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Kete Pūtea: Becoming Debt Free

Debt is a common reality and source of stress for many people, including our whānau. It can come in different forms and with a multitude of strings attached. While most businesses carry a certain level of debt as a way to finance and manage its operations, it’s not something an individual wants to get in the habit of. Many people can carry a student loan, credit card debt, hire purchases, mortgage and car loan at once. To manage this daunting list, here are a few strategies to apply.

Similar to budgeting and saving, the key to success is to put together a robust plan. Having an honest look at your debts will help you prioritise repayments. This means listing the interest rates associated and the schedule in which it must be repaid. Alternately, you can simplify this process and apply for a consolidation loan.

Consolidating your debts

A common way of organising multiple debts is to take out a debt consolidation loan. This is the process of taking out one loan in order to pay off the rest. By doing this, you remove the hassle of juggling multiple repayments while benefiting from a lower average interest rate.

A debt consolidation loan can be organised through your bank or an outside source. It pays to shop around and investigate which terms, conditions, interest rates and fees work for you. Be sure to look out for high interest fees and penalties for defaulted payments especially “loan shark” type lenders.

Like all financial decisions, there are risks attached. A common one being a failure to stay on top of the repayments. To avoid this issue, think about applying the saving and budgeting strategies from the Toi Tupu Savings 101 series. Having some money set aside that is dedicated to a loan will reduce the risk of default.

Click here to read more about debt consolidation.

Click here to read Toi Tupu Savings 101- Part One


An integral part of the planning stage is to identify a realistic and achievable repayment schedule with your loan provider. Many providers will offer flexible schemes that allow for weekly, fortnightly or monthly repayments. Being wary of what times are more difficult for you and your whānau, and creating a schedule that acknowledges that, will lessen the financial strain.

How do I stay on top of this?

Ultimately, the best way to become debt free is to create a simple strategy, be consistent, and as Dory says in Finding Nemo, ‘just keep swimming’. A popular and simple strategy for doing this is called the ‘Avalanche Strategy’ which means paying off the highest interest loans first. Diana Clement talks in this opinion piece about the Avalanche Strategy and several other simple strategies that might work for you.

Often, we enter into many debts because of a lack of planning, budgeting and saving. The more we can embrace a culture of savings and investment, the more likely it becomes to avoid debt altogether.

Our Kete Pūtea financial literacy series has covered a few topics that can help with the basics of finance and investment, but as with most important life decisions it pays to spend time researching what works best for you. Every whānau will have a different saving whāinga so creating a plan tailored to your whānau wants and needs are important.

Previous kōrero

Thinking about investing? Click here to find out more about what investing is and some of the benefits.

Saving for a Kāinga? Check out some of our tips here to see if you’re on the right track.

Or do you need a hand budgeting? You can find the first steps to creating a budget here.