Paying more off your mortgage principal will shorten the term of your loan.
That is a simple fact many homeowners already know.
If you put an additional $100 a month off your mortgage, you could potentially save up to $100,000 and shave years off the term of your loan. That all sounds well and good, but where do you find that extra $100 when your budget feels pretty tight right now?
That is the real question.
For many households, the issue is not always one major expense that has suddenly blown out. It is a series of smaller costs that have crept up over time and quietly taken over a bigger portion of the monthly budget than anyone realised. If you can find a few of those spending leaks and plug them, you may be able to make your dollars work better for you and free up cash for your mortgage.
Where Does My Money Go?
Sometimes it feels like the money barely touches the sides of your bank account before it disappears on mortgage payments, bills, and the general costs of running a household.
It has certainly felt like the price of everything has been climbing. Groceries are expensive. Power is expensive. Insurance has gone up. Petrol has had a habit of jumping when people can least afford it. Unfortunately, wages and salaries do not always rise at the same pace.
There is only so much you can do about those core costs. You can be more aware of your power use, be smarter about what goes in the trolley, and make sure you are not wasting money where you do not need to. But there are also a few sneaky cost increases that can be tackled, and that is often where the quickest wins are.
Subscriptions
Subscriptions are one of the easiest places for money to disappear.
We are often convinced to sign up because the introductory offer looks great. Then the higher monthly rate kicks in, and by that point we have formed a habit or a reliance on the service. That is fine if it is a service you truly value and use regularly, but if you are paying hundreds for meal boxes while half the food ends up in the bin, that is money leaving your account for very little return.
The other issue is subscription creep.
Spotify, for example, has gone from $14.99 a month in 2023 to $20.99 now. That is a 40% increase. Netflix and Disney+ have also climbed over time, and Amazon Prime has doubled in cost. Those rises may not feel dramatic when they happen one at a time, but when several subscriptions all increase quietly in the background, they add up very quickly.
A subscription review is one of the easiest exercises you can do. Go through the account statement properly and ask yourself whether each one still earns its place.
Buy Now, Pay Later
Schemes like AfterPay can be handy if an unexpected bill crops up and you need short-term breathing room.
The problem is how easy it becomes to fall into a cycle where money from next month’s budget has already been committed to a cost you incurred this month. Effectively, you are spending your money before you have earned it.
That can be manageable if it happens occasionally and you are staying in control of it. But if you then need to AfterPay something else the following month because the previous repayments have made things tight, you can start chasing your tail. Before long, a portion of every pay cycle is going towards yesterday’s spending.
If the aim is to free up cash for the mortgage, this is one of the first places worth reviewing. And if you are carrying a few debts at once and wondering whether there is a better way to organise them, Our article on debt consolidation and mortgage restructuring is worth a read.
Coffee
Coffee is the classic example because it feels harmless.
Not that long ago, a barista-made coffee might have cost about $5. Now it can be anywhere from $7 to $9 depending on where you go. If that becomes part of the weekday routine, it could easily be costing you around $140 a month, and sometimes more.
This does not mean cutting out every small pleasure in life. Most people will not stick to a budget that removes everything enjoyable.
What usually works better is being a bit more deliberate. Introduce treat days. Invest in a keep cup. Take coffee from home on other days. Keep the habit if you enjoy it, but reduce the cost of it. A few changes like that can create money in the budget without making life feel miserable.
Make Your Money Work For You
Once you have identified a few of the sneaky spending traps, the next step is to do something about them.
Here are some practical ways to start:
- Avoid using Buy Now, Pay Later services unless you truly have an unexpected cost you cannot cover in full.
- Go through your subscriptions and break up with the ones you do not really need. That includes streaming services, meal boxes, app memberships, regular monthly deliveries, gym memberships, and anything else that gets paid automatically.
- Rather than grabbing a coffee every morning, introduce treat days and make coffee at home on the others.
- Take a harder look at supermarket spending. Could you shop the specials more, or switch to supermarket own-brand products in a few areas?
- Take advantage of discount days. Buy fuel when the pricing is better, wait for the things you need to come on special, and use the discount coupons that so often sit ignored.
The point is to be conscious of what you are buying and why you are buying it. Ask yourself whether you truly need to make the purchase, or whether it has simply become routine.
Once you get some of that money back into your budget each month, you have options. You may decide to inject it back into groceries or petrol if the household budget is already under pressure. Or you may decide to put it onto the mortgage principal, which can be a very smart move if the goal is to shorten the loan term and reduce interest over time.
Could Your Mortgage Structure Be Doing A Better Job?
Freeing up money through spending changes is one side of the equation. The other side is making sure your mortgage is still structured to suit the way you live now.
Many Kiwis do not review their mortgages as often as they should. In many cases, the loan was set up to suit your lifestyle at the time of borrowing or refixing. But life has a habit of changing. What suited you two, five, or even ten years ago may not be the best solution now.
That is why it is worth revisiting your lending from time to time. A proper mortgage review, refix or refinance strategy can help make sure you are not paying more than you need to and that your structure still lines up with your goals.
If you already own a home and want to make your lending work harder, Our home loan advice for existing homeowners is a useful place to start. And if you have been wondering what to do when rates change or terms are expiring, this article on Is It A Gamble To Fix Your Mortgage? is also worth reading.
A Few Small Changes Can Go A Long Way
Most households do not need a perfect budget. They need a clearer one.
If you can identify the spending that is adding very little value, reduce the habits that have quietly become expensive, and redirect even a modest amount each month, you can start making real progress again. That progress may show up as extra breathing room in the weekly budget. It may show up as extra savings. Or it may show up as a mortgage that starts shrinking faster than it was before.
Either way, the first step is knowing where the money is going.
Once you know that, you are in a much better position to decide what you want it to do for you instead.