Australian household and personal debt levels are some of the highest in the world so it’s not surprising that many of us face financial stress and difficulty managing debts at some stage of our lives. More than 2.5 million Australians live in households in financial distress, so if you’re struggling with debt, you’re not alone.
Unless your debt problem is temporary and you have a solution, ignoring it is likely to make it worse. Sometimes the hardest thing to do is to admit that the problem exists and to seek help, but this is the fastest way of dealing with it and getting yourself back on track.
Make an appointment to see a financial counsellor. A financial counsellor is a qualified professional who can provide you with information, advice and advocacy if you are experiencing financial difficulty. It’s a free service that’s non-judgmental, independent and confidential. They will listen and provide emotional support. Financial counsellors do not sell products.
Financial counsellors are often based in community organisations, charities and local government agencies throughout Australia. If you are in debt or are unable to meet your ongoing expenses, a financial counsellor may be able to help you:
Please note: Financial counsellors are not the same as financial planners or financial advisers, who provide financial planning and investment advice for people with money to invest.
If you are you behind on your bills, struggling with debt repayments or unable to cover basic living expenses, there are organisations that can help you manage a financial crisis.
Each of the Services, Army, Navy and Air Force, has a trust fund which can provide loans and grants to ADF members experiencing financial difficulty. ADF members who are suffering financial hardship due to physical or mental injuries, as a result of service, may also be eligible for assistance through the Bravery Trust.
To contact the appropriate source, go to:
If you don’t have a budget, a budgeting tool can help you develop one. A budget will give you a clear picture of your income and expenses and allow you to identify any areas you could make savings. Make sure you include the minimum repayment amounts on all your debts when completing your budget. It might be helpful to list out debts in a debt summary.
If you already have a budget, make sure it’s up to date so you can quickly see whether you can realistically pay your debts without help.
Making a list of current debts and minimum repayments will help you get a clearer picture of where you’re at. Here’s an example of what your debt summary might look like:
|Creditor||Type of debt||Amount owing||Minimum monthly repayment||Current repayment amount||Notes|
|Bank A||Credit card||$8,000||$240||$240||Several payments made late|
|Bank B||Credit card||$5,000||$125||$125|
|Energy co.||Electricity||$485||2 weeks overdue|
If after completing your budget and debt summary you think you’ll have difficulty managing your debts, seek help immediately. Try not to default on your payments, talk to your credit providers to negotiate an affordable payment plan.
As soon as you are aware that you can’t pay a bill, contact the credit provider to inform them you are in ‘financial hardship’ and are finding it difficult to meet your repayment obligation. Ask them about adjusting your loan repayment or bill amount to something more manageable, larger bills can often be paid by instalments. This will only be a temporary measure but might give you a bit of breathing room to sort things out more permanently.
Your credit provider may be able to give you an extension of time to make the repayment, offer you a lower repayment, or a lower interest rate, for a set period of time, to help you get back on your feet. This is called a hardship variation. Make sure that you can afford to meet the repayment arrangement before you agree.
You may find the following MoneySmart resources useful:
If you’re finding it difficult to talk to credit providers, ask a financial counsellor for help.
Don’t panic and rush into a debt agreement. A debt agreement is a form of bankruptcy and could put your security clearance at risk. This could have a serious impact on your career in the ADF and future financial outcomes.
There are many for-profit organisations, often calling themselves ‘debt solution compa-nies’, which offer to help people in financial difficulty. They may provide ‘debt consolida-tion loans’, ‘debt agreements’ or other services for which they will earn fees or commis-sions. Avoid them and choose a free financial counselling or a free legal service instead.
Debt consolidation or refinancing by rolling your existing debts into a single loan, can make managing your debts easier because you’ll only have a single debt to be repaid, but it can make your situation worse. You may end up paying a higher rate of interest that you are already paying, and if you don’t close existing credit accounts it can be tempting to use available credit the next time you find yourself short of cash.
If you are considering entering into a debt consolidation loan, debt agreement or any form of bankruptcy, always seek legal advice first. There are usually better options.