The Challenge Australians Face: Living with a Debt They Can’t Repay

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Financial security is difficult to achieve nowadays. The increased rate of inflation and higher prices of primary commodities has put a lot of Australians into a state of financial insecurity. Almost one in two people have less than three months’ worth of income saved up while almost one in three have even less than one month’s income kept as savings for emergencies. Studies show that two thirds of Australian adults feel financially insecure since they don’t have enough money saved up, or they can barely budget the money they earn.

One in every seven Australians is experiencing financial hardship with having little to no savings at all, and being unable to pay debts that can eventually pile up over time.

Key factors that contribute to the piling of debt

 Contrary to the belief that incurring debt is a result of poor financial choices, debt problems are actually a product of a lot of circumstances.

For most adults who fell behind their debt payments before it was due, one key factor for their debt is the loss of jobs, or underemployment. Losing a job means putting a halt on the flow of income, while bills and expenses continue to pile up. This can eventually lead to financial hardships for those who hardly save enough while still being capable of affording their necessary needs.

 

Physical and mental health problems also appear to be a factor why people fall into debts they cannot pay. Emergencies that are health related can occur anytime. And it disrupts the distribution of expenses a person allocates for every need they regularly pay for. Most people earn just enough to pay for what they need such as housing, electric and utility bills, and groceries without having too much extra budget for miscellaneous expenses. Unexpectedly needing to pay for health services can lead a person to redistribute their budget, or fall behind some bills they need to pay.

Other factors that might appear as common reasons for financial hardship such as gambling or alcohol and drug addiction were a much less prevalent reason why people incur debts.

Earning less also means more hardship. It is a stressful experience falling behind repayments and it is much more difficult when the income leaves no margin for unexpected expenses. Getting into trouble financially can easily occur, and all it takes is a little mishap such as a car breaking down, or an emergency health problem that results in expensive hospital bills.

People who experience financial hardships end up having negative effects on their health, relationships and even their outlook to search for another job or finish their education. It becomes more difficult to function, with a debt weighing them down.

Most try to cope up by cutting down their expenses from reducing their expenses on food, recreation utilities and medical care and transportation while some end up borrowing money just to cover the things they need to pay for.

 How to address financial difficulties

 Consumer protection law allows Australians who experience financial hardship to negotiate payment plans and other arrangements with banks, and utility companies for telecommunications, electricity and water. Although this option is made available for those who encounter financial hardships, only a small number of people choose to use these provisions to obtain financial assistance.

These arrangements tend to be very short-terms, which makes it questionable if low-income debtors really benefit from these types of assistance.

The accessibility of assistance should be broadened, such as choosing to get financial counselling services. Financial advisors such as Debt Solutions Melbourne can provide assistance to low-income debtors to improve their financial and emotional status, by optimizing and realigning their cash flow, so they better manage their expenses.

Each person has different situations, and understanding the primary wants, needs and expectations can be a key factor into improving financial stability and eventually paying off the debt owed.

A professional can help you determine how you’re supposed to spend your money wisely, so you can avoid more debt in the future and eventually help direct you into paying what you owe.

Managing your debt is not easy, but the first step into paying them is recognizing that you need help, and finding ways to improve your current living conditions. It is important for you to determine how much you owe, and when it is due. Keeping your bills in check will help you keep track of where you should allocate your money and which needs immediate attention.

Create a list for your debts and schedule a time each month where you can pay it off. Align it with the income you are getting and try to pay off your bills based on the schedule you have set to avoid late payments. Late payments make it harder for you to pay off your debt since you’ll end up paying for the late fee every time you miss a due date.

It will also help you if you keep track of what you need to spend on. Have a breakdown of your monthly budget with your monthly expenses and see what can be adjusted and if you can save on some items.

Financial hardships can happen to almost anyone, and it can be tough to deal with. But it is not a situation where you cannot bounce back from. Keep in mind that the first step to getting back on your feet is knowing that you need assistance and asking the right person for help.

 

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About Editorial Team 88 Articles
Watch My Wallet has everything you need to know about money, written by real people who’ve been there. Inspired by the philosophy of Early Retirement Extreme (ERE), our goal is to make informed decisions about our finances in order to achieve financial independence.