KEY POINTS:
For Murray and Ola Waititi, these were supposed to be the carefree years. Twenty years of gainful employment behind them, a house in the suburbs, two kids and a solid marriage - the ingredients you'd expect for a financially healthy lifestyle.
Instead the Waititis are up to their eyeballs in debt - with mortgage repayments, credit card debt and childcare costs accounting for much of the $200,000 they earn each year.
Theirs is a common scenario. Despite a buoyant economy, solid employment and income growth, as well as relatively low interest rates, New Zealanders have amassed a mountain of debt over the past 20 years.
And the share of average disposable income needed to service that ballooning debt has climbed steeply from 5 to 6 per cent though the 1990s to 13 per cent now.
Figures provided to the Herald on Sunday by financial planners Spicers show that since 1990 the average debt level of your typical New Zealand household has risen from $18,800 to $99,000 - a figure set to exceed $100,000 in the March quarter, for the first time. Factor in that nearly 50 per cent of families are mortgage-free and the amount owed by your average indebted household is probably double that figure.
It's not difficult to see why. With home loan costs, hire purchase agreements, spiralling credit card debt, bank overdrafts and student loans, the average New Zealander now spends $1.15 for every $1 they earn. And there have been plenty of casualties, with bankruptcies at an eight-year high.
But while Kiwis owe a fortune, they also own a fortune.
In 1990 the typical New Zealand family had assets of around $160,000. Now their assets are worth $452,000.
But is the balance sheet for families like the Waititis as rosy as the numbers suggest?
Not according to the Reserve Bank. While the total value of real estate in New Zealand has more than doubled in the past six years, on the back of that there has been a huge increase in consumer borrowing and spending.
With debt service ratios and household debts at record highs, savings are at their lowest level ever, meaning many couples will rely on equity in their homes to pay for their retirement years.
It's a fact not lost on the Waititis.
The couple owe around $300,000, most of that on the mortgage on their Wellington property - and while they have assets of around $600,000, they have little in the way of cash savings.
"We're not spending frivolously. It's just that a great deal of our money is being chewed up by childcare costs and debt servicing," said Murray Waititi.
"If we didn't have this mortgage, we could do all sorts of things but we are hamstrung."
It's the same for Susie and Mark (not their real names). They are a typical couple with a mortgage, hire purchase, credit card debt and a student loan.
She earns $54,000 a year as a physiotherapist for a Wellington district health board. He earns $40,000 a year.
Susie said they were worried they would never be able to afford for her to give up working to have children.
"We could tighten our belts and have kids but why should we?" said Susie. "If I didn't have to pay off a student loan then life would be better."
She pays about $200 a month off her student loan and has so far got it down from $42,000 to $38,000.
"I don't think I'll ever pay it off in my lifetime - especially if I do have children and take time away from work."
In addition, the couple have a 95 per cent mortgage of $160,000 on a fixed rate of 7.5 per cent. Then there's a $7500 car loan at 14 per cent and $10,000 on the credit card.
"I did my training in Auckland, but couldn't afford to live there," said Susie. "We moved to Wellington and rented a house.
"We both work fulltime and thought we could do better than paying off someone else's mortgage and so moved again to get a step on the housing ladder. Because there was no spare cash to save for a deposit on the house my mum gave it to us.
"We both have nice cars, we live nice lives - we have an overseas holiday once a year, takeaways when we want and have a nice house.
"But it's hard to get ahead. It's hard to save for anything - we spend everything we earn and use our credit card for emergency items like car repairs because we don't have savings. We both like to spend money willy-nilly."
Arcus Investment Management chief economist Rozanna Wozniak told the Herald on Sunday "housing, housing, inflation and people chasing housing" were the key factors for rising debt levels. Since December 2000 Kiwi debt levels had nearly doubled from $53,000 to close on $100,000 now - with 80 to 90 per cent of that being mortgage debt.
And while house values had risen it hadn't been at the same rate as the debt secured against them, Wozniak said.
"You have to look at this issue in two ways - our debt-to-asset ratio looks okay because that debt has been more than surpassed by what we own. But you still have to service that debt, and that's where problems can arise," she said.
"Over the years we have seen more people draw down on their home equity to fund their spending levels. People need to be thinking more carefully about the rate at which they are accumulating debt.
"It looks good while your assets are going up, but the Reserve Bank is pretty keen to slow the housing market down."
Treasury analyst Grant Scobie believed financial deregulation had been one of the main factors in the rise in debt levels.
Twenty to 25 years ago it was almost impossible to get credit, he said. "If you wanted a mortgage you begged on your knees to the bank, now the bank comes begging on its knees to you."
Westpac economist Doug Steel said while the figures suggested "an explosion of debt" several factors needed to be taken into account, such as lower interest rates, which always spurred more borrowing.
And, ultimately, the shift to a low-inflation environment had also driven this rise in debt-to-income ratio. Lower inflation meant slower wage growth, which meant a given amount of debt was not eroded as quickly.
It could take some of the credit for a fall in unemployment from 11 per cent in the early 1990s to below 4 per cent now. That sense of job security added to households' willingness to take on debt.
"What you end up with is more people holding debt and holding it for longer.
"In an absolute sense you have higher debt, but you also have a higher asset price, which means the balance sheet position looks, if anything, better than it did five years ago," he said.
However, he warned that debt needed to be watched carefully.
By carrying more debt households were at greater risk, especially if there was a sudden economic shock that prevented them from servicing that debt.
ANZ National Bank interest rate strategist Khoon Goh agreed.
Carrying high levels of debt was all well and good, but people always had to be aware of their ability to service that debt should there be a change in their circumstances.
"At the moment the ratios between debts and assets look quite healthy. But there is some caution to be had. Debt servicing levels have risen and at the moment we're really in unchartered territory.
"At the moment we don't quite know when we will reach that tipping point."
For the meantime, the Waititis are reluctant to take on any more debt until their children get older and their childcare costs fall. But that could be 10 to 15 years away.
"Even though we earn well, it's not that easy, with most our money going on mortgage servicing and childcare," says Murray.
"But we do count ourselves lucky. There are those people out there on single incomes who do not have choices."
