeling a bit daunted with the financial landscape at the moment is to make sure you know what you spend your money on. To really know.

The truth is that most people don’t have a deep level of understanding about their spending. For example, when we ask how much you spend on groceries as part of a mortgage application, the answer is usually no better than an estimate. I can say that with confidence because when we look through people’s bank statements there is often a massive difference between what people think they are doing and what they are actually doing! If this is you and you’re feeling the squeeze of rising prices, etc. etc. then the first place to look to address the squeeze is your bank statement.

Knowledge is power; the more you know about
how much you spend, the more power you have.

While knowing what you spend is important, the key to making it work is to ask if that spend is important to you.

An example for this couple was how much they were spending on vaping. Sure, they had reduced their spending by switching from cigarettes, but money was still going towards a nicotine addiction. There are two mindsets.

  1. I enjoy vaping, so we must ensure it’s included in the budget.
  2. I’m determined to save for a deposit, so we will come up with some strategies to stop vaping.

That isn’t an anti-smoking message (I used to smoke so I’m hardly going to lambast people who do!), what I’m saying is that everything you spend your money on is a choice. It’s the same in business; they’ll trim expenses to get to goals faster. That’s why my second point about knowing what’s important to you is so important– it gives your spending priorities so that nothing goes to waste.

Please Don’t think about managing your cost of living as you would with a diet. That’s all about going without and suffering. Think of it more as opportunity cost – if we continue to do this, it means we can’t do something else. So, which one is more valuable to you?

It’s not a right or wrong question, it’s a good or better question.

When you don’t know your priorities, you’ll find that whatever money you have left (after bills and stuff) will be frittered away unintentionally. Another person I know started looking at their spending and discovered that over a period of one year, they had spent $30,000 on wine, beauty, and shopping. Imagine what that would look like in your KiwiSaver or added to your property deposit!

There are quite a few tips, tricks, and even apps that can help you get in control of your spending. Two that we can recommend are a tool that we have, that can group your spending into categories straight from your bank account – send us an email if you’re interested in using this one. Or there’s a tool called ‘PocketSmith’ available in your app store, that helps you gain insight into your patterns and change for the better.

Get in charge of your spending and we’re positive you’ll make it through this squeeze period in good shape. Feel free to get in touch to talk about options and how we might be able to help.