A lot of Kiwis are saying that they are feeling poorer as inflation bites, and the fact is we have had our purchasing power reduced – quite significantly too!
Did you know that your purchasing power decreased by 15% in the last 3 years?
Or that what cost $1,000.00 in the year 2000 (Quarter 2) would cost $1,778.50 today? That’s a 43.8% decrease in purchasing power.
Inflation does impact your purchasing power and that’s what you need your income to increase too.
Put simply; your money buys less so you either need to reduce your spending or increase your income.
Calculate For Yourself
The Reserve Bank has published an “inflation calculator” on their website with a few categories that you can look at, and periods that you can select.
The inflation calculator allows you to calculate inflation across the entire basket of goods, or subcategories including:
- General – uses the ‘all groups’ CPI (Stats NZ)
- Food – Food Price Group from the CPI (Stats NZ)
- Clothing – Clothing and Footwear Group from the CPI (Stats NZ)
- Housing – House Price Index (CoreLogic)
- Wages – Hourly wage in dollars (private sector, ordinary time) from Quarterly Employment Survey (Stats NZ)
- Transport – Transport Group from CPI (Stats NZ).
It uses price data, mostly from Stats NZ, to calculate the change in purchasing power of an amount of money between any two points in time between 1862 and the latest available figure.
It’s “interesting” but also quite alarming when you start looking at how things have changed.
So What Can You Do To Feel Richer?
While we have inflation eroding our spending power we are going to need to reduce our spending and if possible increase our incomes.
There are the general living expenses like food, clothing and transport that the calculator shows, and if we watch our spending we can often reduce what we spend in some of these.
Then for home owners there are our housing costs which are harder to immediately reduce, and with our Council rates, insurance costs and higher interest rates it’s a real challenge. But it’s still well worth reviewing things with an adviser to see where you can do things differently to possible save money, do things more effectively or at least not spend money unnecessarily.
People that are currently renting and also feeling the effects of these increased costs through increasing rents.
Then there is always the option of earning more.
Lots of people think they have no control over what they earn, but most people have the ability to earn more if they set their mind to it.
You may be able to earn more with your current employer – that might be asking for a pay rise or there may be the opportunity to take on a more senior role or do more hours.
Other people are changing jobs – there is still a shortage of workers in many roles and that can mean that someone may pay you more than what you are currently on.
Or there are part-time jobs available where you can earn some extra money, and a lot of Kiwis have started a side hustle which can also help with extra income.
What Will You Do?
If you are feeling poorer then you should try doing something about it.
Doing anything is better than doing nothing, and speaking with an adviser might be a good way to get some ideas and direction.
