Research by Te Ara Ahunga Ora the Retirement Commission has uncovered the different ways households have changed their spending habits to cope with the rapid rise in the cost of living.
First, there are those who are cutting back on luxuries, delaying home improvements and limiting recreation expenses.
But the research also highlights the desperate measures some families are being forced into.
Money Week is the annual event organized by the committee that tries to get households to think seriously about their money lives and make changes for the better.
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It usually focuses on helping people save, make better KiwiSaver choices, and get themselves out of debt and continue budgeting.
But the cost of living crisis, in which inflation has been rising faster than wages, prompted the commission to survey more than 1,000 people to see what coping strategies families were using.
Sungmi Kim/Things
Households have to make difficult choices to balance their budget. For a large minority, the difficult choices mean that it is not necessary.
Most families are in pain now
Not every family makes cutbacks, but most do.
About 7% of those surveyed said they were doing well despite inflation.
But out of 100 people surveyed, 53 said they were more careful about money.
Reducing Lifestyle Expenses
The most common place where families made changes was food spending.
Supermarket research shows that households are not in control of a large part of their spending and see the weekly shop as a place to cut costs.
AIMAN AMERUL MUNER/Stuff
One of the first places people want to cut costs is eating out and socializing.
Out of every 100 people surveyed, 45 said they had changed their eating habits.
And 44 ate out less.
Closely related were spending on socializing. Out of every 100 people, 27 said they had socialized less. Seventeen said they had canceled subscription services such as a gym membership or TV streaming services.
Renovations postponed
Sharp increases in the cost of doing things around the house means people are delaying plans to redecorate their homes, the committee found.
Out of 100 people surveyed, 11 said they had suspended renovations
What those renovations were was not specified, but it can range from small projects such as getting a new kitchen or refurbishing the patio, to major projects such as adding rooms.
Leave the car at home
Reliance on cars has been expensive this year.
Petrol prices reached record levels in May. Satisfying, they have come downbut they are still high.
Getty Images
Gasoline prices have had a major impact on people’s car behaviour. Public transport spending has increased.
As a result, people told the committee that they were driving less. Out of every 100 people, 40 said they had reduced their car use.
Pain and hardship
Rapid increases in inflation are traumatic for people who are already struggling to make ends meet.
The committee found that 22 in 100 people felt stressed about their finances, 11 hid their financial position from others and 19 more often ran out of money before payday. Four in 100 had incurred more debt. Three in 100 said they had to move.
Alexander Schimmeck/Unsplash
There is no shortage of good food in supermarkets. But a large minority of families do not have the money to buy as much as they need.
It found that 19 out of 100 had skipped doctor visits and 14 more often went without food.
Given these hardships, it was not surprising that 10 in 100 said the rise in the cost of living had strained their relationships.
Increase income
Only a small proportion had responded by trying to increase their income.
Seven in 100 respondents said they had changed jobs or taken a second job. Six said they had asked for a raise.
Can these figures be confirmed?
Surveys only show what people say they have done.
But many of the answers are reflected in Kiwibank’s latest spending tracker, and the overall picture is similar to that in a survey published last week by the Netherlands Authority for the Financial Markets.
Banks can see what we all spend our money on, and Kiwibank makes its findings public every quarter.
The first thing that becomes clear from the latest spending tracker is that our ‘real’ spending is growing more slowly than our ‘actual’ spending. In other words, we spend more money, but we get less for it.
“The slower rise in real spending may also indicate that Kiwi is straining their pockets,” said Kiwibank’s economist team led by Jarrod Kerr.
DELIVERED
Jarrod Kerr, chief economist at Kiwibank, tracks spending every quarter, and the evidence from April, May and June is that households are tightening their belts to cope with the rising cost of living.
“Compared to a year ago, Kiwibank’s credit card transactions have increased by 6.1% in value,” the Kiwibank report said.
“However, the number of transactions has decreased by 5.2%. Kiwis tap, swipe and insert their cards less often.”
Greener, necessarily
Gasoline prices have risen, but gasoline spending has risen less, Kiwibank noted.
Kiwibank says its map data showed that the number of visits to the gas station in the second quarter fell by 7.5% in April, May and June.
Ross Giblin / Stuff
More people are using public transportation as the cost of driving a car has risen.
Public transport expenditure rose sharply, despite the government’s halving discount on public transport fares.
Yes, no for home improvement
Kiwibank spending data showed housing spending fell by 1.5%.
Hardware expenditures were down 5%.
The hardest end of town
Most families struggle with inflation, but some just can’t do it without going through real hardships.
Sam Garaway, chief executive of Christians Against Poverty (CAP), says: “The rising cost of living is causing further financial hardship for low-income and struggling households.”
CAP sees how hard things are when it works with the impoverished to help them learn to budget and get out of debt. This includes negotiating with lenders to forgive or write off debt.
Delivered
Sam Garaway, director of Christians Against Poverty, says, “People in financial distress spend proportionally more of their total income on essential living costs such as transportation, food and housing than the average household.”
“It takes a lot of ingenuity to manage a family budget with very little money,” Garaway says. “The emotional toll can be heavy as parents and caregivers are constantly using their shrinking resources to meet the needs of their families.”
“CAP customers describe the stress of driving around with a nearly empty fuel tank,” he says.
“With the cost of fruits and vegetables rising by 17%, many are unable to provide their families with nutritious food. For some, this can lead to health complications.
“Before the cost of living crisis, two-thirds of people who call CAP were already skipping meals, and three-fifths were abstaining from family and social events.”