Diana Clement: Are you living within your means?

Changing your money habits requires being mindful and budgeting. Photo / 123RF

OPINION:

It's time for New Zealanders to start living within their means. If inflation wasn't enough of a shock, Russia's invasion of Ukraine has brought more pain to the pocket by the day.

Just how badly we live outside our means currently has been highlighted by Canstar, a money comparison and ratings site in its annual Consumer Pulse Report.

The most shocking figure from that report for me was the 69 per cent of people who couldn't survive two months without any income. I realise there isn't much fat in many people's outgoings, but people of all income levels who budget generally do manage to reallocate some spending to savings and can build up an emergency fund.

The research highlighted that 58 per cent of us spend more than we earn and one in five people live payday-to-payday. Canstar's general manager Jose George noted that the figure is up from 56 per cent at the beginning of this year. Inflation is biting.

The problem gets worse the younger the respondents are. Around 65 per cent of under-40s admit their spending outpaces their income.

George was surprised that, despite these figures, only 32 per cent of us worry about our finances. "It's like: 'I'm living beyond my means, but I'm not too worried'," he says.

Living within your means generally rises with age. While only 35 per cent of 18- to 29-year-olds lived within their means, that rose steadily each decade from 30 years, peaking at 57 per cent for the 70+ group. Many of the 70+ group are living on meagre NZ Super, but making ends meet. George viewed it the other way around, noting that 43 per cent of the 70+ group aren't living within their means.

The percentage of people living paycheque-to-paycheque is highest for the 30- to 39-year group, then falls steadily down to 10 per cent for the 70+ age group.

George says the responses are a brutal reminder of the struggle many Kiwis are having with their money, and says inflation is causing them to fall behind further.

It does seem to have encouraged some to be more conservative with their finances and change some habits, for example around petrol consumption and supermarket shopping.

We're more likely to haggle with our banks. Although small, 7 per cent of respondents had renegotiated their home loan in the past year to get a lower rate than the one the bank advertises, and 5 per cent have switched lenders for the same reason.

Changing your habits does require being mindful and, as I say above, budgeting. It's very easy to say: "New Zealand's expensive". But that can be a cop-out by people who don't want to admit where they are misspending their money.

Researching purchases online before you buy is a good habit. Photo / 123RF

George is kinder than me on that front: "We are an expensive economy because of our location (and) we are a low wage economy compared to most other western societies. We are a consumer society like all other developed economies. But our wallets don't support that. If you look at where people are spending their money, whether for credit cards or BNPL (buy now, pay later), a lot of it is in the buy, use, and throwaway space."

He says if you want to get past living outside your means you should be very clear on what your needs are, and then research purchases at sites such as Canstar, Sorted.org.nz and Consumer before buying goods or services. "We know for a fact that saves money."

If you can't budget, go and get some help. MoneyTalks.co.nz can put you in contact with one of 200 financial mentoring services around the country. Or you can get advice via MoneyTalks' phone, live chat, email and SMS services as well.

One of those mentoring services, Christians Against Poverty (CAP) offers life-saving financial courses. The courses are mostly online currently thanks to the pandemic, but also offers some small groups.

If you need to borrow money (including buy now, pay later) to buy day-to-day items, then it's time to change.