I think I am the only person in my suburb who hasn’t been doorknocked by our occasionally sweary local MP David Seymour.
His website says he personally knocked on 13,000 doors before the last election.
He’d have met an awful lot of heavily-indebted people then.
My neighbourhood passed the $1million average house price mark way back in 2011, or 2012.
The $1m suburb club isn’t so exclusive these days. Rising household debt has helped usher many Auckland suburbs into the club.
Seymour recently pointed out that private household debt has risen to a record 168 per cent of household disposable income.
As a ‘‘small government’’ man, Seymour believes in cutting tax rates so households can pay some of that debt off.
For households, like countries, high debt brings risk.
Whether you have consumer debt (credit cards, personal loans, car loans, etc) or mortgage debt, Run a household surplus Take your opportunities Pay off debt fast
you need to have a plan to pay it off.
Lenders like you to be on their plan, be it three or five years for personal debt, or 30 years for a mortgage.
Repaying your debt on their timetable means they get their predictable income stream.
Paying off debt is one of the most personally rewarding things you can do.
It liberates you, and your income. Interest rates go up. No problem. Your income is your own.
No longer will a temporary inability to work, or a fall in income, threaten to have the debtcollectors around.
New Zealand’s done pretty well ducking financial crises in recent years, but should our luck run out, the people most at risk of financial ruin will be the indebted.
There’s an SOS formula to paying off household debt, which is strangely enough, exactly the same one for increasing your savings.
First, you need run a household surplus.
That means either earning more, and/or adopting a lifestyle of ‘‘targeted frugality’’, where you spend less in chosen areas.
A surplus creates the opportunity to repay debt fast.
Creating your opportunity also also means knowing your loan, so you know how to accelerate payments without incurring break fees. If you don’t know how your mortgage or personal loan works, you may well be labouring under false impressions of the cost of early repayment, or not realise you can use period refixes to pay off chunks of capital.
Lenders generally won’t help you create your opportunity.
I remember the day a couple of years ago, when friendly bank staff pointed out we’d done so well clearing the mortgage, the wife and I could treat ourselves to a couple of new cars. They’d lend us the money.
Creating an opportunity can also require asking for help, budgeting help, or help in dealing with some underlying issue that is keeping you in debt.
The last element of the SOS is speed. Simply put, the faster you pay off your loan the better. It gives the lender so much less time to enjoy the interest they milk from you.
So, get off their plan. Go onto the Sorted.org.nz website, use its debt calculators, and see what you’re capable of.
Asking for help can help create the opportunity to deal with your debt.