Managing money and avoiding debt

Managing money is about covering your everyday expenses, paying for unexpected expenses, and planning for the future.

Managing money will help you avoid debt, feel financially secure, reduce your general stress and enjoy your family life.

How to avoid debt

You can avoid debt by following the basic rule – spend less than you earn. Simple money management strategies can help you do this:

Work out what you earn. This includes your wage, salary and any government parenting payments or other government support.
Work out what you spend money on. Try to include everyday and unexpected expenses.
Use a budget planner to work out how you’ll pay for expenses and also save for the future.

You can also avoid debt by taking care when you’re choosing and using financial products like bank accounts, loans, payment services and so on. Here are some ideas that might help:

Reduce the number of bank accounts and loans you have. This will make your finances easier to understand and control.
Carefully read any terms and conditions before signing up to financial products and services. They might end up costing more than you think.
Avoid short-term, high-cost loans like payday loans or consumer leases on furniture and white goods.
Be careful of ‘Buy now, pay later’ services like Afterpay or zipPay. These often have additional fees, which can add up quickly.

Watch out for scams. Avoid signing up to anything you don’t understand, and always ask someone you trust for a second opinion. If it sounds too good to be true, it probably is.

If you get into debt

If you’re in debt, you’re spending more money than you earn. You can work out why this is happening by reassessing your income and spending. For example:

What is your weekly or monthly family income?
What are your main weekly or monthly family expenses? For example, what do you spend on rent, loans, food and utilities?
How much of your weekly or monthly income do you spend on these expenses?
How often do you pay for each expense?
How many credit cards do you have? How much do you owe on each? How much do you pay off each month?

Answering these questions can help you to list all of your debts. Once you’ve done this, you can focus on clearing one debt at a time. You might want to start with the smallest debt so that you gain confidence to tackle the bigger debts.

To clear debt, you’ll need to save money. Here are some tips for saving money:

Look at your expenses and work out which expense are ‘needs’ and which are ‘wants’.
Identify some ‘wants’ that you can do without.
Identify some ‘needs’ that you can get at a cheaper price.

You can also look into other kinds of financial support. For example, utility companies and banks have financial hardship policies to help their customers.

If you can’t work out how to clear your debts, get some help as soon as possible. For example, financial counsellors can help when you have financial difficulties. A financial counsellor can:

work with you to create a manageable budget
explain options for dealing with outstanding bills
negotiate with debtors.

Financial counsellors are free and available in most communities. You can also speak to a financial counsellor by calling the National Debt Helpline on 1800 007 007.

Taking steps to reduce debt will reduce your financial and personal stress. If you have a partner, reducing debt might also help you avoid conflict with each other.

Australian Government help with debt

The Commonwealth Financial Counselling Program offers free financial counselling to individuals, families and small business operators who are experiencing financial difficulty because of unemployment, sickness, credit over-commitment and family breakdown.

You can also use Services Australia’s Financial Information Service. This service is free and available to everybody. You don’t have to be receiving Centrelink payments to use it.