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As the cost of living squeezes our wallets (and at times our will to live) we are all looking down the barrel at ways on cutting costs to see through the year ahead, or other words, what we can ditch to save $$$.
I’ve done a bit of googling on this, and the most common things that people cut costs on are food quality/eating less meat, selling possessions, electricity bills ...... and cancelling insurances.
As a mum of three I am familiar with cost-cutting (mostly for myself. Hello all Mums, everywhere.) I am eating a lot of cereal now instead of buying lunch (and thus, I am shortly picking up some iron tablets from the Doctor…). I moved my laptop to work in a patch of sun, and I have on extra clothes to save me putting on the heater. I sold my chunky V6 Holden for an embarrassing (yet very zippy) 1.5L Toyota that runs on air. In my darkest days I need to buy supermarket shampoo.
But we still have insurance.
I know from working with a financial advisory team that insurances, especially personal insurance, are one of the first things to be slashed when purses are pinched.
Why? Because it is easy to see from the premiums statements the exact cost of insurance per year, and with one click of the mouse that can all be gone. Voila! So easy!
I confess, I have been tempted (don’t tell my adviser!) to chop out my insurance costs.
In the past, I was much more aware of how much my premiums cost, as opposed to how much my takeaway coffee and lunch costs. It seems so easy and logical to slash the obvious costs, yes?
But is it smart? Now I am no financial adviser, but I would argue – no.
Insurance is important. $40 a week on cafe sandwiches and coffee? Not so much.
And this is why I have held fire on the insurance slash and burn.
According to one bank economist, household costs are up almost $150 weekly. Now I don’t know about you, but I certainly don’t have that lying around as cash stuffed in my mattress to spend on insurance, or any darn thing for that matter.
Like most of NZ, conscious that I suddenly seem to be living rather expensive (yet not lavish in the slightest) lifestyle, I thought I’d better revisit my budget to see where I could trim some costs.
Revisiting my numbers from 2022, I must say, my budget forecast looked very good…especially as it looks so pretty in Excel with its sorted tables and pretty colour-coded worksheets… All wonderful, except that I haven’t really paid too much attention to it since then.
Pulling on my big girl pants, I knew I needed to revisit my forecasted budget... AGAINST MY SPENDING ACTUALS.
That is, my beautiful colour-coded budget compared to one year of black and white, no "B.S"., bank transactions, downloaded and sorted into spending categories.
Well. That was an eye opener.
I completely blew out my budget on takeaway food, eat-in food, and clothing. I spent much more on excessive amounts of those things, than I ever did on my insurance premiums.
Hmmm. You see where I am going with this, right??
It’s time we had a talk.
If you have done an audit of your spending lately, you may be in for a surprise or two. I certainty was, anyway.
Looking at my actual spending was a wake-up call. I spent over $300 on book collecting, and I didn’t even have a ‘Books Category’ in my budget! (Some of them are worth much more money than I paid for them…. but none of that is realised until they are sold, and the cash is in my hot little hands.)
The long, short of it is that I bought a lot of stupid crap I didn’t need.
And the silly thing is, I was considering slashing what I do need, so I could continue spending money on what I don’t need. I could have cut out $2000 worth of life and health cover to keep buying $40 per week of crap I don’t need.
Now I am not talking about ditching Havana Coffee for powdered Greggs here. I am not talking about cereal for dinner every night, or even no Netflix. I am not talking about cutting costs so much that life is a complete misery*. But I am talking about a hard look at the facts and making the right adjustments.
Here are the ways I am saving $40 per week so that I can keep my insurance cover:
1. Quitting the subscriptions I haven’t used in a year – Saving $9 per week.
2. Making espressos at home in a takeaway cup – saving $15 per week.
3. Driving a smaller car - Saving $30 per week.
4. Reducing my training fees to the times I actually attend – Saving $8 per week.
There’s no hardship here, just smarter choices (more than $40 worth). And I am proud of them too.
*Now not all of us can make a few tweaks here and there and still be ok. If you need help immediately, your best bet for financial assistance is WINZ or MSD. In NZ, we pay taxes for a day that we may need welfare support. If you are in that position, use it! I have. There is no shame in it, and it may be the Band-Aid that gets you through.
The general idea is that if you and your family rely on your income to live, you probably need income insurance. Income insurance provides financial protection by paying out up to 75% of your income, in the event you are unable to work. (Unlike ACC, this is not limited to accidents only, which matters, because most people off work in NZ are because of illness, not injury or accident.)
If you have dependents, you really need life insurance. Life insurance is like a safety net that offers financial support to your loved ones, providing them with a sum of money to help them live after you have gone.
If I get hit by a bus tomorrow, I want to know my kids will be ok. This is why I don't buy the fancy sandwich.
Health cover, TPD and Death Cover are also very important, and it can be hard to know what mix you need. This is where talking to your adviser is super important.
The long, short of it is – personal insurance is important. So go through your actuals and cut out the crap you don’t need, so that you can keep what really matters.
Save those sandwiches and flat whites for the days you actually forget lunch, or when you want a treat, not for everyday because it is a habit you unconsciously fell in to.
Then pat yourself on the back and go to bed knowing you've done a bit of awesome adulting, and that everything WILL be ok.
Shona.
Feel free to email me: shona@velocityfinancial.co.nz
About Shona
Hi, I’m Shona, the communications and marketing support person for Velocity Financial. Designing effective communications in a complex industry such as Finance is a worthy challenge. Finding ways to bridge gaps between complex financial information, and the everyday needs of people trying to navigate that world through informed choices, is something that I relish. I love deciphering and disseminating the expert knowledge and ideas of our clever team, into simple messages that speak directly to our clients, who are hungry for more knowledge and better understanding. In my outside life, I am a keen photographer and, like others in the team, I have a passion for the outdoors, hiking and mountain biking. I also train in martial arts and have been known to wield a sword on occasion.
Always get professional advice
The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation. As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too – together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures: https://www.velocityfinancial.co.nz/disclosure-statement.