Buy now, pay later. Is it really a good idea?

Clothes, perfume, sports equipment, and an outdoor fire pit. There’s almost nothing Gina hasn’t added to an online shopping cart.

And for that, she’s felt shame.

Right now, she’s $20,000 in debt and working hard to change her compulsive spending habits – the result of loans over two-and-a-bit years from finance companies, and buy now, pay later purchases.

Gina, whose name has been changed for privacy, is a fan of Afterpay, which allows you to shop now, but pay later through four equal instalments.

If you make the repayments on time, you won’t have to pay penalties – making shopping possible 24/7 even when you can’t afford it at that moment.

On top of that, targeted social media advertising and influencer discount codes mean shopaholics struggle to fight the buzz of a good deal.

Financial advisers say compulsive spending is a huge problem for Kiwis, with debt consolidation loans mounting in number for those eager to buy their first home.

Frivolous spending is stopping many from entering the housing market, with some couples racking up to $100,000 in consumer debt on fridges, cars, outdoor furniture, clothing, holidays, and “just life”.

A debt consolidation loan sees all of a couple’s debt lumped together to make payments more affordable and their interest rate lower.

First-home buyers need a 10 per cent deposit, and depending on the lender no or very little debt.

Most Kiwis aren’t good with managing their money, advisers say, with Mount Maunganui’s Rebecca Puterangi of The Investor Bird cautioning a lump sum of $2 million will be needed for a couple to retire at 65 with an annual income of $70,000 (an age and figure many clients give).

However, Charlene Overell, a financial planner at Tauranga’s G3 Financial Freedom reduced that figure by half, saying studies show people will spend more when they first enter retirement, but less from their mid-70s onwards.

“It’s relative to your income now and how you are used to living, plus how you would like to live in retirement.

“We have people living off a lot less being able to achieve goals of travel with $1minvested at 65, 70, but it is about how you invest it.”

For Gina, a Rotorua solo mum and renter, times are tough and culture and society are telling her to spend.

She lost her job in early childhood education because of Covid-19, and being broke has been a shock.

She’s on the unemployment benefit and is looking for work. She’s also sought the guidance of a budgeting mentor, as she continues to battle with compulsive buying.

She was embarrassed to tell her friends about her finances when she lost her job and continued the “facade” of going out to dinner in new outfits bought from the clothing website Boohoo but paid for via Afterpay.

“I tried to keep the lifestyle up, and I ended up wiping myself out of any money I had, so I came clean (when I lost my job) and decided I needed some help.

“I’m 50 in December so you think I would have learned by now, but no.

“I was never taught about (money). Mum and Dad had good jobs but they lived day-to-day because dad was a drinker.

“I vowed that I was going to get everything that I wanted, and my kids were going to have everything that they wanted. Unfortunately, now, I’m paying for it.”

Ticking up debt in New Zealand is “normal”, says former police officer turned financial expert, Puterangi.

“We come across people going for a first home loan, whom we ask to disclose debts and we put the application in, and the bank comes back and says: ‘Oh, they’ve got an Afterpay’, and the client didn’t mention that, because they don’t even think of it as debt or a problem.

“If (clients) have had parents who’ve been savvy-enough to teach them about money, that’s who I find are good with money, but there’s not many of them. It’s one or two per centers.”

And if you already own your own home, paying off debt as fast as possible should be your priority, she says.

Puterangi’s dad was a financial adviser and she took over his business in Auckland when she left the police after four years as a constable.

Now in the Bay of Plenty, she says everyone needs financial advice, but Kiwis have the mentality only the rich can afford it.

“It’s sad (and) it’s so important,” because most advisers in New Zealand are free.

“If it’s for consolidation loans, KiwiSaver, or a mortgage, we get paid from the bank. The end-user doesn’t pay.”

Ignoring a deficit bank statement is because our culture in New Zealand is “she’ll be right”, says Charlene Overell at G3 Financial Freedom.

She’s had clients in their 50s panic about retirement only when their kids leave home.”They start to think: ‘Oh my God, what have I got?'”.

“We don’t have any compulsory superannuation like Australia or the UK; people don’t even think about their future,” Overell says, with the exception of KiwiSaver.

Like Puterangi, she says youth should be educated on the basics: “money in, money out; budgeting; what does compound interest mean?; How do you do your weekly food shop?

“Whilst some families have money conversations around the dinner table, others do not, which means money management skills are not talked about or being passed on.

“We try and encourage people not to have a credit card unless they are disciplined with money.”

She adding racking up debt is a more common mind frame than “I can’t afford it, so I’ll just save until I can afford it”.

