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 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 money you have coming in. This might include your wage, salary, any government parenting payments or other government support, child support and money from investments.
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, credit cards, payment services and so on. Here are 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 whitegoods.
Be careful of ‘Buy now, pay later’ services or store-issued credit cards. 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, petrol, insurance 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 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.

Clearing your debt

To clear debt, you’ll need to save money.

One of the best ways to do this is to reduce expenses. Here are tips:

Look at your expenses and work out which expenses are ‘needs’ and which are ‘wants’.
Identify some ‘wants’ that you can do without – for example, subscriptions to music or TV streaming services, holidays, dining out, new clothes and home decor.
Identify some ‘needs’ that you can get at a cheaper price – for example, electricity, groceries, insurance and mortgages.

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

And you might be able to increase income by finding new or additional paid employment.

Getting help with debt

If you’re not sure 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
refer you to other services.

Financial counsellors are always free.

You can speak to a financial counsellor by calling the National Debt Helpline on 1800 007 007. This helpline is for individuals, families and small business owners who are experiencing financial difficulty because of unemployment, sickness, credit over-commitment and family breakdown.

You can also look for a financial counsellor in your area using the National Debt Helpline’s Find a financial counsellor map.

If you have special financial needs, you can get help from the following specialist financial counselling services:

Mob Strong Debt Helpline is a legal advice and financial counselling service for Aboriginal and Torres Strait Islander peoples – call 1800 808 488.
Small Business Debt Helpline is a service for small business owners experiencing financial difficulty – call 1800 413 828.
Rural Financial Counselling Service Program is a program for eligible farmers, fishers, foresters and related small business owners experiencing or at risk of experiencing financial difficulty – call 1300 771 741.

For more general financial information, you can use Services Australia’s Financial Information Service. This service is free and available to everybody.

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