Advice about being in debt for the first time: staying out of debt, out of danger

First Debt 101

Take a few minutes to read this before signing on the dotted line.

Staying Out of Debt is the Key

It can be way too easy to buy on credit and borrow money.

Many retailers and banks are more than happy to help you take your first steps into debt.

Racking up debt has become the norm, e.g. with credit cards, hire purchase/credit, personal loans, student loans. As a result, a lot of young adults are living beyond their means, which can become very stressful.

People often get into debt just to keep up with others who in many cases, are in debt themselves. But being in debt is the biggest barrier to creating wealth.

Buy now, pay later! Easy car finance! Credit cards for students - no account fee!

When Debt Hits the Fan

If you do end up struggling with debt, rather than pretending there isn’t a problem, contact the lender/s as soon as possible to explain your situation. You may be able to arrange easier payment terms.

Things can get really bad, really fast if you haven’t made repayments and you haven’t negotiated with the lender/s about how to pay them back.

It can be hard to budget and track spending, especially if you’ve gone flatting for the first time, or started your first job. But the initial excitement and freedom can get you in over your head.

You could end up spending many years repaying your debt/s and wishing you had told yourself more often, “I don’t need it.”

Becoming a Slave to Money

Don’t just stop paying - they WILL track you down!

Organisations that lend money, e.g. finance companies, banks, short term lenders, will do everything in their power to get their money.

Guarantor Debt Recovery If someone trusted that you would pay the debt back and became your Guarantor, they may be approached for the money.

Debt Collection If you can’t be contacted, debt collectors can visit you at home or other locations. You may be charged collection fees, late payment fees, and in some cases, debt collectors can also repossess property.

You may end up having to face:

Don’t just stop paying - they WILL track you down! continued …

Insolvency You may be made insolvent (e.g. bankruptcy, No Asset Procedure, Summary Instalment Order) - which would seriously affect your credit rating and future ability to borrow money/get credit. Legal Action You could be taken to court and end up with fees or costs from court enforcement action being added to the amount you owe. Even more debt! Bad Credit Rating Having a bad credit rating (credit score) because of debt, can make it difficult for years. E.g. to apply for credit, a loan, mortgage, hire purchase, insurance, utilities, a job, rental property.

5 Ways to Get Out of Debt FasterTo help ease the pain of being in debt, there are 5 steps you could take:

1. Make Extra Payments Pay off as much as you can as quickly as you can. To reduce overall costs, try to make extra payments. Every little bit helps … Do you have any money left over at the end of the month?

2. Free-up Money by Reducing Costs Is your lifestyle affecting whether you can make payments? Is it time to sacrifice some aspects of your social life, hobbies or habits, to free-up cash for debt repayments?

3. Cash Up - Sell Stuff Everyone has things they no longer need. Think about whether you could sell anything to help pay off debt (e.g. online, in a garage sale).

4. Earn More Could you take on a second job, or do overtime - even it’s just temporarily, to get on top of debt payments.

5. Look After Your Health There’s a strong link between being in debt, and poor physical and mental health. It’s important to look after yourself and to ask for help if stress from being in debt is affecting you (see Useful Links on next page).

Love My Money has an easy, step-by-step online Journey to help people with debt. Visit our Short Term Debt Journey here.

Useful Links Debt & debt collection Consumer https://www.consumer.org.nz/topics/borrowing-and-debt Consumer Protection https://www.consumerprotection.govt.nz/help-product-service/credit-banking-finance/debt-and-debt-collection/ For your wellbeing Youthline https://www.youthline.co.nz 1737 (call or text for free) https://1737.org.nz/ Depression https://depression.org.nz/ Lifeline

Start a relationship you

won’t regret

You and your money can live happily ever after …

© 2019 Love My Money

We’re here to help you have a great relationship with your money. It’s never too soon to start! Start your free membership: lovemymoney.co.nz/pricing

Already a member? Log in at: lovemymoney.co.nz/dashboard