When that happened, the couple sought advice through a mentor at Moneywise Manawatū. They were advised to use the No Asset Procedure, which is a type of insolvency, which enables people to clear existing debt.
That gave them breathing room. Until discharged, however, the pair couldn’t borrow or get credit cards. “It’s like being blacklisted,” said Fruean. “We had to rein it in on all the things that we were doing. So no holidays away, no buying a car. Since we were discharged from our no-asset procedure [in 2017] we haven’t had a car loan.”
Prior to the turning point, the couple never seemed to save for big bills such as annual car registration. “But working alongside our budget adviser now, we’ve now put sinking funds in place and cash flow so that when those things do come up, we’ve got the cash there available. I hate to think where I would be had I not been forced into it.”
“For me, the purpose of the [TikTok] channel was really just to show people that it’s okay to be low income and struggling, but also be actively looking for a way out of it.”
As Fruean’s story demonstrates there are people who can get off the payday to payday hamster wheel, by doing things differently.
Creating a budget is often the starting point for many. But not everyone can fathom how to budget or stick to it. Moneytalks.co.nz can link Kiwis with a free financial mentor in their area, and also offers its own helpline.
To be clear, getting off the payday-to-payday cycle means having some savings. “The higher that rate is, the less dependent someone will be on their paycheque arriving,” said Tom Hartmann, Sorted personal finance lead.
Simon Kemp, emeritus professor at the University of Canterbury suggests one option is to give up control of the money, rather than trying to tame it. Kemp has researched a range of topics related to spending, including perceiving luxury and necessity, impulsive buying, the relationship of personality to income, and attitudes to debt.
Rather than trying to control their finances, distancing themselves can help break the cycle. “If you do want to stop [living payday to payday], work a system by which you lose control of what you spend. That’s the key to it – to give the control away.”
“If I was always tempted to overspend, I would likely do what many people do: give up the power to spend my own money to someone else. A classic case of this occurs in marriages, where it is often the partner who is less susceptible to overspending that ends up controlling the finances.”
Another way is to automate expenditure with money being automatically divvied up to sub-accounts such as rent, utilities, spending and savings. Getting rid of the credit card can be helpful in this scenario.
Then find a way to restrict access to savings to prevent dipping in. A notice saver account can work. These accounts require 30 or 90 days’– notice for a withdrawal. Providers include Heartland, Kiwibank, Rabobank, and Westpac banks. By automating regular deposits, the savings will grow. It’s still important to keep some emergency funds accessible, which unfortunately means there is still some temptation.
With money tucked away it means next time there is a need to upgrade the car, for example, or pay for other expenses, such as holidays, they can come out of savings.
