Young New Zealanders are, according to a study by Massey university, pretty scared of debt.
The study posits that Sorted’s message of “dumb debt” message is getting through to people, and they’re aware of the temptation of easy credit. (Though they do acknowledge that some credit is important.)
So, what happens when people do get stuck in that debt spiral? In Gisborne, Megan Whelan spoke to two people who are facing huge debts, without a lot of resources to pay them back. (You may remember Arlene and Tatum from this story.)
---
When Arlene spoke to The Wireless in Gisborne, she didn’t want to give her last name because she doesn’t want people to know quite how bad her financial situation is.
Arlene has two mortgages – though she’s trying to sell one of the houses. She also has car finance, owes money to a former employer, and has whiteware on hire purchase.
“Finance companies make it so easy, [it’s all] deferred payments, interest free,” she says.
“For a long, long time, I didn’t realise that when they send you the monthly statements, the minimum payments that you were paying - that’s basically covering the interest, not bringing down the debt.”
Arlene’s parents helped her with the deposit for her first house, and she breaks down when she thinks about telling them about her debt. But life had been fine – she had steady fulltime employment, then she got pregnant, her partner left, and she became a solo mother on a benefit.
“I guess I was really concerned about people judging me as a solo mother, people tend to want to take pity on you, so I had this thing where I had to make everyone believe that I am OK financially” Arlene says.
It’s been hard to maintain that front she says, and she’s been on a downwards financial spiral. Her week-to-week finances are in a negative position, meaning she’s spending more than she’s making.
“Basically I am in quite a bit of debt, and need some help to get out of it” she says. She’s working with Brian, her case manager at Budget Advice to reduce some of her debt. Some of that means reducing her spending where she can. At the moment, she’s trying to get Kiwisaver to release some of her savings to reduce the debt, but that’s proving difficult to access.
Short of that money becoming available, Arlene is looking at insolvency. “As someone with a son, and trying to make a future for myself, it’s pretty scary’, she says.
Because she hasn’t been paying off her debt, Arlene now has a default on her credit rating so now have bad credit. “I mean, I worked a good 11 years of my life, and I had an excellent credit rating.”
Arlene says that even her first meeting with a budget advisor was a relief. “Over time I’ve just sort of been trying to manage, and now I’ve finally realised that I am not going anywhere, and unless something changes, I’m just going to keep sinking.”
Arlene and her budget advisor Photo: Unknown
Tatum Gerrard’s story is similar. She is a single parent to three children. Her main source of income is a benefit, plus a little more from a part time job.
She has, she says, a bunch of “dumb debt”. Things like parking tickets, which she forgot to pay, and went from a small amount, to triple the amount, and ended up in court.
She now has her debt under control, or “organised”, and she says she didn’t know how to communicate about money, or what processes to follow. “Sometimes there’s things you doing know how or whom to ask, and you end up going round and round in circles.”
Before seeking advice, Tatum was really stressed about her financial situation. “I think I might have been producing more grey hairs than I needed”. She says no one ever taught her how to budget, or how to look at debt. “You don’t get taught how to sign a contract for debt” she says, “it’s a whole new language”.
She says understanding how to look at debt is really important, and that while it might be a short term gains she’s learned, it’s often painful in the long term. “Especially if you only think about the positives, and don’t consider a negatives. For example, not having an income, or always being healthy. So you have to be smart about things.”
Tatum has learned how to prioritise and value her money, and while she acknowledges she still has work to do, she feelis like everything is clearing. Ultimately she says it’s a matter of facing reality, accepting responsibility, and not being scared of what your financial situation really looks like.
