Owing money or falling behind on repayments can be stressful. The good news is there are steps you can take to relieve the financial pressure:
Know what you owe
The first step is to get a clear picture of what you owe. Make a list of all your debts, showing:
how much each debt is
the minimum monthly repayment (if any)
Include credit cards, loan repayments, unpaid bills, fines and any other money you owe. Then add up all the debts to see how much you owe in total.
Work out what you can afford to pay
The next step is to work out how much you can afford to pay towards your debts. The easiest way to do this is to create a budget. List all the money you have coming in each month (income), such as salary or benefits. Then list all the money going out (debts and expenses), for things like food, rent or mortgage, credit cards, electricity, phone and transport.
If you have more money going out than coming in — it's time to make some choices. Think about what are:
'needs' (can't do without)
'wants' (could do without, at least for a while)
Identify some expenses that you can cut or reduce. Be realistic — don't make it impossible to stick to. If you need funds urgently, you might be eligible for help from the Government or relevant community organisations. These resources might help:
Government assistance and community support in New Zealand
Prioritise your debts
Work out which debts are your priority debts and try to pay them first if you can. Priority debts include:
rent or mortgage payments
council rates and body corporate fees
electricity, gas and water
car repayments — if you need your car for work or essential travel
If you can't keep on top of these you can request financial hardship. You could also request financial hardship for lower priority debts like:
internet and phone bills
credit cards
payday loans or consumer leases
The National Debt Helpline has a step-by-step guide and can help you to prioritise your debts.
Build a savings buffer
Use any left over money you have each week to build an emergency fund. This will provide a financial safety net to cover any unexpected expenses or future changes to your income.
Get help if you need it
Before you jump into anything, talk to a free, confidential financial counsellor. They can explain your options and help you make a plan.
If you don't know where to start, call the free National Debt Helpline on 1800 007 007. The helpline is open Monday to Friday, 9:30am to 4:30pm.
Avoid credit and debt repair companies that claim they can clean up or fix your debt. They may not be able to do what they say. They may also charge you high fees for things you can do by yourself for free.
If you have any questions or need extra support, we're here to help you anytime in any language. Simply start a chat with us via the home screen of the Sonder app.
Article originally published on moneysmart.gov.au
All content in Sonder's Help Centre is created and published for informational purposes only. It is not intended to be a substitute for professional advice.