Cut up your credit cards: Financial expert’s advice to Kiwis - The Front Page

A financial expert says people struggling to stay afloat in a cost-of-living crisis should get rid of their credit cards. Photo / Getty

Kiwis struggling to stay afloat in a cost-of-living crisis are being urged to cut up their credit cards and throw them away.

EnableMe head strategic coach Katie Wesney told The Front Page many people were turning to plastic to bridge the gap between their income and increasing expenses.

“Here’s a shocking figure – 42% of us have credit card debt and 31% of us have buy now, pay later debt,” she said.

Worryingly those who used this method of payment ended up spending 15% more because it was a less transparent form of payment, she said.

Wesney’s comments come after Wellington Mayor Tory Whanau earlier this week said she had to sell her car to pay her bills, despite earning $190,000 a year.

“Good on her for looking at her situation and saying, ‘well, how do I free up cashflow?’ In my mind cars are depreciable assets. They get you from A to B,” Wesney said.

She said a lot of people felt like “hamsters on a wheel, pedalling fast but going nowhere” when it came to their finances at the moment.

“I saw lovely clients this week ... and their income as a household was $350,000. Working incredibly long hours, very clever people, but in the same breath they have one home with a $1.1 million mortgage and at 7% that means $88,000 is gone per year.

“They said, ‘Katie we are honestly living pay cheque to pay cheque. We just don’t know where we are going wrong’.”

They were over-leveraged and spending everything they earned, but it didn’t have to be this way, she said.

“If you’re going backwards or holding your ground, I think that’s unacceptable. You need to be looking at levers to do better,” Wesney said.

She encouraged people to scrutinise their bank statements to see where their money was going.

“If I’m really honest with you, this is not a new problem and I think that often in New Zealand the thing we think that will fix our personal financial situation is that we need to earn more money and in reality, the more that we earn, the more that we spend and the more that we disconnect from our finances,” she said.

It wasn’t what you earned that got you ahead, but what you had left over that mattered, Wesney said.

“We fritter about 15% of our net income. So that inefficiency is what I look at first for my clients ... spending too much on food, often a little bit of entertainment, looking at subscriptions, in of itself seems minuscule, but it all adds up.”

Wesney said we start learning about money from the age of 3 and replicate the behaviour we see, and that meant if our parents were bad with money, we may be too.

“All is not lost though, and what I know to be true from all of my clients who I see, again, what they’ve done in the past is no indication of what they can do in the future.

“Financial success is 1% ideas, 99% execution and doing what needs to be done,” she said.

Listen to the full episode to hear more about how people can tackle their money problems and whether budgeting should be taught in schools.

The podcast is presented by Susie Nordqvist, a former presenter and producer for TVNZ and Newshub. She began her career as a newspaper reporter and was a finalist for best newsreader at this year’s NZ Radio & Podcast Awards for her work at Newstalk ZB.

You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.