For many, the Level 4 lockdown has been painful – emotionally and financially. Many Kiwis have lost their jobs as a result of the economic downturn unleashed by the global coronavirus pandemic.
For some, the restrictions have forced them to reassess what’s necessary in their life and make changes to their spending habits. It’s possible that out this difficult time, Kiwis can put themselves and their savings in a better position.
OneRoof talked to money experts to find out how Kiwis can use to their advantage the current Level 4 restrictions and those that will be in place once the country moves to Level 3.
Economist Tony Alexander says some Kiwis will be pleasantly surprised at the savings they will have accumulated since lockdown began on March 26. First home buyers may be in a stronger position without daily coffees and spending on nights out.
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“Have a look at what you’ve saved as a result of the lockdown and extrapolate it to six to 12 months and see what it can do to the size of your house deposit,” he says.
First home buyers who have lost about 20 per cent of their KiwiSaver could see real benefits if they restrain spending for up to a year.
Build your reserve
Financial adviser Hannah McQueen agrees. “This lockdown and the government wage subsidy are only the calm before the storm, and we have to use this time to build a reserve,” says McQueen, whose firm enableMe helps people make smarter savings decisions.
She notes that for the first-time, every one of the firm’s thousands of clients has achieved their savings goal for the quarter, with most achieving “astronomical” savings of 40 percent of their income because they have no choice but to buy only essentials.
However, McQueen notes that everyone’s essentials are different, and the cost of essentials varies.
“It’s essential to me I have a cleaner but for some people it would be a luxury so you need to make sure that your spending's are appropriate to your income level,” she says.
Loan Market mortgage adviser Mikey Smith, 28, knows all about discipline. When he was saving for a deposit for his first home, he was putting aside 65 percent of his income.
He says the lockdown and Level 3 afterwards are a good time to trial aggressive saving techniques and help boost savings for a home deposit. “Aucklanders are saving huge amounts right now because they are forced to.”
Smith also saved $500 a month from cancelling subscriptions to Spotify and Netflix and ditching his gym membership. “I saved a huge amount. I didn’t even realise how much money a month I was wasting – it was quite embarrassing,” he says.
Smith says it only makes sense to cancel home entertainment subscriptions after the lockdown restrictions are lifted and the amount of time spent at home is reduced.
Crisis savings as security
Author and finance journalist Frances Cook, who hosts the popular money matters podcast Cooking the Books, says Kiwis should be using the lockdown to examine which utility providers offer the best value for money.
She says the goal is to save three months of your core household bills and expenses to have as a fall-back amount for darker times.
“Go through your core bills and figure out, ‘how can I get what I’m getting but for less?’ Examine what can be negotiated and switched out and you’ll automatically save more and hit the goal a lot faster,” she says.
Every dollar brings you closer to the goal and helps avoid debt, which is an ultimate wealth-killer, Cook says.
Three months' worth of living costs saved will bring security during these uncertain times.
“If you happen to lose your job, you will have peace of mind that you can survive for a long period of time until things settle down again. We all got the motivation we need and there’s still time to stack the cash and get through this,” Cook says.
