There’s nothing more Kiwi than an overseas experience (OE) – it’s synonymous with adventure, excitement, and experiences you’ll remember for a lifetime.

It’s a rite of passage for many in their 20s. But the usual combination of working in a pub, paying big-city rents, and spending your cash on plane tickets means you can give your bank accounts a thrashing while you’re away.

Add a student loan quickly gathering interest, or credit-card debt and it’s easy to dig yourself into a serious financial hole.

A shock on returning home

Sarah* left New Zealand at 21 with a NZ$40,000 student loan and no savings, spending three years in Asia. She worked there, but earned the local currency – not much in New Zealand dollars. Everything she did earn was spent on travelling.

“I had a bad money attitude – I didn’t think about the big picture,” she admits.

“It seemed too hard to make the repayments on my student loan and I defaulted. I got a bit of a shock when I came home. Friends had all bought houses and got ahead with their student loans, and I was well behind, with Inland Revenue calling me to say I needed to pay back the arrears.”

Her loan went up NZ$10,000

Sarah’s not alone. Some 92 per cent of overdue repayments on student loans are owed by Kiwis who are overseas. By the time she returned in 2014, Sarah’s loan had increased to NZ$50,000. Four years later, she’s still got NZ$18,000 left to pay.

She has no regrets, and says everyone’s situation is different. While she might be behind financially, she had a successful career overseas and experienced all the benefits of living in a foreign country.

Fortunately, she says, her outlook on her finances has improved.

“I’ve made heaps of extra repayments on my loan. I’ll be a different person when it’s paid off. Now I’m thinking about the long term.”

A smarter overseas experience

An OE probably won’t make you money, but it doesn’t need to hold you back for years to come, says Lisa Dudson, financial adviser and director of Acumen.

She’s got some helpful tips:

Save for your OE before you leave. Work in the holidays, keep your costs down, and minimise the amount of debt you take on.

Pay off any credit card or consumer debt before you travel. “That debt grows at a nasty rate of knots. At 20 per cent interest, it will double in just over three years.”

Work more if you need to. Work for four months, instead of three, to fund your next adventure. Make the sacrifice.

Look for ways to get career experience. Can you find a starter job overseas in your field of work? It could give you a boost when you get home. “I worked professionally for half the seven years I was in the UK, and worked pub jobs and travelled the rest of the time,” says Dudson. “That career experience put me a few years ahead when I got back.”

Consider ways to repay your student loan. At the very least, ensure you make the minimum repayments – the Inland Revenue has some great resources to help.

Be resourceful. Getting by on the smell of an oily rag builds resourcefulness and problem-solving skills – the kind of life lessons that really make your OE worthwhile. “Those things are really valuable,” says Dudson.

Short-term pain but long-term gain

If you do only one thing, consider the long-term impact of your choices before you make them, says Dudson.

Making better money choices is easy in theory, she adds, but hard in practice.

Facing your finances and cutting your spending right now feels painful, while ignoring your money problems is relatively easy.

“If you take the easy option today, you need to recognise that it can create a lot of pain down the track.

“The further you bury your head in the sand, the bigger the problem will get. Dealing with it in the present means you have more flexibility and freedom in the future.”

* Surname withheld.

Fast facts on student loans

· 731,754 people have a student loan.

· The total balance of all student loan debt is NZ$15.3 billion.

· The average loan balance is NZ$20,983.

· 57 per cent of borrowers are female.

Source: Ministry of Education Student Loan Scheme Annual Report. Data correct as at June 2016.

First published 24 July, 2018

Story by Amy Hamilton Chadwick

JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate.