It’s been a bloody tough time in the financial sphere lately, team – and if you’ve been looking at your bank account with a mix of confusion and despair, you are NOT the only one. We delve into the state of it and just what our debt looks like – and meet a couple who, on a positive note, managed to turn a lot of red into home ownership in a VERY speedy manner!
Just like many Kiwis, Hamilton’s Michaela and Michael Steel’s debt began innocently enough – a new car purchase, backed by a stable job and easy repayments. Until the pandemic started to bite.
Says Michaela, “As the cost of living continued to rise, everyday essentials like groceries and even dog food became increasingly expensive, so I started relying on my credit card to cover those costs. Initially, I kept the card purely for emergencies – like unexpected vet bills – but over time, it became a way to fill the gap in my budget.”
Soon, Michaela and Michael were staring at a $30,000 bill across credit cards and loans – and seemingly no way of clearing the debt. It was a scary, devastating time, she says.
“It was incredibly stressful. It felt like there was this constant weight pressing down on me, and no matter what I did, I couldn’t seem to get ahead.”
It’s a story that’s all-too familiar for SO many Kiwi families right now – and a story that’s been highlighted in this year’s Generation Debt report, compiled by insurance provider One Choice. And look, some of it makes for grim reading. Some said ‘highlights’:
- Nearly seven in ten Kiwis (68%) have some form of debt, even higher among Gen Y (77%).
- Half who don’t currently own a home are not even somewhat confident home ownership will be achievable for them.
- Most (84%) Kiwis report that financial stress impacts their mental health.
What does our debt look like? Well, it is a reality for so many Kiwis. Of course, not all debt is bad – how else do you buy a house without a mortgage!? Credit card debt is the most common (42%), followed by mortgages (34%) and personal loans (27%). Gen Y are more likely than other generations to have personal loans (37%) and buy now, pay later (BNPL) schemes like Afterpay (33%). On average, Kiwis carry two types of debt, but 27% manage three or more – rising to 38% among Gen Y, who are the most likely to juggle three or more kinds of debt.
For close to a quarter of those surveyed (23%), the amount of debt being carried feels unmanageable. There’s growing concern about what this means for the future, with over two in five (44% ) worried about passing on debt to their kids and more than half (55%) are anxious about carrying debt into retirement.
But specifically, with this cost of living crisis, about three in four (75%) Kiwis have reduced their social spending, with more than one in three (34%) making significant cutbacks. Dining out (71%), going to cafes and coffee shops (57%), weekend getaways (57%), and visiting bars or clubs (51%) are the most commonly skipped activities as Kiwis tighten their belts.
The findings highlight how financial stress is reshaping social norms and priorities, leaving Kiwis—particularly younger generations—at risk of losing formative experiences and meaningful connections.
As more people withdraw from social activities to save money, the hidden cost of financial hardship becomes clear: isolation and loneliness. This research underscores the need for solutions that help Kiwis maintain social connections despite economic challenges, such as promoting free or low-cost community activities and fostering financial literacy to balance short-term enjoyment with long-term goals.
That, plus the crushing weight and stress of managing debt, makes a pretty grim picture. But, reading the report, says Michaela, made them feel as though at least they weren’t alone.
“Reading it was really fascinating, because many Kiwis are in the exact same boat as me. In particular, the statistics about the likelihood of different generations facing financial hardship really resonated with me:
Gen Y (millennials) are the most likely to be impacted by financial hardship (58%), followed by Gen Z (55%), while baby boomers are the least likely (26%).
“It wasn’t surprising, but it was validating to see it reflected in real data. So often, our parents and grandparents tell us how hard they had it in their youth. Yet, many of them now own multiple homes, take regular holidays, and have financial security that feels out of reach for our generation. Even something like buying a brand-new car feels almost unattainable for many of us!”
HOWEVER, there is a way through, says Michaela – and it starts with asking for help, like she and Michael did.
She says of the turning point that made them realise that something needed to change, “We knew that buying our own home was something we really wanted, but we had no idea where to start when it came to saving for it. That was the moment we realised we needed professional guidance to help us take the next step towards home ownership.”
With the lure of becoming home owners strong, the couple did the best thing they ever did – and asked a budget adviser to help them make sense of the debt.
“Seeing our spending habits clearly laid out in front of us was eye-opening. We realised how much disposable income we actually had – it was just being used in ways that weren’t serving our goals. From there, we were able to break those poor spending habits and put a real savings plan in place.
“We focused on paying off the smaller debts first,” she continues. ‘That helped reduce the number of separate payments we were making, which in turn freed up more money to make larger payments on the bigger debts. It created momentum and helped us pay them off more quickly, while avoiding additional interest.”
The pair were good students – GREAT students, even. Within nine months, they had not only cleared their debt, they had bought their first house. It was an incredible turnaround, Michela says, and they are very proud of themselves.
“My biggest piece of advice is to work with a budget adviser, but take the time to find one who explains things in a way that makes sense to you and who you feel comfortable with. It has to be a partnership that works for you.
“We’re much more intentional with how we spend. We think carefully before making purchases, look for sales, and are more conscious about whether something is truly necessary. It’s shifted from spending reactively to spending with purpose.”
If you’re in the same boat as Michael and Micahela were, we’ve had a chat to the Debt Free Diva (and financial adviser) herself, Tracy Hemingway, for her first tips to getting back on the right track:
The start of financial freedom
Many young Kiwis are in debt, and it’s often due to high living costs, student loans, and easy access to credit. But to get ahead, you first need to ‘Know Your Debt.’ List everything – credit cards, loans, interest rates, and due dates. Prioritise the ones costing you the most. Then, ‘Make a Budget.’ Track where your money goes, cut unnecessary spending for a short period, and put extra cash toward debt. Next, ‘Pick a Payoff Plan.’ You can use the ‘Snowball’ method to knock out small debts for quick wins, or the ‘Avalanche’ to attack high-interest ones to save money. These steps – knowing your debt, budgeting, and picking a plan – are crucial. It’s about getting clear on your situation and having a strategy.
How to eliminate debt
Once you know your debt, it’s time for action. You can ‘Negotiate & Consolidate’ by calling creditors for better rates, or consolidate debt if it makes sense for lower payments. Also, ‘Boost Your Income.’ Side gigs, selling stuff, asking for a raise – whatever works to bring in extra cash. This isn’t sustainable long-term, but it’s great for knocking off extra debts. I’ve seen hacks like getting the whole family involved, making it fun for kids to track, or giving them 10% profit from a garage sale. Remember to ‘Automate & Track’ – set up auto-pay to avoid fees, check progress, and adjust. And critically, ‘Stay Out of Debt’ by building an emergency fund. I always ask clients to build $1,000 (or $3,000 for a family) before aggressively attacking debt, to avoid going back in.
Mindset and lifestyle shifts for long-term financial freedom
Managing money well is about small, smart moves that add up, not drastic changes. Sometimes, you need to ‘Adjust Your Lifestyle (Temporarily).’ Can you downsize, house hack, or use public transport? Small sacrifices now mean freedom later. The trick is knowing your spending habits and ‘tricking’ yourself. For example, I’m a natural spender, so I split funds across two bank accounts, and my proper savings account doesn’t even have a card. By the time I transfer money, the impulse is gone. Another trick for clients is to think of the amount you pay on debt each week as your ‘pay rise.’ My favourite trick is adding an additional $5 a week to your mortgage; it becomes addictive, and you’ll be surprised where you can find $5.