“For people on the poverty line, it is difficult for them, but for the people that have a choice, you either go and spend $100 on the weekend in a nightclub or you put it towards a saving account for a house or a goal.”

Shirley McCombe, manager of Tauranga Budget Advice, and Michelle Nahu of Family Focus Rotorua say Kiwis feel the pressure to “keep up with the Joneses”.

Afterpay, Laybuy, deferred payments, and interest-free only work if a person has a steady income and is disciplined with money, McCombe says.

“The difficulty (for the others) is that you are committing to pay something based on future earnings and sometimes based on wishful thinking,” referring to promised overtime, securing a new job, or the hope of selling something on Trade Me.

“It is especially problematic when you are committing to pay something in the future (like) five years deferred or interest-free.

“Often, the item is purchased, used, disposed of, even before the payment is due and the client has lost focus and moved on to the next model, version or fad.”

Both Budget Advice and Family Focus are working with people at the “grass-roots level”, supporting them to manage their finances,pay off debt, and negotiate with creditors.

“Sadly, for many of our clients, they can’t meet their day-to-day needs so retirement saving is not amongst their priorities,” McCombe says.

A beneficiary from Rotorua, vouches for that: “It’s kind of hard to budget when you’ve got no money to budget with,” she says wryly.

Nahu, who is Building Financial Capability Services team leader at Family Focus, says since Covid-lockdown, higher-income families are also struggling.

Every second client has one to four Afterpay purchases on the go, with some monthly debt repayments and bills exceeding their income.

She says no credit checks are needed for buy now, pay later purchases and bad credit doesn’t play a part in access.

“There are no monitoring systems in place to prevent consumers from financial hardship, and people get addicted. I had a lady, where we tidied everything up, and straight away she went back and did it again until the overdraft was gone.

“They’re not really looking at the big picture – that they really couldn’t afford it to start with.

“It’s all sorts of madness happening at the moment and it’s going to get worse at Christmas time,” she predicts.

Furthermore, shopping apps on mobile phones are making resisting temptation even harder.

“Gone are the days where you’d go into The Warehouse to buy a T-shirt. They’re looking at this system that’s allowing them to get the latest, labelled gear.

“There’s no money for food, but we’ll still get that pair of Nike shoes for Tommy who doesn’t really need them, but his mates have got them.”

She recalls having her own post office savings bank book as a child, and even though she contributed a meagre 20 or 50 cents at a time, it created a good savings habit.

Money should be talked about in an educational way, she says, cautioning against parents discussing their financial woes in front of children.

“I don’t think that’s fair on a child. That sends a message to the child that ‘we are in hardship. How am I going to get out?’.”

Financial adviser Roszarri Wiringi of Wealth Health in Rotorua regularly sees buy now, pay later bills on hopeful first-home buyers’ bank statements, along with Neon, Netflix and Spotify subscriptions, gym memberships, and expensive phone contracts for the “flashest” cellphones.

“Now, with Covid, banks have different servicing and test rates, so it’s a lot harder to get in the market. While they’re saying interest rates are coming down etcetera, it’s more about the servicing.

“People come to me thinking the banks have money to give away, and it actually doesn’t work like that. There’s limited funding that they’ll give if you have a deposit less than 20 per cent. Once that (money) is gone, you have to wait for the funding to come back around.”

Without wanting to criticise, women are typically the big spenders in a relationship, she says.

“It’s always the mum that’s purchasing makeup or clothing… It’s definitely something that comes up all the time.

“If you’re a full-time working parent and can’t get to the shops, (online shopping) is easy.

“Most mums have said that when they’re relaxing at night, that’s when they’ll purchase their items. It’s more of a convenience type habit, I think,” she says, adding that some of her male clients have been unaware of the number of purchases their partners are paying off.

One struggling client has gone to a collection agency from a buy now, pay later payment.

Wiringi says financial advisers help debited Kiwis sort their goals, needs, and how best to meet them.

Without visiting one, it can be a slippery slope, particularly if you’re a first-home buyer.

“If you just go out there, you’re going to get knocked back.”

If you’re struggling with shopping addiction, call Lifeline on 0800 54 33 54 or visit, Laybuy, and similar alternatives offer responsible spending advice on their websites.

Money 101- a step-by-step guide

1) Look at your money coming in and out. Can you make any savings or changes? And, if you do, where would you redirect that money?

2) Build up an emergency fund (cash in the bank). Ideally three to six months of your spending.

3) Set your foundation: Income and life insurance, a will, and enduring power of attorney.

4) After completing steps 1-3, continue to manage your continued money in, money out, and looking at creating surplus income. Seek advice on what to invest it in, be it KiwiSaver, managed funds, term deposits, or saving for a house.

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