KEY POINTS:
The headlines have an apocalyptic ring: Credit crunch fall-out; finance companies going belly-up; plummeting share prices; mortgage rates near a nine-year high; petrol, food, rates and energy prices rising; and no respite in sight.
Not that we have to read it in the paper to know our pay isn't going as far as it did even a few years ago. Little wonder, then, we spend an average of $1.14 on everyday living for every $1 we earn.
Economists are predicting a triple whammy of rising basic costs, higher mortgage interest rates and rent hikes and a likely tightening of credit after local finance company collapses. Add to that the sub-prime crisis in the US and those who are already financially stretched could be hit the hardest.
Says ASB chief economist Nick Tuffley, "There's a feeling the ratchet is being turned very slowly on the wallet... People who have borrowed up to the gunnels may come a cropper. That's what we've seen in the States."
Last year's sub-prime crisis occurred when house price slump on top of rising interest rates triggered an economy-rocking flood of mortgagee sales in the "sub-prime", or high-risk, low-collateral loan market.
Now talk of a slowdown in the world's biggest economy is putting the frighteners on local markets.
All's not doom and gloom. New Zealand is experiencing the longest period of economic growth since World War II and the lowest unemployment for at least 20 years.
"If we're going into a period of slower growth, we're at a very good starting point," says Tuffley.
But reality will bite. "We're still going to feel pain."
The Federation of Family Budgeting Services is an umbrella group for agencies offering free, professional and confidential budgeting advice. In 2002, the average urgent and overdue debt owed by clients was $2500. Today it's close to $6000.
Chief executive Raewyn Fox says more middle-income people have been seeking help - "particularly people who are struggling with mortgages and rents. It's not people who are going into debt over luxuries, it's just people who can't afford to pay for the absolute basics."
Making ends meet is becoming no mean feat.
So what better time to join the shift to thrift and revive some of our grandparents' pennywise tricks?
The war and post-war eras saw thrifty living as a way of life, before the consumer society intervened and waste became both a corporate by-product and corporate industry.
The call to budget and eco-consciousness can sound like a sentence to dullness and self-denial. Many frugal habits are prosaic and require a little self-discipline: turning off lights, not taking the car for short trips, buying refills.
But thrifty living doesn't have to equal homespun naffness and wowserism. Thrift can be rewarding, creative, sociable. Thrift can even be hip.
One moneysaving, eco-friendly trend that's already swept Britain and the United States is swapping clothes, or swishing.
Auckland speech therapist Polly Newton started throwing clothes swap parties with a friend five years ago when they were poor students.
Now she does it for original pieces that you couldn't buy, the re-using ethos, and fun. Up to 20 per cent of her wardrobe is from clothes swaps.
Once a season, friends and friends of friends descend on her lounge with wine and snacks, dump their wardrobe rejects on the floor, and start rifling through the pile, trying on whatever takes their fancy.
Anything left at the end goes to charity.
Other swaps she's heard of involve more formal bartering or even token money, with items "valued" by a judge to ensure fair exchanges.
Swap parties could be experiments in social psychology. "You really see the personalities coming out: the people like me who will just lunge, the people who will stand back and wait to see if anyone else wants it and, if they don't, they'll take it," she says.
"Then you get the ones who keep subtly checking with someone who's selected a piece they like if they're really going to take it."
In Britain and the United States clubs hold clothing swap nights, where an extra frisson is injected by participants wearing their swappable items and exchanging outfits on the spot.
You can swish online with popular website whatsmineisyours.com, founded by British fashionista Judy Berger.
Even the stars have gone second-hand. Renee Zellweger's 2001 Oscar ceremony turn in a glamorous yellow vintage gown is credited with shifting op-shop chic from the grunge fringes to haute couture and on to the mainstream masses.
In the United States, buyers for Cameron Silver's Decades stores trawl the deceased estates of Hollywood doyennes for clothes to sell on to today's A-list starlets.
New Zealand top-end vintage store Designer Exposure, run by mother and daughter team Denise and Maria Williams, sources its range from American celebrity cast-offs.
It has one shop in Auckland but is mostly an online business, with prices in US dollars and 33,000 hits a day, according to the site.
The vintage chic trend has fuelled the growth of a new kind of op-shop frequented by shoppers who wouldn't be seen dead at the local Sally's.
Fashion Quarterly editor Melissa Williams-King mentions Auckland stores Fast & Loose and Tango in this "boutique vintage" category. "It's seen as cool to be wearing something from Fast & Loose, rather than 10 years ago when it would have been seen as grungey."
The immense popularity of auction sites such as Trade Me also speaks of used goods' gathering cachet. "Something we are seeing a lot is environmental-friendliness; the propensity for people to re-use is growing," says Trade Me general manager Jon Macdonald.
"The thinking is, 'I was going to throw this in the landfill but I feel a bit guilty about it now'.
"That may be a flavour of this year and the next."
Meanwhile, the make-do-and-mend mentality has proved a surprise hit in the form of last year's British bestseller Austerity Britain: 1945 to 1951 by David Kynaston.
