The big three

Saving money is so often viewed as a sacrifice.

In New Zealand, we have a paltry household savings rate of minus 1% per year. This basically means we are spending everything that we earn.

Naturally, most people would then view saving money as a sacrifice, since it means living a lifestyle that costs less than our current one.

When it comes to cost cutting, I am of the opinion that big is better. I find it much easier, and less of a sacrifice, to focus on two of the biggest expenses – housing and transport. I’d rather live in a cheaper house saving $10,000 a year, than worry about making $10,000 worth of small cuts such as no coffees, no travel, cold showers, and hundreds of other penny pinching methods. Then it would feel like more of a sacrifice to me.

Sure, its not a bad thing to watch every dollar. But I would rather focus my attention on one or two grand moves, then I don’t need to worry as much about the smaller stuff.

Household spending statistics

Every couple of years, Statistics NZ releases a household expenditure report, which summarises how the average New Zealand household spends their money each year.

According to the most recent version of this report, the average household spent $66,682 in the year ended 2016.That spending can be seen as follows:


The big three

From these statistics, it is obvious how much we spend on food, transportation and housing alone. A whopping 62%, of which housing makes up 30%. I haven’t seen any report for 2018, but I imagine that with the increased cost of housing, that this number will be even higher.

By buying less house than you can afford, or renting out a room, you can make some great inroads into your savings.

Same goes for a vehicle. Can you bike more? Can you buy second hand vehicles? Can you ride share?

By saving more on housing and transport there should be no decrease in happiness levels. All new things lose their shine pretty quick. So, no matter how big a house, or fancy a car you buy, they won’t make you happy long term. Only for a very short while. I wrote a post about this concept known as hedonic adaptation.

If that’s the case, housing and transport are the easiest, and the biggest impact, areas you can cut spending with very little impact on your lifestyle.

Then you don’t have to worry so much about not going to that special occasion dinner, or that really important sports game. By making big savings in housing and transportation, then you don’t have to cut out important things in your life if you don’t want.

Let’s have a look at the impact of what I am talking about by using numbers.

New and improved household spending report

Now that we are financially aware, lets assume we have been able to find a house that is just enough to meet our needs. Nothing more, nothing less. By not buying more than we need we have been able to save 20% per year.

We’ve also traded in our gas guzzling car for a more economical model. Another 20% savings here.

Let’s have a look at the impact this has on the average household:


$6,000 a year in savings just from two very small, and simple moves. Our annual spending reduced by almost 10% without even touching the other categories.

Doesn’t seem like much deprivation to me.

Whereas, $6,000 savings from the other categories would be much more difficult and time consuming to find.

Final thoughts

I found a job with a company vehicle and downsized to a much smaller house. These two moves alone saved me over $20,000 a year, with no decrease in happiness.

Food on the other hand, is one expense I haven’t been able to master. It brings me joy, and I am not too willing to sacrifice too much there.

I’m not worried about eating out every now and then, or having some avocado on toast.

For me, the best results have been from focusing on the big expenses of transportation and housing. If you can also cut back on food, even better.

Find your happy medium where you can save for tomorrow, but not neglect today.

Saving money is not a sacrifice if done right. Eliminate waste and think big.

The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here