How to take control of debt: practical debt management strategies

Debt management is about finding practical ways to stay on top of your repayments, reduce financial stress and regain control of your money. Whether you’re dealing with credit cards, Buy Now Pay Later, personal debt or overdue bills, the right strategy can help you make steady progress without relying on more borrowing.

This guide explains practical debt management strategies for New Zealand households, including budgeting, prioritising repayments, communicating with creditors and avoiding common mistakes.

Debt management is the process of organising your finances so you can repay what you owe in a realistic and sustainable way. It involves understanding your financial situation, creating a budget, prioritising repayments and making informed decisions about your spending.

Good debt management isn’t about finding a quick fix. It’s about having a plan that helps you stay on top of your commitments while still covering your everyday living expenses and working towards your financial goals.

The earlier you take action, the easier debt is usually to manage.

When repayments are missed, interest charges, late fees and collection activity can quickly make a difficult situation feel even more stressful. As debt grows, it becomes harder to catch up and can affect your ability to achieve other financial goals, such as building savings or buying a home.

Taking action early gives you more options. It allows you to review your budget, speak with creditors if you’re struggling and make changes before debt becomes unmanageable.

Remember, asking for help isn’t a sign you’ve failed. It’s often the first step towards getting back in control.

Not all debt works the same way. Understanding the different types can help you decide which repayments should take priority.

Secured debt

Secured debt is backed by an asset, known as collateral. If repayments aren’t made, the lender may have the right to recover the asset to repay the debt.

Common examples include:

• Home loans
• Vehicle loans secured against your car.

Because the lender has some security, these debts often have lower interest rates than unsecured debt.

Unsecured debt

Unsecured debt isn’t tied to an asset. Instead, the lender relies on your agreement to repay the money you’ve borrowed.

Examples include:

• Credit cards
• Buy Now Pay Later accounts
• Personal loans
• Overdue household bills.

These debts often carry higher interest rates, making them more expensive if they’re left unpaid.

Before you can create a plan, you need a clear picture of where you stand financially.

Start by making a list of every debt you currently have. Include the balance owing, minimum repayment, interest rate and payment due date for each account.

Next, review your monthly income and compare it with your regular expenses, including:

• Housing costs
• Utilities
• Groceries
• Transport
• Insurance
• Childcare
• Subscriptions
• Other regular bills.

Once you’ve identified where your money is going each month, you’ll be in a much better position to decide how much you can realistically put towards reducing your debt.

This exercise often highlights areas where small spending changes can free up money for repayments without dramatically affecting your lifestyle.

A budget is one of the most effective debt management tools because it helps you plan your money before you spend it.

Instead of hoping there’s enough left over to make repayments each month, a budget allows you to allocate money towards your essential expenses, debt repayments and savings from the beginning.

When creating your budget:

• List all sources of income.
• Record every regular expense.
• Prioritise essential household costs.
• Schedule debt repayments alongside your bills.
• Review your spending regularly.
• Build a small emergency buffer where possible.

A budget isn’t about restricting everything you enjoy. It’s about making sure your money is working towards the things that matter most.

A debt management plan is a structured approach to paying off your debt while still meeting your everyday living expenses. It brings together your income, household bills and repayments into one realistic plan, so you know exactly what you can afford each month.

A good debt management plan should:

• List every debt you owe, including balances and repayment dates
• Prioritise your repayments based on your financial situation
• Include all essential household expenses
• Set realistic repayment goals you can maintain
• Be reviewed regularly as your circumstances change.

The most effective debt management plans aren’t about making the biggest repayments possible. They’re about creating a plan you can stick to over the long term. Even small, consistent repayments can make a significant difference over time.

If you’re feeling overwhelmed, getting support to create a personalised budget can help simplify the process and give you a clear path forward.

There’s no single “best” debt repayment strategy. The right approach depends on your financial situation, your personality and what will keep you motivated over the long term.

Debt Snowball Method

The Debt Snowball Method focuses on paying off your smallest debt first while continuing to make minimum repayments on all your other debts.

Each time you clear a balance, you roll that repayment into your next smallest debt.

Many people like this strategy because the early wins build confidence and help maintain motivation.

Debt Avalanche Method

The Debt Avalanche Method focuses on paying off the debt with the highest interest rate first.

Although it may take longer before you completely pay off your first debt, this approach usually saves the most money over time because you’re reducing the amount of interest you pay.

If your priority is paying off debt as efficiently as possible, the Avalanche Method may be worth considering.

The Feel Good Method

Sometimes the most stressful debt isn’t the one costing the most.

The Feel Good Method encourages you to tackle the debt that’s causing the greatest emotional pressure first. That might be money borrowed from family, an overdue account or a debt that’s creating constant anxiety.

Reducing financial stress can make it much easier to stay committed to your overall debt repayment plan.

Choose the strategy you’ll stick with

The best debt management strategy is ultimately the one you can maintain consistently.

Whether you choose the Snowball, Avalanche or Feel Good approach, making regular repayments and sticking to your budget will have a much bigger impact than chasing the “perfect” strategy.

When you’re managing multiple debts, it’s easy to feel unsure about which one to tackle first. The answer depends on your financial situation, but having a clear plan is far better than trying to make repayments without a strategy.

