Oily Rag Column: Smokes, booze and TV

The New Zealand Herald recently reported the results of a survey into the spending habits of Kiwis. The headline result was that nearly half (44%) of New Zealanders are living day-to-day without any savings to fall back on. The article attracted flow-on discussion on talk back and in other news outlets.

The commentary pointed out that this situation was especially prevalent for young people and women.

It is logical that this would be the case for young people, who have not had many years in the workforce to build up savings or to climb very far up the corporate pay scale. Young people do however have the greatest advantage of all – time. They have time on their side to invest whatever savings they are able to make and gain the benefit of compounding interest as the years pass. We often hear from people who say they were fortunate to have parents who instilled into them a savings habit.

The good news was that nearly two-thirds of people said they not only had a budget but they stuck to it!

An interesting comment was reported from the North Shore Budgeting Service's Brian Pethybridge, who said most people only require about three changes to balance a budget - "It can be something like smokes, alcohol, Sky TV, or little things that add up.”

If smokes, booze and TV are for most people the difference between saving and not saving, then that’s great news. In our opinion all three are luxuries that should be the first things to go when money is tight.

Here are some examples of how much can be saved.

The one-packet-a-day smoker would spend about $7,500 a year. If instead, they kicked their habit and put the money into repaying their mortgage - or put it into KiwiSaver – as a result of the effect of compound interest, after 20 years those savings would have grown to around $250,000 (enough to buy a modest home in the provinces!).

Over that 20 year period, the person spending say $40 a week on booze and nightclubs would be giving up $60,000 and the Sky subscriber would be giving up another $30,000 or so.

The total of these three spending vices is about $340,000 over 20 years. It’s no wonder those who smoke and drink while watching pay-TV are not saving and will always live day-to-day and be included in New Zealand’s “poverty” statistics.

There are of course many more ways to save money - and there are literally hundreds of ideas posted on our website at www.oilyrag.co.nz. Most of the tips are as simple as switching power providers to take advantage of the competition in the retail power market, or changing from premium brands to house brands in everyday grocery items. In most cases the only differences between the brands is the packaging and the price – the product inside is often pretty much the same.

There are a couple of other interesting points to come from the survey about banking habits.

More than half of the population no longer has a cheque book – clearly reflecting the age of internet banking - and 13% of those questioned said they had been able to negotiated lower fees or interest from their bank.

That’s also good news and shows how competitive the banking industry now is. It’s clearly time for the other 87% to have a chat with their bank manager about the bank fees and interest rates that they are being charged!

If you have a favourite money-saving tip you would like to share with others, please send it to us at www.oilyrag.co.nz or write to Living off the Smell of an Oily Rag, PO Box 984, Whangarei.

Frank and Muriel Newman are the authors of Living Off the Smell of an Oily Rag in NZ. Readers can submit their oily rag tips on-line at www.oilyrag.co.nz. The book is available from bookstores and online at www.oilyrag.co.nz.

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