Getting Out of Debt After Divorce or Financial Abuse
Getting out of debt is hard enough on its own. But when you've been through financial abuse, a divorce, or had to start over from nothing, it’s not just a numbers game, it’s a healing journey.
You’re not irresponsible. You’re not a failure.
You’re someone who survived, and now you’re rebuilding.
In New Zealand, women are more likely than men to experience financial hardship following a relationship breakdown, and women who have experienced financial abuse report significantly lower financial resilience (Te Ara Ahunga Ora Retirement Commission, 2021).
If this is part of your story, you’re far from alone — and there’s a path forward.
Step One: Understand Your Debt Landscape
Before you can make a plan, you need to know exactly where you’re starting from.
It can feel overwhelming, but seeing it all laid out is the first step toward taking back your power.
Grab a notebook or use a spreadsheet and write down:
Who you owe
How much you owe
Minimum payments
Interest rates
Any emotional weight attached (e.g. debt tied to your ex)
Some debts (like student loans) might not be urgent to pay off aggressively, while others (like a high-interest credit card) need attention sooner.
Tip: Try not to judge yourself while you do this. You’re gathering information, not grading your past.
Step Two: Choose Your Debt Repayment Strategy
There’s no one-size-fits-all plan. Different methods work for different people and you’re allowed to choose based on your situation.
Here are three popular strategies:
1. Debt Snowball (popularised by Dave Ramsey)
Pay off the smallest debt first while making minimum payments on others.
Once the smallest is gone, roll that payment onto the next smallest.
Great for emotional momentum — quick wins build confidence.
2. Debt Avalanche
Pay off the highest-interest debt first while making minimum payments on others.
Saves the most money in the long run.
3. Debt Tsunami (a lesser-known method)
Prioritise paying off debts that cause you the most emotional distress, even if they’re not the highest interest.
How to Choose?
If your motivation needs a boost: start with Snowball.
If you want to save the most money: Avalanche it is.
If certain debts feel emotionally heavy: Tsunami might help you breathe easier.
You’re not just paying off debt — you’re reclaiming your mental space, too.
Step Three: Prioritise Based on Interest (and Emotions)
Debt with high interest rates (think payday loans, credit cards) should usually go first, because it grows fast.
Other debts, like student loans (especially in New Zealand, where the interest paused when living locally), might not be as urgent.
Create two lists:
Debts to Smash Now (high interest, emotional toll)
Debts That Can Wait a Bit (low/no interest)
This helps you channel your energy where it will make the biggest difference.
Step Four: Avoiding the Debt Trap While You Pay Off Debt
Once you're in debt, it’s easy to stay in debt, especially when modern finance tools make it feel so normal.
Buy Now Pay Later (BNPL) schemes like Afterpay, Laybuy and others can seem harmless — no interest! flexible repayments! — but they can quickly turn into a financial trap.
Miss a payment, and you’ll often face steep late fees and even impact your credit score.
It’s also easy to lose track of how many BNPL instalments you have stacked up at once.
Tip: If you're working hard to pay off debt, consider hitting pause on BNPL accounts. Treat it like a kindness to your future self.
Another powerful move?
Reduce your access to new debt as you go.
Financial educator Luke Kemeys from Keep The Change shared how he tackled his credit card debt:
"Every time I paid a chunk off my credit card, I called the bank and lowered my credit limit."
You can do the same with credit cards, overdrafts, or any other "easy access" debt facility.
Lowering your limit as you repay debt helps remove the temptation to slide backward, especially on tough days.
Think of it as building a safety net for yourself: not from a place of weakness, but a place of wisdom.
Step Five: Should You Invest While Paying Off Debt?
Although often a debated topic, I firmly believer this is a personal decision and there's no "wrong" answer.
When I was rebuilding my finances, I did a little of both.
I started investing tiny amounts — $5 a week into Sharesies, $5 into my KiwiSaver — while still focusing on clearing debt.
Here’s a simple rule of thumb:
If you’re drowning in high-interest debt (e.g. 20% credit cards), focus on debt first.
If your debt is manageable and you want to build healthy financial habits, micro-investing can help lay the foundation for your future.
Think of investing (even tiny amounts) as planting seeds for future stability, not as competing with your debt payoff journey.
Step Six: Stay Motivated Through the Journey
Debt repayment is rarely a straight line. You’ll have setbacks and that’s okay.
Here’s what helped me:
Use a debt tracker: Watching those numbers shrink feels powerful. (You can grab my free Budgeting Bundle with a debt tracker here.)
Track your net worth too: Even when your debt feels huge, tracking your net worth (assets minus liabilities - a.k.a. debts) shows progress over time. I use a free app called WorthTracker.
Celebrate milestones: Every $500 paid off, every debt closed out — celebrate them all.
You're allowed to feel proud even before you hit “debt-free.”
Final Thoughts: Compassion Over Shame
Debt is not a moral failing.
It’s a situation and situations can be changed.
In the words of financial educator Tiffany Aliche (The Budgetnista):
"Your mistakes are not who you are. They are what you did."
You are not your debt.
You are strong, wise, and worthy of a future that feels safe and free.
You’re not just paying off numbers on a page.
You’re rebuilding your life on your own terms.
And that is priceless.