As a general guide, prioritise:

• High-interest debts, such as credit cards.
• Overdue accounts that may attract late fees or collection activity.
• Essential repayments that protect your home, vehicle or access to important services.
• Any debts that are causing significant financial or emotional stress.

Whatever approach you choose, continue making at least the minimum repayment on your other debts whenever possible. Missing payments can lead to additional fees, interest and unnecessary stress.

Remember, debt management isn’t about paying everything off overnight. It’s about making steady progress while keeping your finances manageable.

High-interest debt can become expensive surprisingly quickly.

Credit cards are one of the most common examples because interest is often charged on any unpaid balance each month. Simply making the minimum repayment can mean it takes years to clear the debt while paying significantly more in interest.

If your budget allows, consider:

• Paying more than the minimum repayment
• Putting unexpected income, such as a tax refund or work bonus, towards your highest-interest debt
• Redirecting money you’ve saved from cancelled subscriptions or reduced spending into your repayments

Even small additional repayments can shorten the life of your debt and reduce the total amount you pay.

If you’re struggling to meet your repayments, don’t ignore the problem.

Many creditors understand that financial circumstances can change and may be willing to discuss temporary repayment arrangements or alternative payment options.

The earlier you make contact, the more options you’re likely to have.

Before speaking with a creditor:

• Understand your current budget
• Know what repayments you can realistically afford
• Be honest about your financial situation
• Keep a record of any agreements you make.

Having these conversations early can reduce stress and help prevent your debt from becoming more difficult to manage.

If your debt feels overwhelming, remember that you don’t have to solve everything at once.

Start with the basics.

Review your budget

A clear budget helps you understand exactly where your money is going and identify opportunities to free up cash for repayments.

Prioritise essential expenses

Housing, utilities, groceries and transport should generally come before discretionary spending.

Speak with your creditors

If you’re finding repayments difficult, contact your creditors before missing multiple payments.

If you’re finding it difficult to keep up with repayments, remember that help is available. Taking action early can reduce financial stress, prevent your debt from growing and give you more options.

Here are some places you can turn for support in New Zealand.

MoneyTalks

If you need free financial guidance, MoneyTalks is a great place to start. Their helpline connects you with qualified financial mentors who can help you understand your options, create a realistic plan and, where appropriate, work with your creditors.

Freephone:0800 345 123
Text: 4029
Website:https://www.moneytalks.co.nz

Work and Income New Zealand (WINZ)

If you’re experiencing financial hardship, Work and Income may be able to provide assistance depending on your circumstances. This may include help with essential living costs or referrals to additional support services.

Freephone: 0800 559 009

Website:https://www.workandincome.govt.nz

1737 Need to Talk?

Money worries don’t just affect your bank balance, they can also affect your mental health. If financial stress is becoming overwhelming, 1737 Need to Talk? offers free, confidential support from trained counsellors at any time of the day or night.

Call or text: 1737
Website:https://1737.org.nz

Looking for ongoing budgeting support?

If you’d prefer someone to help you stay on top of your finances every payday, MyBudget offers a personalised budgeting service designed to take the stress out of managing your money.

Unlike financial mentoring services that provide guidance and education, MyBudget works with you to create a personalised budget, manage your household bills and repayments, and help you stay on track towards your financial goals. We can also work with your creditors on your behalf where appropriate, helping simplify the process and reduce some of the pressure.

If you’re ready for ongoing, hands-on support, enquire online or call 09 849 6285 for your free, no-obligation budgeting appointment to see how MyBudget could help.

Paying off debt takes time, so it’s important to recognise your progress along the way.

Some simple ways to stay motivated include:

• Setting realistic repayment goals
• Tracking your progress every month
• Reviewing how much debt you’ve already reduced
• Celebrating milestones with inexpensive rewards
• Keeping your long-term financial goals front of mind.

Progress isn’t always fast, but every repayment moves you closer to financial freedom.

Managing debt can sometimes feel isolating.

Having someone to check in with can help you stay focused and motivated, particularly when progress feels slow.

An accountability partner could be:

• Your partner.
• A trusted family member.
• A close friend.
• A budgeting coach or financial mentor.

They don’t need to manage your finances for you. Sometimes simply having someone encourage you, celebrate your wins and remind you why you started can make a significant difference.

Becoming debt free doesn’t happen overnight.

Every debt you pay off, every month you stick to your budget and every financial goal you achieve is worth recognising.

Celebrating your progress doesn’t have to cost money. It could be:

• Enjoying a family picnic.
• Watching your favourite movie at home.
• Spending time with friends.
• Crossing another milestone off your debt tracker.

Recognising your achievements helps maintain motivation and reminds you that your hard work is paying off.

Key takeaway

Debt management isn’t about finding a quick fix. It’s about creating a realistic plan that works for your financial situation and sticking with it.

By understanding your finances, creating a budget, prioritising repayments and taking action early when challenges arise, you can reduce financial stress and steadily work towards a stronger financial future.

You don’t have to manage debt on your own. For more than 25 years, MyBudget has helped over 130,000 people reduce financial stress and take control of their finances through personalised budgeting support. We’ll work with you to create a budget that’s tailored to your income, expenses and financial goals, helping you stay on top of your repayments and plan confidently for the future.

Enquire online

Or call us on 09 8496 285 for your free, no-obligation budgeting appointment.