Debt free: Charlene's mission to become a saver

Charlene, a stay-at-home mum with four children, had amassed over $60,000 in debt. She filed for bankruptcy at the end of 2020, but still had other money owing.

However, she has managed to turn things around.

"I've managed to get out of bankruptcy, I've paid off the car. I've got all my other debts all paid off," she explains in the latest episode of the Thrift podcast.

Linda Smith, a financial mentor with the Christchurch Methodist Mission, helped Charlene become a dedicated saver.

Smith runs an incentive saver scheme which rewards people who work towards a financial goal.

Her first tip is take stock of your situation.

"If people really want to save then I'd say well go and have a look at your bank statements or on your phone and just look at where, over the last month or so, the money has gone."

If we look closely, there are changes that can be made, Smith said.

"Is it one less coffee a week? Is it not calling in the dairy on the way home?"

Charlene had fortnightly meetings with her mentor, went through her finances, and started to get a feel for where her money was going.

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"I was spending a lot of money on smoking and alcohol, and I'm slowly giving up on both of those."

Part of the financial advice she got was helping her to see the techniques that were being used against her.

"I learned quite a lot different marketing schemes that people try and pull you in with, like when you see sales outside of store and it tries to drag you in the store to try and buy more. So, I've been staying away from that kind of thing. Staying away from After Pay, I paid all that off, I'm not going back down that hole."

Smith has seen a lot of people caught up in a cycle of debt.

"The income reduces because of the debt payments that go out. And that's something that Charlene really managed to overcome. She was very inspirational, you know, we celebrate it, it was great to see when the things were paid off. And that just puts more money back in her pocket."

Motivation is key, Smith says. Set a goal that is achievable but not too modest.

"I remember one of the savers describing it as it needs to be a jolly big post in on the ground rather than a sort of a stick waving in the wind. And what he was meaning is your goal has to be important enough for you to decide that actually I'm not going to buy that because that's really where I'm heading."

For Charlene that goal was her children.

"Knowing that I was doing it for them and doing it for their Christmas, they were my main inspiration."

A good strategy is a direct credit that puts money into a savings account. Charlene has now done something similar opening a 32-day saver account.

Another tip from Smith is to keep any automatic payments small.

"If you try and save a big amount like $50 a week, often that's not going to work because you actually need the money. So, keeping it in small, manageable amounts that you don't really notice missing."

Charlene has now paid off her car - she gradually cleared the loan at $60 a week.

When it finally belonged to her, it was a good feeling, she said.

"It was very satisfying. I managed to pay it off and I didn't miss not even one payment."

The incentive saver scheme is based on a similar model in Australia. The Mission set it up here in 2022 because Smith said about 39 percent of New Zealanders either don't have an emergency savings account, or if they do have a savings account, there's nothing in it.

Smith is keen to see that change.

"There's lots of ways that people are encouraged to spend their money, and we wanted to do the flip and encourage people to save."

Each saver in the scheme can sign up and agree to save a certain amount either $300, $400 or $500. They then have to pay between $10 and $20 into their accounts every week.

"Sometimes even people use a different bank so that the money is a little bit more locked away."

Each person has to do four sessions with a financial mentor within that time and then at the end, when they reach their goal, Methodist Mission matches them with the equivalent amount.

That money is then theirs to use but it does have to be spent on health, wellbeing or education.

So far 40 people have completed the course, and 80 percent have carried on saving.

It's worked for Charlene, and she's been able to show her children a different way of doing things.

"They've been proud of me actually, that I've managed to get everything out of pawn and I haven't been putting stuff back in and then I'll be like 'the savings has hit this much, are you proud of me?' And they're 'yeah, we're definitely proud of you mum'."

And Charlene feels differently about herself too.

"The savings have just given me a positive spin. And I know that I'm not going to be struggling as much as I was. So, I've changed my mindset."