How to become debt-free

Debt is a reality for most Kiwis. Whether it’s a home loan, credit card, student loan, hire purchase, or a mix, it can leave you feeling overwhelmed and worried about the future. In fact, a survey by the Financial Services Council (FSC) found that 70% of Kiwis now worry about money either daily, weekly or monthly.

With living costs rising and food prices up more than 4% in the past year, the urgency to manage and reduce debt has arguably never been greater. That’s why focusing on becoming debt-free is one of the best investments you can make in your financial wellbeing.

At Blue Canoe, we don’t just help you get out of debt. We can help you move toward long-term financial freedom, giving you:

-Greater flexibility and peace of mind

-Reduced stress and improved wellbeing

-More resilience in uncertain times

-Better credit scores

-A stronger ability to borrow for good debt that builds wealth

 

Good Debt vs Bad Debt

Understanding the difference between good and bad debt is key to managing your money wisely, and deciding which debts to prioritise.

Good debt helps you build wealth or increase income over time. Examples:

-Home loan: Property generally appreciates in value, building equity

-Student loan: Boosts your earning potential over a lifetime

-Business loan: Funds equipment, expansion or capability to grow revenue

Ask yourself:

-Will this asset grow in value or make me money?

-Can I comfortably manage the repayments?

-Is the interest rate reasonable?

Bad debt drains your money and provides no long-term benefit. Examples:

-Credit cards: High interest balances that can spiral quickly

-Car loans (especially new cars): Depreciates the moment you drive it out the lot

-Luxury items or holidays: Short-lived satisfaction, long-term debt

But even “good debt” can become bad if it’s not managed well. That’s why having a plan is critical. At Blue Canoe, we can help you get started.

 

Know what you owe and build a plan

Before you can get rid of debt, you need a clear picture of it. Many of us juggle credit cards, personal loans, hire purchases and mortgages without ever seeing the full story in one place. An important first step is simply to list every debt you have – who it’s with, how much you owe, the interest rate, minimum payments and how long it will take to pay off at your current pace.

Once you know what you’re dealing with, you can build a realistic plan. Blue Canoe Financial Advisors can help you create a robust budget that covers your essentials (like housing, food, utilities and insurance) and take an honest look at where you can cut back on non-essentials. Even small savings, redirected towards debt, can make a big difference over time. With that foundation in place, you’re ready to use proven strategies to become debt-free faster.

 

Proven strategies for a debt free future

1. Pay off high interest debts first

If you’re juggling multiple loans and credit cards, one of the smartest ways to get out of debt faster is to focus on the debts with the highest interest rates first. These are usually your credit cards and hire purchases (bad debts), which can easily charge 20% or more in interest. Start by throwing as much as you can at the highest-interest debt while paying the minimums on the rest. Once that one’s gone, move on to the next highest, and so on.

The logic is simple: The higher the interest rate, the more it costs you over time. By clearing those expensive debts first, you reduce the total interest you pay and free up more money to put towards your remaining balances.

High-interest debts also tend to be smaller in size than lower-interest ones. For example, you might owe $8,000 on a credit card at 20%, and $350,000 on a home loan at 4.50%. While the home loan is bigger, the credit card is costing you much more in interest per dollar.

So it’s a win–win: You get quick wins by clearing smaller, high-interest balances. And you save the most money overall by cutting down the most expensive debt first.

2. Consolidate your debts

Debt consolidation is when you roll multiple debts — often with different interest rates — due dates and lenders, into one single loan, ideally at a lower interest rate. Many banks and lenders offer debt consolidation loans to help make repayments simpler and more manageable.

Instead of trying to juggle several debts of different sizes, dates and interest rates, you only have one repayment to focus on. This can make it easier to stay on track and avoid missed payments. Plus, if the new loan has a lower interest rate than what you were paying before, you could save a significant amount of money in interest over time.

3. Refinance your debt

If you’re carrying a lot of high-interest debt (such as credit cards, personal loans or hire purchases), refinancing can be a smart way to reduce what you pay in interest and get out of debt faster.

Refinancing means keeping the same type or number of debts, but changing the terms, usually by switching to a lower interest rate or a better deal with the same or a new lender. This is different from debt consolidation, where you combine multiple debts into one new loan. For example, you might:

-Move a credit card balance to a card with a lower rate or 0% balance transfer offer

-Refinance a personal loan to one with a better interest rate

-Renegotiate your home loan rate and terms so you can free up cash to pay other debts faster

However, it’s important to check the costs of refinancing, which may include application fees, balance transfer fees, early repayment or break fees, and legal or valuation costs for mortgages. Add these up and compare them to your potential interest savings. If the savings are greater than the costs, and you’re confident you won’t run up new debt, refinancing can be a smart strategy to help you get ahead.

4. Increase your repayments (a little goes a long way)

Don’t underestimate the impact of bumping up your repayments a bit. Even small increases can make a big difference over time, because more of your payment goes toward reducing the balance, not interest.

You don’t have to double your payments to see progress. Try:

-Rounding up your payments e.g. $183 to $200

-Adding an extra $20–$50 a fortnight or month

-Paying weekly or fortnightly instead of monthly, if your lender allows it

These small changes can shorten the life of your loan and reduce the total interest you pay, often by thousands of dollars over the long term. With clear modelling and visualisations, we can show you exactly how much faster you’ll become debt-free if you increase your repayments by different amounts.

 

Becoming debt-free

Becoming debt-free is one of the most powerful steps you can take toward financial freedom, and Blue Canoe is here to help you make it happen.

We don’t just offer advice. We equip you with smart data and modelling tools that turn your financial goals into clear, achievable outcomes. With tailored insights, scenario planning, and real-time projections, we help you understand the impact of every decision you make, so you can stay motivated, stay on track, and see your progress in a way that makes sense.

Whether you’re consolidating debt, refinancing, or tackling high-interest balances head-on, our tools can help you turn insight into action, and action into results. Ready to get debt-free, faster? Get in touch for a chat.