30. How to Prioritise Debt Repayment in New Zealand

Not all debt is equal. And treating it as if it is (paying a little off everything or simply making minimum payments across the board) is one of the quietest ways wealth building gets undermined.

Debt has a priority order. Understanding it changes how you approach your money.

At the top of the priority list is high-interest debt. Credit cards, buy now pay later accounts, personal loans, hire purchase agreements. These are the debts that cost the most and compound the fastest. A credit card charging high interest is working against your wealth-building efforts every single day. Before you invest seriously, before you build aggressively, this debt needs a clear strategy.

Below that, but still demanding attention, are personal loans and car finance. Rates vary, but many sit well above mortgage rates. These are debts worth clearing with intention and as promptly as reasonably possible.

Then comes the mortgage. For most people this is their largest debt, but it is also the most strategic one. Mortgage debt, managed well, is not the enemy of wealth building. It can be a tool for it. Your home is an appreciating asset. And strategies like overpayments and regular reviews of your structure can reduce the total interest you pay significantly over time.

At the bottom of the priority order (though this is context-dependent) is student loan debt in New Zealand. For most borrowers, this is interest-free while you are employed in New Zealand, which means it carries a different urgency than other debts.

The principle is simple: direct extra money toward the debt that costs you the most first. This is sometimes called the avalanche method, and over time, it saves more money than any other debt strategy.

The second principle is equally important: do not let debt become invisible. Know exactly what you owe, to whom, at what rate, and what it is costing you every month. That clarity, however uncomfortable it might initially be to face, gives you the information to make good decisions.

Debt is not a reflection of your worth or your intelligence. It is a financial tool that most of us use at some point. The question is simply whether you are using it intentionally, or whether it is quietly using you.

Do you know the interest rate on every debt you currently carry? When did you last look at the full picture?

The content shared here is general in nature and designed to broaden your financial knowledge. It is not personalised financial advice. For advice specific to your circumstances, I recommend speaking with a licenced financial adviser. You can also reach out via the Contact tab to start a conversation with me directly.