10 Signs You’re in Financial Danger
Are you unknowingly heading towards financial disaster? Our guide highlights ten warning signs that signal financial danger as well as practical steps to regain control. From debt traps to job instability, learn how to spot the risks before it’s too late.
Updated 27 January 2025
Summary:
Our guide highlights ten critical warning signs of financial danger—designed to make these risks crystal clear. Many people don’t realise the trouble they’re in until it’s too late, so we’ve published this to help Kiwis recognise and address financial risks before they spiral out of control. We cover:
What does it truly mean to be in “financial danger”?
While everyone's perspective on money differs, financial danger generally indicates that you live beyond your means or are at high risk of doing so soon. Financial danger can include things like:
The warning signs might be subtle or glaringly obvious. Sometimes, it’s the persistent feeling of stress when an unexpected bill lands in your inbox. Other times, it's maxing out a monthly credit card or realising you’re trapped in a job you hate but can't afford to quit.
- With so many things pulling at our attention, our finances are usually the last thing on our minds. However, many Kiwis are likely closer to danger than they think.
- In today’s consumer-driven world, it’s alarmingly easy to find yourself in financial danger without fully realising it. Our society is saturated with targeted advertising that makes it effortless to succumb to impulse buying—whether for designer goods, new gadgets, or big-ticket items like a new car. On top of that, the proliferation of credit cards, buy-now-pay-later (BNPL) platforms, and personal loans has made instant gratification more accessible than ever.
- While many Kiwis may not know it, they're likely one wrong step away from financial disaster - even though, on the surface, everything may seem fine.
Our guide highlights ten critical warning signs of financial danger—designed to make these risks crystal clear. Many people don’t realise the trouble they’re in until it’s too late, so we’ve published this to help Kiwis recognise and address financial risks before they spiral out of control. We cover:
- Our 10 Must-Know Warning Signs
- Are You in Financial Danger? Take This 5-Question Self-Check Quiz
- Concluding Thoughts: The Hard Truth About Financial Danger
What does it truly mean to be in “financial danger”?
While everyone's perspective on money differs, financial danger generally indicates that you live beyond your means or are at high risk of doing so soon. Financial danger can include things like:
- Not having enough emergency funds or savings set aside.
- Relying on high-interest debt (e.g. credit cards) to make ends meet.
- Not investing any excess cash in your future (e.g. investing in term deposits, stocks or property to supplement retirement/NZ Super).
- Facing unexpected job insecurity.
- Getting hit with large, unpredictable expenses.
The warning signs might be subtle or glaringly obvious. Sometimes, it’s the persistent feeling of stress when an unexpected bill lands in your inbox. Other times, it's maxing out a monthly credit card or realising you’re trapped in a job you hate but can't afford to quit.
MoneyHub Founder Christopher Walsh shares his views about why signs you're in financial danger:
"New Zealanders are being financially crushed. The data doesn't lie. Households are more leveraged than ever, wages haven't kept pace with inflation, and the cost of renting or buying a home and living has skyrocketed. The last five years have been brutal—rising rents, surging food prices, and mortgage rates that are double or triple what they were just a few years ago. Yet, what makes it worse is that many Kiwis are sleepwalking into financial disaster. The financial traps are everywhere: bad car finance deals that stretch beyond affordability, high-interest credit cards maxed out every month, buy-now-pay-later services making people think they can afford things they really can't, and a blind trust in 'the system' to take care of them. The result? A growing number of New Zealanders live paycheck to paycheck, one unexpected bill away from financial ruin. If your job disappeared tomorrow, could you still pay your rent or mortgage for the next three months? If your car broke down today, could you cover the repair without borrowing? Would you still be financially stable if interest rates rose by another 2%? Most Kiwis can't confidently answer 'yes' to these questions—and that's what financial danger looks like. This guide has not been published to scare you - we have published the reality because no one else will. The banks want you to take on more debt, the retailers want you to spend more, and the government isn't going to bail you out. The only person who can change your financial future is you. The truth is that most financial problems don't happen overnight. They creep up slowly. The extra $50 here, the slightly bigger loan there, the 'I'll deal with it later' attitude towards savings. By the time people realise they're in trouble, they're already in too deep. But the good news? Financial problems are often fixable. Recognising the warning signs early, making hard decisions now, and taking control of your financial future is the only way out. New Zealanders deserve better. We need to stop normalising financial stress and start prioritising financial security. It's time to break free from the cycle of debt, take back control, and build a life that isn't dictated by money problems. If you recognise even one of these warning signs in your own life, don't wait until it's too late—make the change today." |
Christopher Walsh
MoneyHub Founder |
Our 10 Must-Know Warning Signs:
Warning Sign #1: You’re on a Single (Potentially Unstable or Volatile) IncomeMost people think their job is rock solid - until it’s not. One of the most significant financial risks you can face is relying on a single income source - especially if that source is unstable or in a sector that increasingly goes through booms and busts.
