Thrifty living in tight times
How to turn tightening the budget into a long-term win for the future.
There’s no denying that the current economic times pose quite a few challenges. From higher mortgage rates to grocery price hikes, every facet of daily living seems to demand more from our pockets. But, as daunting as it may seem, there’s also an opportunity to use these circumstances as a catalyst for positive, long-lasting change.
Here are some strategies for turning tough economic times into long-term financial success.
Pausing and planning
When you’re in the whirlwind of financial uncertainty, it can be easy to fall into a reactive mindset, responding to each new challenge as it comes without considering the broader picture. This is where pausing and planning become essential.
Creating a realistic budget based on an honest and detailed assessment of your income and expenses allows you to regain control over your financial life. But, remember, setting the budget is just the first step: you also need to create a budget-aware mindset. This means setting and sticking to your budget, but also revisiting and adjusting it regularly to keep up with changes in income, costs, and financial goals.
Consider it a living document – an active tool in managing your financial life, rather than a static set of numbers.
Developing a thrifty mindset
While it’s important to live in the present and respond to short-term challenges, having a future-oriented mindset can also help you build longer-lasting financial stability.
Developing a thrifty mindset is not about penny-pinching, it's about thoughtful and mindful spending. It's about making choices that align with your long-term goals rather than giving in to every impulse buy. This means recognising that every dollar spent on unnecessary items today could be dollars you're missing in your future savings or investment account. So, when considering a purchase, ask yourself: "Do I need this? Is it worth the cost, or could this money be put to better use?"
Making thrifty lifestyle choices
Meaningful and lasting change starts from the ground up, by building new routines into your daily life. And it’s important to note here that adopting a thrifty lifestyle doesn’t mean compromising on quality or enjoyment, but rather being creative and resourceful with what you have.
Here are some practical examples:
- Eating out often? Maybe start cooking more meals at home and assess what difference this makes to your budget after a month. How much more could you save in a year?
- Do a subscription audit. They may seem small in the grand scheme of things, but subscriptions and memberships can be a significant drain on your finances. Make sure you take a closer look at what you’re paying, and downgrade or cancel what you’re not using to its full extent.
- Take advantage of sales and discounts. Some people are very good at finding discounts or buying on sale. Others… not so much. If you belong to the latter category, it’s a good idea to train that mindset: over time, it may become second nature.
- Maximise free and low-cost activities. New Zealand’s cost of living is pretty high, but not everything has a ‘cost’. In fact, many activities are (literally) priceless. Think about outdoor recreation, like hiking, biking, swimming, star gazing, fishing or birdwatching – the list is endless. Depending on where you live, there may also be community activities worth checking out, like local markets, free festivals or art exhibits. And don’t forget about things you can do at home, like hosting a movie night or a potluck dinner with friends.
These are some quick examples, but you may find more if you start looking around you.
Going 'tech' with your cost-cutting and budgeting
Technology has transformed the way we manage our finances, helping people make their money work more effectively for them. For example, many apps and websites (like Pocketsmith or You Need a Budget – YNAB) are designed to simplify budgeting, track spending, and even automate savings. By using them, you can gain key insights into your spending habits, highlighting areas where savings could be made. And if you don’t want to pay more than needed on utilities and other services, why not check comparison websites and online reviews?
Investing in knowledge
Understanding financial concepts, market trends, and investment principles is crucial for your financial well-being. And you don’t need to become a financial expert: even a basic understanding can help you make better-informed choices about your financial future.
Make sure you take the time to educate yourself about money matters. For example, you can consider enrolling in online courses, reading books, or listening to finance-focused podcasts (like these).
Doing regular financial check-ups
Remember, your financial situation isn't static, so your financial plan shouldn't be either. Just like you'd schedule regular check-ups for your physical health, your financial health also needs regular monitoring.
Review your budget monthly to ensure it's still realistic and effective. Check on the progress of your savings and investments. And if you're not meeting your goals as expected, it might be time for a reassessment. Once again, these regular check-ups ensure that you remain proactive in managing your financial health, rather than reacting to unforeseen issues.
The bottom line
As you can see, proactivity is the not-so-secret sauce to managing your financial life more confidently through thick and thin. At the end of the day, financial resilience is not just about surviving when things turn south, but also learning, adapting, and using the circumstances to make headway.
Every challenge presents an opportunity for change and growth. And by embracing a thrifty lifestyle, fine-tuning your budgeting skills, and maintaining a focused approach towards your financial goals, you can set the stage for a more secure financial future.
