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Save it, spend it or shave it off is a new fortnightly listener.co.nz finance column where Kiwis tell us about their relationships with money, and ask investor and entrepreneur Lisa Dudson for her advice on how they can make their money work better. This week, Anna* shares how a terrible financial decision she made in her twenties has made her to want to manage her money better.
In 2018, I decided to go to on a holiday with my friends to the United States for Coachella and put the whole trip on a high-interest credit card. It was a really terrible financial decision and took me a decade to pay off. I don’t even want to think about what I paid in interest. Spoiler alert: Do not do this.
I did see Beyoncé, though…
I would love to buy a house with my partner eventually. I would love to go on a nice holiday. I would love to be in a position where I’m not constantly thinking about getting to the next payday without dipping into my savings.
I’m in an era of change at the moment. Around the time I approached 30, I woke up one morning with a clear sense that “something has to change here”. Since then, I’ve been resetting my spending habits and I’m enjoying the feeling of being in control of my spending – although I’m not enjoying saying “no” to things.
Now, more settled and hopefully more responsible, I want to know whether I should prioritise saving for a home deposit or paying off my student loan?
* Name changed to protect identity.
Lisa Dudson asks the questions:
Okay, first tell us about yourself: I’m 30 years old; my salary is $75,500 and I get paid fortnightly.
What’s your financial situation? Recently, I finally FINALLY got out of that credit card debt after years of bad habits, and I’m able to save more than a dollar a week. The cost-of-living crisis isn’t helping this endeavour but we soldier on.
Where do you live – and how much do you pay to live there in rent/mortgage: We rent a house in Mt Albert, Auckland (just the two of us), and pay $750 a week combined. My partner earns more than me and so pays more towards rent and bills. I do more of the domestic labour. It works for us.
Student loan or other regular debt repayments: I pay $300 a fortnight towards my student loan which is only just hitting the $20,000 mark. I did an undergraduate degree and a postgraduate diploma and took out all the course-related-costs I could for very few actual course-related costs. Now, 30-year-old me is resentful of 20-year-old me for this, but she did have fun.
KiwiSaver contributions: 3%
Insurance: Health, contents, car. About $200 a month altogether.
Weekly food costs – groceries: As a couple, we spend about $200 a week on groceries. We split the cost, in that whichever one of us is closest to the checkout at the time of paying gets it that day.
Weekly food costs – eating out, takeaways, alcohol: I love to eat and drink out. My two favourite words are “happy hour”. I have cut back on this spending A LOT this year (thanks to the cozzy livs). I’m probably at about $150 a week now (including takeaways, the occasional bought lunch, Ubers from town etc).
Transport costs: $40 a week in fuel, although I very occasionally take the train (I need to do this more regularly).
Entertainment – including streaming service subscriptions: About $30 a month on streaming services (Disney+ and Apple TV). My boyfriend pays for Amazon Prime. We’re still on my parents’ Netflix account (thanks, Mum and Dad). I also pay $100 a month for my phone (plan and paying off the phone itself, combined).
Health & wellbeing: I spend $120 a month on ClassPass which I use to take pilates and yoga classes around the city. When I run out of credits, I go for walks. Free! Fresh air!
Clothing and personal grooming: I have an account called “Nice things”. I put $200 a month into it for clothes, skincare, make-up - your classic dopamine-hit buys. When it’s gone, it’s gone.
So, how much stress does money and finance cause you? I would say I experience a low-level buzz of anxiety over money at all times. The closer I get to payday, the more it increases. This is not a unique feeling (talking to my friends of the same age and similar income, I would say it’s in fact, very common). But it is tiring.
Your parents – good or bad financial role models? I grew up in middle-class Christchurch and money wasn’t something we talked about much growing up. I’m still not entirely sure how much of it we had, although my sister and I both went to a private school, so we must have been pretty fine. (Although she got a scholarship and I didn’t, so I probably dragged us down financially).