Whether it’s because one partner stays home looking after the children, takes care of elderly parents or simply because they’re in between jobs (largely due to job market constraints) – single-income households are more common than people might think. While it's less ideal to be on one income than two incomes, it's drastically more risky as you likely have no alternative if you lose that income stream. Unless the single-income earner is earning $150,000+, it's highly unlikely that they've got the earnings power to support a full family/household's expenses and save for the future. Equally, it's much harder to take risks when you've only got a single income source. Whether that's pushing for a promotion, wanting to move abroad or looking at a sabbatical, you're generally much more constrained when you're on one income than two (meaning you end up taking fewer risks due to reduced bargaining power). Furthermore, being on a single income can impact interpersonal dynamics within the household. Kiwis that have single incomes in volatile industries (e.g. gig work, hospitality, seasonal work or cyclical sectors like real estate) are particularly vulnerable to job loss. In these instances, many households will be on a “knife’s edge” if something bad were to happen to the New Zealand economy (like a recession). Example Scenario
More details: |
Warning Sign #2: You Work at a Startup (especially one that’s running out of cash runway)While working for a startup can be exciting, fun and potentially very lucrative (through restricted stock or stock options), it often comes with a fair amount of financial risk. Startups are inherently risky. Statistically speaking, an overwhelming majority of startups fail to scale up and survive after five years. If you’re working at a startup (compared to, say, working at an NZX 50 company that's been around for decades, like Air New Zealand, Fonterra, Beca, etc.), it's much more difficult to say with certainty if you'll be in the same company 2, 3 or 5 years from now.
While it’s exciting to work at a startup, you need to recognise the trade-offs with taking a job there versus at a more reliable, lower-risk (and probably lower-reward) company. Startups often have very lumpy revenue and capital investment, meaning the founders may not be able to say with certainty if the team will have jobs in 12 months (if they don't execute their plans). Layoffs are extremely common at startups. Supie is a prime example of a high-profile startup that raiised venture capital funding (which raised millions on crowdfunding platforms). With very short notice, Supie went into voluntary administration and Supie's employees were told that they were losing their jobs (many were not paid their salaries for the last few weeks until a third party donor stepped in, which is highly unusual). Startups often lowball salaries (due to cash constraints) but dangle the carrot of "future equity value" in front of employees - promising a million-dollar payout if they get acquired or the business starts scaling up. However, very few startups convert these pipe dreams into reality. Which startups are the most dangerous or put Kiwis at the most financial risk?
Example Scenario
More details: |
Warning Sign #3: You’re in a Cash Flow Negative PositionA major sign of impending financial danger is if you’re spending more than you earn every month. This situation is commonly called "cash flow negative," which means you're routinely depleting your savings, relying on credit, or juggling bills because your outgoings exceed your incoming funds.
If you’re in a cash flow negative position, you will eventually run out of money. Things happen, and sometimes you have a month or two where your cash outlays exceed money but try not to make a habit of doing it. The problem with being in a negative cash flow position is that it can become harder to get out of it (e.g., high-interest credit card debt snowballs). The more you burn down your savings, the less cash buffer you have against future disasters. Living in a chronic state of negative cash flow can be incredibly stressful, impacting mental health and putting strain on personal relationships. Example Scenario
One common misconception is that having negative cash flow only happens to Kiwis on lower-incomes. However, this is not true. Many high earners also spend more than they make. If you earn $500k but you’re spending $550k, you’re still in a cash flow negative position and at risk of financial danger. Regardless of your salary, having expenses continually outstrip your income is a clear way to serious money problems. More details: |
Warning Sign #4: You Have a High Debt-to-Income (DTI) RatioToday's increasingly common problem in New Zealand is the incredibly high absolute borrowing amounts that Gen Z or Millennial Kiwis must take out. Because younger Kiwis will have had less time in the job market earning an income (and saving for a deposit), it’s increasingly become the norm to take out huge mortgages to buy property.
For example, a young Kiwi couple in their late 20s to buy a $1.5m house in Auckland who may only have $150,000 saved up (which is still substantial by any measurement), they're able to put 10% down to get onto the property ladder but need to borrow the other 90%. They must take out a $1.35m loan at ~6% interest rates, not including any LMI (Lender's Mortgage Insurance) or additional fees for a low equity deposit. Even if this couple earns $200,000 a year, their debt-to-income (DTI) ratio is >6.5. It's not uncommon for some younger Kiwis on far lower salaries to be on DTI ratios of >10x. A high debt-to-income (DTI) ratio means a large chunk of your monthly income is already earmarked for paying down various forms of debt. Mortgages, car loans, student loans, credit card balances, and personal loans can all add up quickly. While carrying some debt (especially a mortgage or necessary student loans) is normal for many people, a disproportionately high DTI ratio is a red flag. The more debt you have, the less financially flexible of a position you're in. You end up saving less, have fewer options and are at higher risk of struggling if something happens to your income (or your debt is refinanced at a higher rate). Example Scenario
More details: |
Warning Sign #5: Your Relationship Is Increasingly TransactionalMoney problems can harm even the strongest relationships. Conversely, relationships that depend too heavily on one person’s finances can become strained, imbalanced, and transactional. Whether you’re dating, married, or in any long-term arrangement, if financial transactions replace emotional connection, it’s a huge warning sign.