Some of his tips are:
* Re-use old sheets by cutting in half sheets that are worn in the centre but good on the edges, turning them over, and sewing them back together;
* Make the most of leftovers: think bubble and squeak and cottage pie;
* Wash and re-use tin foil.
Almost everything in Jo Roke and Tony Phillips' home is second-hand or homemade. The Ikea shelves are from Jo's sister. Twenty-month-old son Toshi's pen-marked wooden toy tractor cost $2.50, the stylish corner-chaise $80.
After Roke, 34, and Phillips, 38, had Toshi, the Auckland couple made a conscious choice to live on less so they could focus on their son and bring their lifestyle in line with their values.
Roke sold her vintage clothing store, Phillips got a job as a school caretaker in Waitakere and the family moved to a school house with subsidised rent of less than $300 a week.
They've drawn up a budget and stick to it, with one account purely for bills. No more buying lunch every day or frittering money away on new magazines and clothes.
Instead of going to the movies, they watch DVDs or have dinner with friends. They have a veggie garden, Roke gets free clothes from a mothers' group she belongs to.
"I don't really think of it as deprivation, because if we really want something, generally we end up getting it," says Roke.
"In our 20s, we probably did lots of excessive things, so it's like we've already eaten that pie."
It helps that they're not alone. "All our friends who have kids are poor, and our rich friends live in town and we just see them occasionally."
The revival of vegetable gardens is showing up in plant and seeds sales. Seed supplier Yates reports accelerating sales for vegetables, especially herbs. Our more sophisticated culinary tastes are reflected in its range: the company that once sold only two lettuce varieties - Great Lakes or Webb's Wonderful - now offers six varieties and two mixes.
"We're selling a heck of a lot more edibles," says Peter O'Neill from Auckland's Kings Planet Barn.
"You can feel the difference from last year. And it seems like a younger demographic."
The "disposable society" syndrome, of things made for the short-term then replaced rather than repaired when they break down, is also fading. Charles Chapman of appliance repair service Aaron Appliances says it's still mainly older people who get repairs, but business is steady.
"When things get a bit tighter, like now, people do think twice about chucking their machine out and buying another one."
Another way of extending the dollar is joining a bartering community, such as local exchange trading systems, or Lets.
New Zealand has 14 active Lets, with membership slowly growing. Anne Dixon says the Taranaki network she co-ordinates has 33 members, including retirees, a bus-driver, dentist and psychologist. They exchange goods, such as vegetables, and services.
Three members have signed up since Christmas, including a mother of two toddlers. "She just couldn't afford to get her car fixed and she really needs it." She'll now get the repairs courtesy of a Lets member.
Take your pick of strategies but belt-tightening is the order of the day. Economist Tuffley: "We'll all have to try to be more prudent and aware of what we're doing with our money."
Keep tightening your belt
In case you need proof that times are tight:
* Electricity and gas prices have risen 4 per cent annually for the past four years.
* Petrol prices spiked at 175.9c a litre for 91 octane this month, only one cent shy of the all-time high reached in August 2006. And the only way is up, with the coming biofuel charge (expected to be 5c/litre), carbon charges of 4-12c/litre and any fall in the buying power of the kiwi. Aucklanders and Wellingtonians also face up to 10c a litre extra for a flagged regional petrol tax.
* Food became 5.4 per cent more expensive last year, with successive increases in the last four months. Dairy underwent stomach-curdling rises: butter soared by 66 per cent, cheese by 37 per cent and milk by 16 per cent. The general grocery food category rose by 7.8 per cent. Again, expect more of the same in 2008, as international food crops are diverted for biofuels and rising oil costs are passed on to the consumer.
* Latest figures show it takes 83.4 per cent of one median take-home income to pay the mortgage on a median-priced house purchased in November, up from 72.5 per cent a year ago. In the Central Otago Lakes district, the index rises to 110.6 per cent; in Auckland, to 99 per cent.
- Sources: Statistics New Zealand, Fairfax Media, interest.co.nz
Thrift tips
* Set up a babysitting club with friends who also have kids.
* To decide whether it would be more economic to update than to fix your old car, work out whether the annual repair bill exceeds 50 per cent of the cost of buying the same car in running condition.
* Why buy when you can swap? Dinner, clothing, books, gardening - all can be bartered between like-minded people.
* Review your banking: could you manage your money better to cut fees? Putting everyday purchases on a credit card will save on Eftpos fees, as long as you're sure you can pay off your card every month.
* Get real and draw up a budget. You can find guides online at familybudgeting.org.nz and sorted.org.nz.
Thrift sites
Stretcher.com
whatsmineisyours.com
frugalhacks.com
allthingsfrugal.com
craftster.org
* Austerity Britain, 1945-1951. by David Kynaston.
* Leftovers: by Kate Colquhoun, to be published by Bloomsbury.
* Saving Money with the Tightwad Twins: More Than 1,000 Practical Tips for Women on a Budget by Ann Fox-Chodakowski, Susan Fox and Charlotte Fox Messmer.
* Frugal Living for Dummies by Deborah Taylor-Hough.
