Tired of being told how to save money? Here’s what to do instead.

by | Nov 4, 2022 | Managing Your Finances

The money advice Kiwis hate

Amongst the headlines painting a dire picture of the current economy, the internet is awash with advice on how to save money. As well-intentioned as that advice may be – some of those tips and tricks are well… annoying.

In fact, according to research recently released by Finder, Kiwis aren’t too keen on being told how to save. Especially if that advice includes cutting out streaming services, working out at the gym, or getting pampered at the salon.

And it’s not surprising that people might not be too keen on curbing these costs. While our finances are being squeezed from every angle, it’s these little affordable luxuries that can go a long way to help us feel a little happier.

This ties into a curious phenomenon referred to as the ‘lipstick index’ (a term coined by Leonard Lauder from Estée Lauder in the early 2000s). He noticed that the sale of lipsticks or other “affordable luxuries” rose when the economy was going through a downturn. While it’s not a fool-proof theory, it does show that even when economic times are a little tough and we know we should be cutting back, spending on the things that make us happy remains.

Another reason Kiwis may resent being told to cut these costs from their budget is that they’re not necessarily doing badly financially. They want to get more ambitious and grow their wealth – rather than just stockpiling their savings. Being told to cut back on costs then feels more insulting than helpful.

Then there’s the fact that telling someone to cut out the $20/month for their Netflix, so that they might be better off financially in the long term, feels akin to the advice millennials received to stop buying smashed avo on toast so they could afford to buy a house. Why cut out something that makes you happy when the impact is so small, or the payoff’s just not worth it?

So, what’s the alternative? If not small savings, how can we do better? How can we learn to spend our money in a way that brings us joy AND allows us to get ahead?

It’s all about spending consciously

One of the things we do when we’re setting up a financial plan with an enable.me client, is we get them to identify 2 or 3 things that are important to them, things they don’t want to cut back on – even if they could. This could be an annual holiday, a monthly dinner out, or paying someone to mow the lawns so you don’t have to. We refer to these as ‘non-negotiables’ and this is what we’ll build their financial plan around.

Why? Because these luxuries aren’t necessarily the expenses that are holding them back from reaching their financial goals – rather it’s the unconscious spending we’re all guilty of that might be to blame. These are the things we’re spending money on that don’t make us happier – so by cutting these out we’re bolstering our ability to get ahead, without making ourselves miserable.

So, I can keep my Netflix AND get ahead?

Theoretically, yes! When it comes to finding where we can cut costs – there’s a pecking order we generally follow.

First up is your mortgage. This is a huge area of unconscious fritter and mortgages are often structured in a way where we end up paying more interest than we need to. And trust us – paying less interest to the bank definitely won’t make you any less happy!

We look for ways to re-structure your mortgage so you’re paying it off faster without losing flexibility – and which will free up funds later down the track to help you grow your wealth.

Next is your food. This is another area where we’re often spending a little more, more frequently than we realise. So, we look at how we can be more mindful in our spending and cut back on waste (both in terms of food and therefore money).

Then we look at utilities. There’s often little drive for us to change utility providers – that’s your internet, our power, our mobile phone plans – but it’s an area where we can easily save money without impacting our happiness. It’s not about cutting out these services completely, but rather finding a plan that still provides the services you require, just at a lower cost.

Only then do we look at your discretionary spending. This is an area where it can be easy to make cuts (and you’ll notice that the ‘savings’ advice you’re getting tends to be within this area).

However, we’d argue that spending in this area is most likely to be connected to happiness. And being able to spend on the things that make you happy helps make a financial plan sustainable. Spending twice on something, however, won’t necessarily make you twice as happy, so it’s about finding the point of diminishing returns and maybe asking yourself, does this purchase spark joy?

So, if indulging in a café coffee, getting a facial, or pumping iron in a room full of other sweaty people is what brings you joy (without impacting your financial well-being) then give yourself the permission to spend in these areas and build your financial plan around them, rather than cutting it them of your life completely.

Have your financial plan – with advice that you’ll actually like – set up with the help of an enable.me financial adviser. Book a consultation to kick start your financial progress today.

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