My dad was an accountant for much of his career and always had solid advice when I turned to him for budgeting help in my teens and early 20s (which was … not often). Did I ever listen to it? Christ, no.
How old were you when you first started worrying about money? When I went to university, I remember running out of the money I had allocated for the whole year far before the end of the year, and having absolutely no concept of how that had happened. It panicked me. In hindsight, it was because I was a f**king terrible budgeter. If I wanted it, I bought it.
Are you a spender or a saver? I am now trying to be more of a saver (it only took 30 years) but as you’ve probably picked up, I’m a spender at heart.
Do you have a weakness – the thing you can never walk away from without spending money on? Where do I start? A good bottle of red wine, a flattering pair of jeans, a celeb-endorsed blush, a plate of oysters, a Chemist Warehouse sale.
The advice – where to spend, what to save, and what to shave off:
Congratulations on acknowledging that you didn’t make a smart financial decision earlier in your life that had significant consequences. Everyone makes financial decisions that are not ideal at some point. Most importantly, you are now focused on creating a better financial life for yourself.
Also, well done on being far more conscious of how you spend your money and all the changes you have already made. Managing your money is often not easy as there are so many tempting places to spend it. The area people struggle the most with is discretionary spending, which is usually all the fun stuff, like eating out, entertainment, holidays, clothing and hobbies.
The next step is to have a strong, impactful goal to keep you motivated. Things to consider when deciding to pay your student loan off or save for a home deposit:
· While you are living in New Zealand your student loan does not incur any interest. If you are planning to move overseas before this is paid off then your student loan will start incurring interest.
· You make student loan repayments when you earn more than the repayment threshold which is $24,128 for the 2025 tax year. The amount you have to pay each year is 12% of every dollar you earn over the repayment threshold. By repaying $300 per fortnight, your student loan will be paid off in just under three years.
· Having a student loan, provided you make the required payments, does not affect your credit score.
· There may be some psychological relief from paying off your student loan as it can weigh heavily on your mind, causing stress and anxiety. Paying it off could alleviate some of this financial pressure.
· But the same level of financial pressure can be felt from delaying buying a home because you are more focused on paying off your student loan.
· Having a student loan will reduce the amount of money you will be able to borrow as it reduces the income you have available to be able to service a mortgage and therefore reduces the amount you can borrow. Always talk with a mortgage adviser though and get them to look specifically at your individual situation and note that what you can borrow does change over time as market interest rates fluctuate.
· Owning a home can be a valuable asset and provide stability in the long run. It eliminates the uncertainty of renting and can potentially lead to equity growth over time as property generally goes up in value over the long term. From this perspective it makes sense to be able to buy a home sooner rather than later.
· Having your own home also provides the financial stability and security that most New Zealanders aspire to have. Each mortgage payment contributes to building equity in your home, which can be tapped into for future financial needs, such as home improvements, emergencies or even retirement.
· You can add value to your home through renovations which can improve your equity and financial wealth, especially if you do a lot of the work yourself.
· Saving for a home deposit will be a great goal to have with your partner and you can be accountable to each other. Whereas your student loan is just yours.
In your situation, I tend to favour saving for a house deposit over paying off your student loan faster. Having a financial goal that you are emotionally invested in makes such a big difference to your motivation to save.
So, what do you think will motivate you more to save – paying off your student debt or saving for a house deposit? Whatever you decide, remind yourself of your goal regularly to keep yourself on track and away from life’s temptations to spend money.
Lisa Dudson is an investor, entrepreneur and author of eight bestselling personal finance and property investment books. She has been a media commentator on financial issues for more than 20 years and is known for pragmatic, meaningful and easy-to-understand financial advice. She is a director and shareholder of Saturn Advice and National Capital and provides financial and property advice through her consulting business www.acumen.co.nz
Lisa’s advice is of a general nature, and she is not responsible for any loss that readers may suffer from following it. She cannot correspond directly with readers, or give financial advice. If you’d like to take part in Spend it, save it or shave it, please contact listener@aremedia.co.nz
