Official cash rate, dovish, rate cuts, inflation. Cut to the chase please – what does this mean for me and my family? The Reserve Bank recently reviewed New Zealand’s official cash rate and decided to hold it steady at 5.5% with hints towards small rate cuts being expected as soon as the end of this year meaning we’ll start to see interest rates (thankfully) decreasing.  

But how about the here and now? So many of us are still struggling – losing jobs, living pay check to pay check or dipping into our emergency funds (it’s okay folks, that’s what they’re there for) to make ends meet. The “survive to 2025” mentality is resonating with a lot of people – but can we do more than just sit tight and wait it out? Of course we can. Here are 07 easy to implement ways to lower your cost of living AND elevate your lifestyle that can be actioned almost immediately.  

1. Practice Gratitude

Now bear with us – we’re aware this could sound wishy-washy. Although everyone is doing it tough right now, it’s good to remember to be thankful for everything we do have, so take a moment to practice being thankful and expressing appreciation for the relationships, resources and realities in your life. 

Research shows gratitude is linked to increases in happiness, empathy, improved self-esteem, increased resilience, improved relationships, and reductions in depression, in blood pressure and in anger. Gratefulness can also have a positive impact on your money and how you spend it, leading to enhanced financial decision making.  

Enhanced Financial Decision-Making can mean: 

• Mindful Spending: When you feel grateful for what you already have, you’re less likely to seek fulfillment through unnecessary purchases. This can lead to more thoughtful spending habits, prioritizing needs over wants, which can reduce your overall expenses. 

• Budgeting Awareness: Gratitude can make you more aware of your blessings, encouraging you to manage your resources wisely. It may inspire you to keep a better track of your finances and appreciate the value of money, leading to more disciplined budgeting. 

• Reducing the Desire for Upgrades: If you’re grateful for your current possessions, you might feel less urge to replace them with newer or more expensive versions. For instance, being thankful for a perfectly functional smartphone can diminish the temptation to buy the latest model. 

• Appreciating Simple Pleasures: Gratitude can help you find joy in simpler, less costly activities—like enjoying New Zealand’s natural beauty, which is mostly free. This can mean fewer expenses on entertainment and leisure activities that add up over time. 

Let’s practice right now. What’s one thing you’re grateful for? 

2. Get It Done Quicker

We’re talking about striking while the iron is hot! Have you ever been sent an email, read a news article, or listened to a podcast that’s talking about a great deal, savings strategy or investment opportunity and you think “I should get onto that” but never actually do? Then this tip is for you. The concept of “speed of implementation” refers to how quickly you can take an idea or plan and put it into action. In personal finance, applying this principle can significantly impact your cost of living and overall lifestyle in a positive way.  

Here are some ways in which speed of implementation can help lower costs and improve quality of life: 

• Taking Advantage of Sales and Discounts: Implementing fast repayments or refinancing plans as soon as favorable terms are available (like lower interest rates) can significantly reduce the total interest paid over time. 

• Acquiring new education that leads to new skills that can save you money 

• Utility and Service Contracts: Quickly adjusting service plans for utilities (like internet, electricity, and phone services) to more cost-effective options can reduce monthly expenses. This includes switching providers or renegotiating contracts when better deals become available. 

• Automating Savings: Setting up automated transfers to savings accounts or investment plans shortly after receiving income ensures that savings goals are met before the temptation to spend increases. This also applies to taking immediate advantage of employer-matched retirement plans, like KiwiSaver in New Zealand, to maximize benefits. 

• Home and Vehicle Upkeep: Implementing maintenance schedules quickly for homes and vehicles can prevent minor issues from becoming major, costly repairs. For instance, fixing a small leak immediately can avoid more significant water damage. 

• Healthcare: Proactively managing health through regular check-ups and immediate response to health issues can prevent more severe health problems later, potentially saving on expensive medical treatments and maintaining a higher quality of life. 