MoneyHub is not a relationship expert – but finances are one of the core reasons couples break up. Finances can be extremely emotionally harmful (especially if resentment starts to build as one partner feels exploited or undervalued). The more difficult your financial situation, the more likely you are to stay in a toxic situation (especially if the other partner controls the finances). Whether there are secrets about debt or hidden spending in separate accounts, financial strain can bring further tension and instability to a relationship. Love and finances are intricately entwined, and it’s perfectly normal for couples to support each other. But if that support morphs into manipulation or becomes the primary basis of the relationship, you’re headed for a dangerous future — both financially and emotionally. More details: |
Warning Sign #6: You Have a Toxic Partner, Needy Parents or Children All Demanding MoneyFinancial danger can also come from external family obligations. While it’s natural to help out close family members, sometimes these loved ones can become excessively dependent, manipulative, or even abusive in their demands for financial support. This situation can be especially tricky because familial bonds often come with emotional entanglement and guilt.
On the one hand, if you're in a better financial position, you may feel obligated to support others. On the other hand, the more you do this, the weaker the financial position you put yourself in. Constantly bailing out relatives leaves you with less money for your necessities, savings, or emergency funds. Additionally, humans are hedonic creatures that adapt. The more you give, the more that person is likely to expect financial support. The first time you pay off a family member's debt, they're likely extremely grateful. The next time you do it, they may not be so grateful—they may evolve into expecting it. If you end up declining their future requests, it might create a sense of guilt or pressure that can spiral into anxiety, depression, or resentment within the family dynamic. Equally, while your intentions may be good if you help "bail out a family member", you may be encouraging poor habits if they got into that financial position based on money mismanagement (e.g., gambling, reckless spending or scams). If you keep enabling them, they'll never improve. Example Scenario
Our View: Loving your family doesn't mean bankrupting yourself. While it's admirable to help parents or children in need, it shouldn't come at the expense of your financial health—or mental well-being. More details: |
Warning Sign #7: You’re Living Paycheck to PaycheckChances are, you know, friends that are living paycheck to paycheck. Whether it’s a young student at uni who's just moved out, someone who's lost their job or a recent divorcee – living paycheck to paycheck is far more common than people think, as discussed in a popular 2025 Reddit New Zealand post.
Living paycheck to paycheck means that each time money hits your account, it’s immediately allocated to cover bills, debts, and daily expenses - with little or nothing left over. If something unexpected happens (like medical bills or your car breaks down), you're forced to turn to credit cards, payday loans or skip paying certain bills (ruining your credit in the process). You’ll have no cushion for emergencies, need to turn to riskier alternatives (like loan sharks) and will likely have chronic stress every time the end of the month rolls around. Example Scenario
More details: |
Warning Sign #8: You Have No Emergency FundAn emergency fund is an essential financial buffer that helps you handle unexpected events - like job loss, medical emergencies, car costs or urgent home repairs, without sinking into debt. Yet many people overlook this essential savings component because they assume “nothing bad will happen” or they’re too focused on immediate wants.
Example Scenario You live comfortably, covering all your monthly bills without much difficulty. You assume everything is fine. Suddenly, your car breaks down, and repairs cost $1,200. Without an emergency fund, you're forced to charge it to a high-interest credit card. Now, you're stuck paying interest each month because you can't cover the full balance immediately. This adds a new monthly expense on top of everything else. More details: Emergency Funds - Save Today to Avoid Stress Later. |
Warning Sign #9: You’re Constantly Worried About BillsIt's completely normal to feel concerned about money sometimes. However, if you're losing sleep or are constantly stressed over whether you can keep up with your bills, it's a good indicator that your finances are unhealthy.
Every time the phone rings, you worry it might be something that's going to cost you more money. You're frantically monitoring your bank account each day before payday to ensure you won't run out of money. You might skip paying one bill to cover another, leading to mounting debts. Excessive worry about bills can be paralysing, but it's often a symptom of underlying issues like high debt or insufficient income. Tackle the root causes, and you'll gradually see your stress levels subside. |
Warning Sign #10: You’re Chasing Status and “Keeping Up with the Joneses/Kardashians”The popular phrase “keeping up with the Joneses/Kardashians” (depending on what generation you’re from) refers to the tendency to compare our financial and material standing with that of our friends, neighbours, or social media acquaintances. This behaviour can manifest in buying the latest smartphone, an expensive car, or a giant home - not necessarily because we need or can afford it, but because we want to match or surpass someone else’s perceived lifestyle.
