High interest rates and the rising cost of council rates and insurance are pushing many high-income earners into financial stress - even when they earn well into six figures.
When Wellington mayor Tory Whanau said this week she had sold her car to help pay her bills, some questioned how she was under pressure when she earned $190,000 a year, and had previously won Lotto.
But Angela Smart, customer service team lead at helpline MoneyTalks, said Whanau was far from alone.
She said there had been a notable increase in higher-income people asking for help with their finances.
She estimated 20% of clients were people who earned more than average. The average household income is about $130,000.
Retirement Commission data shows that among households earning $100,000 to $149,000, just 55% describe themselves as financially comfortable. Among those earning $150,000 or more, it is 68%.
One percent of those earning $150,000 or more say they are “sinking badly”. Another 4% say they are sinking a bit.
“There’s been a big change from when Covid first hit and it was almost like everyone had this equal footing of being able to ask for help because we were all going through same thing - business owners, people who were single-wage earners, public servants - anyone could ask for help,” Smart said.
“Then through the boom of 2021, 2022, it became people who were struggling continuing to reach out to Moneytalks. Then as interest rates got higher and higher we saw a change in the demographic of who was reaching out, really proactively and it would often be people struggling with mortgages.”
She said many people had been used to being able to pay their mortgages and cover everything else, too. But things had changed so that by the time they had paid the food, power, rates and insurance they were squeezed. “Food, power, everything was another 20% higher.”
Some people had been talking about dropping insurance, she said, because they could not afford it.
High interest rates and the rising cost of council rates and insurance are pushing many high-income earners into financial stress. Photo / 123RF
Many households who had previously been on comfortable incomes had taken a “set and forget” attitude to their finances or did not have time to look for better deals on bills to save money, she said.
“Generally they don’t want to have to worry about all that stuff at 8pm when they finally fall on the couch… but it’s definitely interest rates are what’s pushed people over... wage increases haven’t kept up for the average New Zealander.”
But she said many New Zealanders were not good at asking for help and were too embarrassed to admit they wanted to cut costs on things like going out for dinner with friends. “That higher income bracket is used to being able to go and do things and the idea of saying no is really embarrassing. Even Tory saying she’s selling her car - how is she getting backlash for choosing to be financially prudent? This attitude becomes a bit of a common thing.”
Smart said people who had done well financially didn’t necessarily have financial knowledge to turn that into long-lasting wealth. “Yes, they can make money but how to hold on to money are two different things.”
Some people who migrated to New Zealand might be high-income earners but not understand the New Zealand system.
“It’s about breaking that whakamā about talking about money, asking for help - saying no to things when we’re constantly encouraged to buy that kind of stuff. Lifestyle creep is so easy. Why do we need a $2 million house, why don’t we sell it and buy a $1.5m one and get rid of $500,000 of the mortgage. There’s got to be a whole cultural shift.”
Financial mentoring network Fincap data shows the income bracket with the most clients in the 2023 year was that earning more than $1000 a week, the highest level the organisation tracks.
Stats NZ data shows the cost of living has been rising fastest for the highest-spending households, up 5.6% in the year to June following a 6.6% increase in the year to March. Interest payments were up 27%.
In contrast beneficiary households’ costs increased 4.5%.
Christine Liggins, founder of Debtfix, said she saw higher-income people seeking help, too. Often it was because they had had a “curve ball” thrown at them, she said.
Shula Newland, a financial coach at Full Balance Coaching, said many higher-income people were more highly leveraged. “Downsizing cars is something we present as options for clients that have equity in their vehicle - but many don’t do it because they are attached to the status the car brings… That’s why I say ‘buy the cheapest car your ego can afford’.”
