Money and common sense

I often present the following scenario to my clients:

Quote: If someone was bleeding out, say from a perforated artery or vein, what would a doctor try and do first: transfuse more blood or stop the bleeding?

People don’t need a medical background to answer this correctly. It just takes common sense. Yet, when it comes to money, common sense disappears. People place themselves in a quagmire of debt but don’t think about trying to stop spending. Their self-talk seems to be, “I need more money” without considering the thinking behind what created the problem in the first place.


Mismanagement is…

So in the context of money, what does mismanagement look like?

  1. Signing a 36 month contract (with all the ‘add-ons’ of admin fees, insurances) for an overpriced car and being unable to afford the repayments after 2 months and/or the Warrant of Fitness and/or the car registration and/or repairs.
  2. Signing a credit contract to regularly purchase heavily overpriced, low quality products, when you struggle from day to day with how you’re going to feed your children. (In defence of unwitting customers though, some businesses have left many budget advisers gobsmacked at the overtly predatorial behaviours that appear to target the low educated, the elderly, even the mentally impaired, most often in our low socio-economic districts and communities.)
  3. Choosing to live in a home or rental accommodation that leaves no money for other essentials like: food, power.
  4. Using credit cards for unwise purposes and then not even making the minimum monthly repayments. In my droll opinion, most people have displayed a lack of financial sense to justify being banned from using one until they understand how credit card institutions make money off them.


A lust for spending?

Most people I work with spend emotionally and without a plan. They have no solid rationale besides the fact that they just want it. Unfortunately, one of the consequences of living in a fast-paced society is, and that’s due to the rate of change and advances with technology, credit is so easy to access.

Even tougher on the unquestioning consumer with a lust for spending, is the powerful influence of the media which is more than complicit with retailers as their streams of revenue are highly dependent on advertising for their existence. New Zealand society is constantly bombarded with unrealistic media images that reach and teach us how we should define ourselves- brand clothing, fashion accessories, the latest electronic devices to engage in social media, cooler vehicles (that end up being repossessed), bigger houses and the list goes on…

Question: Why are we spending money we don’t have to keep up or impress people we don’t know and probably don’t even like?

Answer: Is it because we want to feel like we belong somewhere, whether it’s with our extended family or a group of friends, a small part of our community, even if it harms us?

Opinion: Feeling like we belong to anything at the expense of our happiness, of giving up control over our money, safety and security and all logical financial sense, is overrated.

Advice: We may want to consider seeking out what common sense and good financial management is that provides you with a sense of control. Go and make an appointment with your nearest NZFFBS budget adviser, read up on whatever information you can find.




A day in the life of a budget adviser

Day 1

The Women’s Refuge brought in Claire some time ago. She had been battered and almost strangled by her ex, leaving her barely talking with a croak, and he had also verbally  abused her employers and told them what a piece of work she was, so she had lost her job as well.

She was waiting for a benefit to start, and was worried mainly about her power and phone bills, both of them overdue. We did the normal things, phoned the utilities and wrote letters.  We put Claire on the phone to give the ok for us to talk to the phone company, and the customer service officer, not a good English speaker, was so unhelpful that Claire lost the plot completely, gave the woman an earful, then banged the phone down. Not a good negotiating opener.

A week later Claire phoned. She was devastated, because her phone had been disconnected, and she was paranoid that her ex would come back to finish her off, and she wouldn’t be able even to phone the police. She was going to end it all, she said. She was meeting her son after school, taking him to the dentist, and then would take her life and leave her problems behind her for ever. I said it wasn’t a good idea, but she had thought it all through, she said. It would attract big headlines, create a stir, abused mother takes her life over overdue phone bill, and maybe big utilities would learn that they couldn’t treat people like that, and so some good may result. She hung up. She was not hysterical and sobbing, she was calm and deliberate, somehow cold and distant, and she sounded deadly serious.  I did not have her mobile number, Women’s Refuge people were out, and I got no answer from Mental Health crisis. Who else to phone? The Samaritans?

Finally I phoned the Police on 111. I wasn’t sure how Claire would react to the Police arriving at her door, and maybe I would get a mouthful from Claire in return for my actions.  When she did phone back however she was overwhelmingly grateful. She had been standing on the edge, close to falling off, and I had saved her. The Police had taken her to the watch-house and given her a cup of tea. They had gone to Work and Income and made an urgent appointment. They had assured her things would be ok, to leave things to the professionals at the budgeting service and not to do anything rash.

The next day, Work and Income paid both utilities bills in full for her, both arrears and current, and I had this beautiful blond throw her arms around me in the middle of the office. I was worried she would start kissing me, and my partner, waiting for me outside, might see us!

I never saw Claire again, although I did have a few phone calls with her about her budget. The last one she was over the moon. She had found a job, $40,000 to start, and it was all my doing, she said. She loved me more than I could ever know. As far as I know she is still doing well. The budget worksheets and cashflows certainly have their place in our work, but sometimes the other needs are even greater, and if we fix these we may not need to do much more.

Day 2

Betty brought in her credit card bill today which was a bit of a surprise.  I didn’t even know she had a credit card and would certainly have told her as strongly as I could not to go near one. Betty had a health problem and was on Invalid’s Benefit, she had intellectual difficulties, an anger management problem, and she was illiterate, although she had learned to sign her name.

A bank had generously posted her an application, pre-approved of course, and once someone had read the letter to her she asked for a pen, and where to sign. Betty soon discovered that she could use her shiny new card to draw money from an ATM, and great wads of bills came forth.

She spent so prolifically that some of the local retailers called the police, wondering how this woman had so much cash to spend, and they casually called in one day to see whether we could help at all. Betty had spent prolifically, on anything that you could name, and once she tired of things she gave them away, so she could buy some more.

Now it was at crunch point. Her balance was $21,500, and her minimum monthly payment was $10,500. She would have found difficulty in fronting up with $20 that day. I told her, no nonsense, that the card had to be destroyed. She sat there in the chair, red faced and tearful, stamping her feet on the ground like a child, and crying ‘It’s mine, It’s mine’ like Gollum with his precious ring. In vain did I try to tell her that the card was not hers, it never had been, it belonged to the bank, and they would want it back.

After we sent off the authorisation, the fun bit began. The bank did not really want to talk about the debt much at all. She could borrow some money perhaps, and pay off the debt in full, or the family could help, or they would simply have to begin their normal collection process.  It was not their problem, it was Betty’s.  I argued that they had behaved improperly in sending out the pre-approved offer in the first place. Offering people credit cards without even an assessment is gross folly, and they deserved to have people such as Betty default on payment. They would not have lent her money, so why give her a credit card?

I was quite reasonable with the bank. All I wanted was for a freeze on interest charges, and for the bank to accept $20 per week from Betty for the next 20 years. The bank tried to argue that to discriminate against the Bettys of the world would be a breach of human rights, but could not explain why a failure to approve a loan would not be such a breach.

Finally, with progress so slow, I contacted the Banking Ombudsman, who agreed to forward my complaint to the bank’s complaints officer.  The final outcome, when it came, blew me away. The bank surrendered completely, and agreed to write off the whole of the debt, subject to some acceptable conditions such as that it was a full and final agreement. Strangely, they also did not want to be named.


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