Maria and her husband Joe thought they were getting ahead in life. They had a BMW. Two investment properties. Good jobs on decent pay.
But the reality was they had no savings. Instead, they owed about $100,000, not including the two mortgages, three credit cards, two car loans and bills piling up.
At the same time, they were both in insecure contract work.
They’re not alone. Australians ranked household debt as the country’s most pressing problem in the Australia Talks National Survey.
Maria and Joe’s debt breakdown
- Car loans: $50,000
- Credit cards: $27,000
- Unpaid bills (utilities, phone, council rates, body corporate): $23,000
- Total debt: $100,000
Back to basics with a budget
- The first step with debt is to get everything down on paper.
- Check it with a bank statement because sometimes people can’t remember what they do spend on certain things.
- We do a budget that looks at expenditure fortnightly, even on those items that aren’t fortnightly. Car registration might be once a year or once a quarter.
- Set rainy day money aside so when unexpected expenses comes up, you’ve got that money there and do not need to rely on loans and credit cards.
- Cut down on costs where possible. Many people are spending money on things that perhaps they don’t need, they’re not really getting that much benefit out of it — for example they might have phone plans that are incredibly expensive when they could buy their phone outright and have a prepaid sim.
- Cut down on food bills — changing to cheaper supermarkets, no longer getting any takeaway, taking lunch to work — cancelled their streaming services, changed phones to prepaid, renegotiated their insurance and other service providers and no longer have holidays.
- Contacted all the organisations money is owed to and asked for hardship provisions, which often means a new repayment arrangement. If you are in too much debt and it’s unaffordable then financial service providers have an obligation to come to a hardship arrangement.
The long road to recovery
The whole process of getting on top of their debt took about three years.
It was probably a longer case because it was so complex and things unfolded. Circumstances change and there were more things to do, Each time Maria or Joe changed jobs everything had to be reconsidered. In the three years they worked with Ms Jacobs, Joe had six job changes and Maria two.
“In the beginning it was just small amounts — $50 here, $50 there,” Maria said.
“But it started to grow as we knocked the small debts out. It’s really ramped up in the last year.”
Finally, they both secured permanent employment last year, which makes keeping to their budget easier.
Slowly and steadily, the couple have paid off around $65,000 so far and hope to have paid off the last $35,000 of debt in two years’ time.
And her advice to others in debt?
“What I would say is don’t try and keep up with other people. No one really cares at the end of the day.”