Managing credit card debt and other consumer debt has become increasingly important in today’s world.  With the cost of living rising ahead of incomes and inflation at levels many younger people have never experienced, it’s easy to see how financial pressures can mount. Throw in business failures, job insecurity, and unexpected emergencies, and those with little or no savings can quickly find themselves spiralling into debt. 

According to the Financial Services Council of New Zealand’s 2024 report, “Money & You - Consumer Resilience and the Road to Prosperity”, 94% of Kiwi’s are concerned about their finances and 24% of respondents are uncertain about their ability to meet debt repayments in the future. High-interest consumer debt, such as credit cards, is a major contributor to this growing problem, highlighting the need for practical advice to help tackle debt head on.

However with the right help and advice, debt reduction or even elimination is possible.

1.     Assess your current financial situation.  In order to change you need to have a good handle on where things are at currently.  As bland and unappealing as it sounds, reviewing where you’re at is the first step in working out how to get out of debt.  There are many free and paid services you should be able to access to help you do this.  Google free budgeting services. There are lots of good government funded options and or websites if you want to do things yourself (sorted.co.nz).

Work out your income and expenses and what is left over each pay once everything essential is paid including the minimum payments on all your debts.  Whatever is left over each pay is your discretionary spend per pay.  To simplify budgeting, convert all figures to the same frequency as your pay cycle.

Next list all of your assets and liabilities on a page.  Review your statements to work out balance, interest rates being charged and minimum payments owing.  Work out how long it will take to pay off the debt if you continue paying the minimums. 

I’m assuming for the purposes of this article that you have a surplus after debt and expenses.  If you don’t talk to a free budget adviser.  There are some pretty decent options available to you if you simply don’t have enough money to cover rent food and debt but we won’t get into that today other than to say get advice early. 

2.     Restructure to better rates. Shop around.  Negotiate. 

Once you have all your debts and you’ve completed your budget, rank your debts in order from the most expensive interest rate to the least and then work on reducing interest costs starting on the debt with the highest interest. 

Can you refinance any of the existing debt onto better terms?  Many credit card providers have a zero interest rate for a balance transfer for the first six months or similar – if you have three credit cards for example of 5k each can you transfer all three to 0% for six months.  If you can get any of your debt transferred to better interest rates and cheaper fees then do so.  At the time of writing a quick google revealed that TSB and ASB both have 0% for six months balance transfer offers and ANZ has a 1.99% for 24 months.

Can you consolidate your debts into a cheaper consolidation loan?  Make sure any debt you consolidate is only done if the interest rate and fees you are being charged on the new loan / product is cheaper than what you are currently paying.    

Can you negotiate better rates and fees with your existing providers?  Call and ask if there is anything cheaper that they can offer.  Tell them you are considering switching to some of the offers you found earlier.

Once you have tried to reduce the interest costs on all your debts to as low as possible it is time to work out a plan to pay them off.

3.     Cut unnecessary expenses

Start with trying to reduce costs in your housing, food and transport as these are usually the three biggest costs in any families budget.  Can you move to a cheaper area, or could you rent out a room or get a homestay to reduce your housing costs? Can you buy in bulk and meal plan to avoid waste and save on food costs?  Can you downgrade your car?  Can you walk or take public transport to reduce costs? Have you reviewed your utilities to make sure you’re getting the best deal?  Have you reviewed all your subscriptions and are there any you could cancel now? 

Once you’ve decided what to cut back on, it’s also worth reviewing HOW to cut back.  The simplest way to budget is to have all your bills automated and coming out of your account the morning after you are paid including the minimum payments of all your debts so that there are always funds in the account to pay them, and then withdrawing cash for food petrol entertainment in one amount each pay cycle so that you can’t go past your budgeted amount.

4.     Prioritise debt repayment. 

Decide on your debt repayment priorities and create a budget and spending plan with a timeline; which debt do you first want to pay over and above the minimum on?  From a purely numbers point of view, it makes sense to pay all spare money from your budget (worked out in step 1 as your discretionary spend per pay) towards the debt with the highest interest rate until it is repaid in full then move onto the next debt with the highest interest rate (this is called the debt avalanche strategy).  Work out how long it’s going to take you to pay everything off.

However the best strategy is the one that works and the one that you stick with, so if you find that knocking off your smallest debt first works better because you make progress faster and this keeps you more motivated and engaged to stick with the plan as you build momentum, then this may be a better strategy for you (known as the debt snowball strategy).  Choose the strategy that best aligns with your spending habits and motivation.

5.     Debt detox. 

Make sure that while you work on this plan to become debt free or even to just reduce your debt to a manageable amount, that you don’t get caught taking out new debts to cover any shortfall.  Buy Now Pay Later is debt and should be avoided at all costs at this stage as it will just lead to budget shortfalls in future pay cycles. 

Part of your debt detox should include building an emergency fund as quickly as you possibly can.  While some recommend building this first while just paying the minimum on all your debts, I recommend you stick with the plan steps one to four and then use additional ways to accumulate your emergency fund as quickly as you can.  Open a separate account and put all additional money you can rustle up into this account.  Ideas for this can include but not limited to – asking for a pay rise or looking around at other better paying roles, getting an additional part time job or starting a side hustle, check if you have a tax return owing (refund for donations made during the year, if you worked only part of the year in a PAYE role it’s likely you would have overpaid tax), having a good declutter and selling unwanted stuff online, bank any windfalls you get rather than just spending them (put all the additional money from any pay increases straight to your emergency fund).

6.     Invest in your financial education. 

Use this time to continue to educate yourself financially.  Utilise the free budgeting advice available to you (ask at your CAB or just google free budgeting advice to find someone local to you).  Look online as there are so many free resources – I recommend MoneyHub , Keep The Change, Dave Ramsey (US based so not everything is relevant), The Happy Saver and Sorted as good starting points.

Tackling consumer debt can feel overwhelming, but with a clear plan and focused effort it’s entirely achievable.  Breaking free from the negative cycle of stress, guilt, overspending, and more stress requires discipline, focus and determination, but the rewards are literally life changing. 

By assessing your financial situation, restructuring to reduce interest costs, and cutting unnecessary expenses, you can take meaningful steps toward regaining control. Prioritising debt repayments and choosing a strategy that works best for you, whether it’s the avalanche or snowball method, while you track your progress towards your end goal ensures you stay motivated.  At the same time, building an emergency fund creates a financial safety net, helping you avoid slipping back into debt when unexpected expenses arise.

With every debt repaid, you gain momentum, freeing up more money to repay the next debt even faster.  If you stick to your plan, track your progress, and maintain focus, you can lift yourself out of the debt spiral and enjoy the peace of mind and freedom that comes with being debt free.

Current as at 9/1/25