• Sustainability Practices: Quickly adopting sustainable practices, such as reducing waste, using energy-efficient appliances, or installing solar panels, can lower ongoing living costs. In New Zealand, where electricity prices can be high, the rapid implementation of energy-saving measures can lead to significant savings. 

• Learning and Adaptability: Rapidly acquiring new skills or adapting to changes in the job market can lead to better job opportunities and higher income. This includes taking up new educational opportunities or certifications as soon as they become relevant. 

3. Offset your mortgage interest

Offsetting your mortgage interest can significantly lower your cost of living and elevate your lifestyle by reducing the amount of interest you pay on your home loan. This can result in substantial savings over the life of the mortgage and free up funds for other uses. Here’s how it works. 

Interest Savings 

• Reducing Principal Balance: An offset account is a transaction account linked to your mortgage. The balance in this account is offset daily against your mortgage balance, reducing the amount of interest charged on the loan. For example, if you have a $500,000 mortgage and $50,000 in your offset account, you will only be charged interest on $450,000. 

• Accelerated Mortgage Repayment: With less interest accruing, more of your monthly payments go towards repaying the principal. This can shorten the overall term of your mortgage, saving you money in interest payments over time.

Financial Flexibility 

• Access to Funds: Unlike making extra repayments directly into your mortgage, funds in an offset account are readily accessible. This provides liquidity for emergencies or other financial needs without affecting your mortgage repayment strategy. 

• Encouraging Savings: An offset account incentivizes saving, as every dollar saved reduces the interest payable on your mortgage, effectively giving you a risk-free return equal to your mortgage interest rate. 

Here’s how it works in action: 

The average household income in NZ is $126,411 per year 

The average home loan size in NZ is $369,435 

and the average interest rate is 5.5% 

If you offset $50,000 per year, you’ll pay $335,705 in interest with offsetting for 30 years ($50,000 savings) as opposed to paying $385,705 in interest without offsetting for 30 years.  

Keen to set up an offset account? Book a 15-min Mortgage Advice Consult with our friendly team today and we can see what can be implemented to ensure you can save even more.  

4. Create Financial Harmony With Your Partner

Who’s had a fight with their partner about money before? It’s a very common point of tension in most relationships. Understanding your partner’s money personality can play a crucial role in harmonizing financial goals and practices within a relationship, which can significantly impact your cost of living and overall lifestyle.  

Here’s how knowing each other’s financial traits can help you reduce arguments, increase relationship satisfaction and create a meaningful lifestyle. 

Pretend you and your partner are pieces of string. On it’s own, the string is weak and prone to breaking under financial weight, but together, the string creates a braid, making it much stronger and more resilient. Creating a braid not only increases load-bearing capacity but is also less likely to unravel. 

• Financial harmony reduces arguments and increases relationship satisfaction  

“Journal of Marriage and Family” highlights that financial disagreements are stronger predictors of divorce relative to other areas of conflict. Understanding each other’s money personalities can reduce the frequency and severity of these disagreements. 

• Alignment of financial goals leads to saving more and less impulsive spending 

Research indicates that when couples have aligned financial values and goals, they are more likely to engage in positive financial behaviors such as saving and less likely to engage in detrimental behaviors like impulsive spending. This alignment can be achieved through understanding each other’s financial tendencies and predispositions. 

• Joint decision making on larger investments leads to more economical choices 

A study in the “Journal of Consumer Research” suggests that couples who make joint decisions on larger investments tend to make more economical choices compared to when individuals make decisions in isolation.  

This collaborative approach is facilitated by understanding each other’s money personalities, leading to decisions that are more considerate of shared financial limits and goals. 

• Optimizing your spending plan leads to more meaningful and satisfying lifestyle 

Research has shown that mutual awareness of financial habits helps couples optimize their budgeting strategies, effectively lowering unnecessary expenditures and enhancing their ability to allocate resources towards more meaningful and satisfying aspects of their lifestyle.