Prices are officially stabilising, but you probably won’t be noticing that at the supermarket. Frances Cook makes some suggestions of other ways to cut costs.
Inflation is technically in the “under control” range, yet many New Zealanders are still feeling a squeeze in core areas.
What’s happening? It’s a trick of the numbers that explains why you’re not imagining things.
Many of the core categories you can’t avoid paying for are still soaring in price.
Insurance, rates, food staples like butter and mince, are all going up.
But “discretionary spending” categories are far calmer, bringing the average number down.
In a live webinar edition of the Making Cents podcast, economist Brad Olsen said headline inflation had eased to 2.7% over the past year.
It was up slightly from the 2.2% earlier in the year, but still within the Reserve Bank’s 1-3% target band.
Under pressure are the daily essentials. Food prices rose 5% in the year to July, while energy prices recorded double-digit increases.
Meanwhile, the cost of building a new house actually fell slightly, but that doesn’t help the average household.
“It’s the frequent stuff. It’s the necessities a lot more. And sometimes it’s almost your necessary luxuries. Your chocolate and coffee that are increasing at a much more brutal price increase than otherwise,” Olsen said.
That’s why you’re feeling the pinch so badly.
Olsen pointed out that 36% of the items tracked by Stats NZ actually fell in price in the June quarter, compared to a year ago.
But those were items like furniture or clothing, which you can put off buying.
The items that are non-negotiable, like dairy, meat, power, insurance are the ones marching upwards.
Cooking under pressure
Chef Alice Taylor specialises in affordable cooking, but says even she has found creating recipes a challenge in the current environment.
“I went to make a recipe literally last week and I was like I can’t do this, this is too expensive, this is crazy,” she said.
Mince, once a budget staple, is now often too costly to feature. Butter, eggs, cream, and chocolate are all far pricier than they were just a few years ago.
Taylor’s advice is to shop with flexibility. Rather than sticking rigidly to recipes, she encourages people to adapt based on what’s affordable in a given week.
Her go-to substitutions include grated apple or flax seeds for eggs, oil for butter, coconut milk instead of cream, and lentils to bulk out mince.
She also recommends creating what she calls a “staple pantry”.
Keep a few carbs like bread, pasta, and rice, one or two proteins, and a small selection of spices.
That core can then be mixed and matched with whatever is cheapest in store that week.
“If you’re putting food on the table, be proud of what you’re making. It doesn’t have to be perfect,” she says.
“You’re having leftovers for breakfast? I have leftovers for breakfast all the time and I love it.
“We put so much pressure on ourselves. I don’t want people to put even more pressure on themselves when it comes to cooking food, especially in this economy.”
The morning’s headlines in 90 seconds, including a cash boost for regional airlines, sellers re-enter the housing market, and Donald Trump’s social media fury. (Source: 1News)
Mortgages and the bigger bills
While food dominates headlines, housing costs are just as tough. EnableMe financial adviser Kirsty Healey said her clients were struggling with both rent and mortgages.
For those with a mortgage, now was a prime time to start negotiating, and get the best deal possible to help your budget.
Healey says that negotiating the interest rate is good, but mortgage negotiations don’t stop there.
“For most people actually having a really good optimised mortgage structure in place, that is personal to their situation, is going to get people ahead super fast.”
While an interest rate negotiation could save thousands, a restructure could save hundreds of thousands over the life of the loan, she said.
Healey said making big-ticket bills the priority, and looking for ways to renegotiate or switch to cheaper providers, was one way to cut down core costs.
Then tracking expenses to look for other budget leaks could be surprisingly effective.
Whether it’s a money diary, or an app like YNAB, Healey said her clients typically found 15% of their budget was being lost to meaningless spending that they didn’t realise was happening, and got little reward from.
Olsen also recommended simplicity, even when trying to overhaul spending to survive the cost of living crunch.
“Don’t try too many things at once,” he says. “If you try and change everything in your life to make everything so much more financially better, you’re probably going to mess up on all of them and retrench. You’re going to go back to what you did before.
“Choose something, give it a good crack. Once that works, once it’s better, move to the next one.”
The information in this article is general in nature and should not be read as personal financial advice.
