Five signs you may be living beyond your means

12 July 2010 Media release

Five signs you may be living beyond your means

During the nineties and noughties, New Zealand and developed countries around the world experienced an explosion in credit and personal debt. But times have changed, and frugality is back in fashion. By necessity the 2010s are likely to become an era of budget balancing as attempts are made to reduce debt from both a government and individual level.

Borrowing to spend had become so commonplace that the average New Zealand adult is in the red to the tune of $4,400, not including mortgages or student loans.

Collectively Kiwis owe more than $12.7billion in personal debt. $5.2billion of this is in credit card debt, $3.8billion in hire purchase schemes and store cards and $3.6billion in other types of loans. This debt doesn’t account for the $167.9billion we owe in mortgages and housing loans, or the $10.2billion owed in student loans.

David Kneebone, manager of independent money guide sorted.org.nz, says it’s easy to overspend if you’re not keeping an eye on your budget.

“People have got used to having more than one credit card, buying items on hire purchase and borrowing to buy. This is fine if you can afford it, but can cause problems if paying off the debt becomes difficult,” Mr Kneebone says.

Sorted has identified five warning signs to help Kiwis identify they are overspending:

Is your credit card is maxed-out, or close to it, and you’re only making the minimum payments? Are you having difficulty paying all your bills at least once every three months? Do you have no idea how much your regular bills are every month? Do you have no idea how much spending money you have every month? If you lost your job, would you be in financial trouble within a month?

If you answer yes to three or more of these questions chances are you need to get your spending back under control.

Mr Kneebone says the first step is simple, make a budget so you can work out whether you’re spending more than you earn. He then suggests using some of the many tools available to make a plan to reduce debt more quickly and start saving.

“Sorted.org.nz has a free budget calculator that makes putting a budget together easy, all you need is details of your current spending and income and it does the calculations for you. There’s also the Money Tracker tool so you can see exactly where your money goes and, if necessary, where you need to adjust your budget.

“Make a budget to avoid a blow-out. Knowing what money you’ve got to spend is a great way to take charge of your money,” Mr Kneebone says.

Ends

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