Social Media’s Role - Our View
|
Are You in Financial Danger? Take This 5-Question Self-Check Quiz
Many people don’t realise they’re heading towards financial trouble until it’s too late. Answer these five critical questions honestly to assess your financial health. Each question comes with a score—add them up at the end to see where you stand.
Question 1: Do you have at least three months' worth of essential expenses saved in an emergency fund? Essential expenses include rent/mortgage, utilities, food, and transportation.
Question 2: Are you regularly spending more than you earn each month? This includes using credit cards, overdrafts, or loans to cover everyday expenses.
Question 3: If you lost your job today, how long could you cover your living expenses without borrowing money?
Question 4: What percentage of your income goes toward paying off debts (excluding your mortgage)? This includes credit cards, personal loans, car loans, and BNPL payments.
Question 5: Do you regularly feel stressed or anxious about money?
Your Score & What It
What’s Next?
Question 1: Do you have at least three months' worth of essential expenses saved in an emergency fund? Essential expenses include rent/mortgage, utilities, food, and transportation.
- A) Yes, I have 3+ months' worth saved (0 points)
- B) I have some savings, but less than 3 months' worth (2 points)
- C) I have little to no emergency savings (5 points)
Question 2: Are you regularly spending more than you earn each month? This includes using credit cards, overdrafts, or loans to cover everyday expenses.
- A) No, I always spend less than I earn (0 points)
- B) Occasionally, but I try to make up for it later (3 points)
- C) Yes, I rely on debt to get by (5 points)
Question 3: If you lost your job today, how long could you cover your living expenses without borrowing money?
- A) More than 6 months (0 points)
- B) 1 to 6 months (3 points)
- C) Less than 1 month (5 points)
Question 4: What percentage of your income goes toward paying off debts (excluding your mortgage)? This includes credit cards, personal loans, car loans, and BNPL payments.
- A) Less than 10% (0 points)
- B) 10-30% (3 points)
- C) More than 30% (5 points)
Question 5: Do you regularly feel stressed or anxious about money?
- A) No, I feel in control of my finances (0 points)
- B) Sometimes, especially around big bills or emergencies (3 points)
- C) Yes, I constantly worry about making ends meet (5 points)
Your Score & What It
- Means 0-5 Points: Financially Secure: You’re in good shape! You have savings, control over your spending, and minimal reliance on debt. Keep maintaining healthy financial habits.
- 6-12 Points: Moderate Financial Risk: You're doing okay, but there are warning signs. Focus on building emergency savings, reducing debt, and improving your financial stability. Small adjustments now can prevent big problems later.
- 13-25 Points: High Financial Danger: You’re at serious financial risk. Your savings are low, debt is high, and job loss or an unexpected expense could push you into financial crisis. Now is the time to take action—start budgeting, cutting expenses, and increasing income where possible. Seek financial advice if needed.
What’s Next?
- Use Our Free Budget Guide – How to Build a Budget and Manage Your Money
- Reduce Debt Now – How to Pay Down Debt Faster
- Build Emergency Savings – Emergency Funds: Save Today to Avoid Stress Later
Concluding Thoughts: The Hard Truth About Financial Danger
- Most Kiwis won't realise they're in financial trouble until it's too late. Financial danger isn't just about making minimum payments on a credit card—it's about the stress, anxiety, and limitations it places on your life. When money controls you, instead of you controlling money, everything suffers—your health, relationships, and future opportunities.
- If you see even one of these warning signs in your own life, now is the time to act. Financial security isn't just about having more money—it's about making smarter choices, setting boundaries, and ensuring you're not just surviving but thriving.
What you can do today:
- Face the reality of your financial situation—Don't ignore it or assume things will magically improve.
- Cut back where you can—Every dollar saved strengthens your position.
- Build an emergency fund—Start small, but start.
- Reduce reliance on debt—Debt may feel like a lifeline, but it's usually a trap.
- Increase your income where possible—Side hustles, better-paying jobs, and smart investing can change your financial trajectory.
The best time to take control of your finances was yesterday. The second-best time? Right now.
Related Guides
- Layoffs, Redundancies, and Restructures
- Debt to Income Ratios
- 40 Must-Know House Buying Tips
- Emergency Funds
- 20 Things to Stop Buying to Have More Money
- How to Pay Down Debt Faster and Break Free from Financial Stress
- Financial Red Flags in a Relationship
- Bailing Out Your Partner Financially
- Don't Let Supporting Your Adult Children Ruin Your Retirement
- How to Build a Budget and Manage Your Money Effectively