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What you’re doing wrong that keeps you in debt

Don't turn a blind eye. Here's how to get out of debt once and for all.

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Many people view debt as a negative thing, but debt can often start out as something positive. Debt can help you get the things you want and need faster and can help you live a lifestyle you might not have previously been able to. As long as you can retain control of and stay on top of your debts, things can remain hunky-dory. It's once this control is lost that debt can become a problem.

WARNING - Consider your own circumstances, or obtain advice, before you act on the general information contained in this article.

The reality of Australia’s household debt

In 2014, the Australian Bureau of Statistics (ABS) commissioned a study titled 'Australian Social Trends, 2014'. The study examined various forms of household debt using data from the ABS National Accounts and the ABS Survey of Income and Housing.

The study revealed interesting trends of how Australians handle their debts.

Why do people struggle with debt?

A look at the numbers above reveals that debt is a part of the majority of Australian households. While some of us continue to struggle with debt, others manage their debts with complete assurance. A different approach and a different mindset make a big difference when it comes to dealing with debt responsibly. How do you deal with your debt? People who struggle with debt:

  • Do not monitor their income and expenses. This may be due to not knowing how to budget properly, or not sticking to their budget
  • Have expenses that typically exceed their income
  • Are experiencing financial distress brought on by conditions such as a reduced income, being underemployed, etc.
  • Engage in certain wasteful habits such as shopping for things they don't need
  • Lack proper money management skills
  • Have little or no savings for dealing with unforeseen expenses such as medical emergencies, or loss of income
  • Don't compare products or review their financial products to see if they could save
  • Remain in denial and refuse to acknowledge that they have a debt-related problem on their hands
  • Fail to pinpoint the real reasons that got them into debt in the first place
  • Make only the minimum payments towards their debts
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What debt consolidation methods are available?

If you're struggling with your debt, there are strategies you can consider to reduce it. The most important step is to find the debt consolidation method that is going to work best for your needs and the type of debt you have.

  • Debt consolidation loans. If you're juggling multiple repayments, you could consider consolidating them into a single loan. This can help reduce the amount you're paying in interest, as well as fees on separate accounts. A debt consolidation loan can come in the form of an unsecured personal loan, or by you accessing equity you have available in your property. Keep in mind you will need to have good credit to qualify.
  • Balance transfer credit cards. If you have credit card debt across multiple accounts you can consolidate it into a single card with a balance transfer. You will pay 0% interest for a specific period of time, with some card providers offering up to 24 months. Certain credit card providers also let you balance transfer personal loan debt. For this method, you will also need good credit to be approved.
  • Part 9 Debt Agreements. If you're having trouble paying your debt, you could enter into a debt agreement with a third-party organisation and your creditors. The agreement essentially freezes the interest you're paying and gives you a certain repayment period to pay back what you owe. Some creditors agree to accept less than the full balance for repaying your debt, but entering into a debt agreement shouldn't be taken lightly as it is considered a form of bankruptcy.
  • Credit counselling. Enlist the services of a reputed credit counselling organisation for formulating a Debt Management Plan (DMP). Once you enrol in a DMP, the creditors will often reduce your interest rates. Afterwards, you will need to make one monthly payment to the counselling organisation. This organisation will handle the repayment to your creditors. This is worthwhile if you can repay your debt within five years, but again, it isn't a decision that should be taken lightly. This should only be entered into if you are having difficulty repaying your debts on your own.

Staying out of debt

When it comes to staying out of debt, there are quite a few things you can do. You could look at developing an emergency fund by trying to save up to 15% of your income. If you find this number a bit high, or just want a way to ease the financial strain, you could consider ways to create alternate sources of income. There are a huge amount of ways to make money online with freelance work by charging people for your skills. You could also consider selling some of your unused items, or looking at your expenses and seeing ways you could cut back. As always, creating a budget and sticking to it is a surefire way to keep you on track.

Debt reduction strategies you can consider

If you are considering tackling your debt head-on without taking out another type of credit, there are ways to help you take back control of your finances:

  • The "snowball" or "domino" method. This involves you writing down your total outstanding debt on each of your credit accounts, except for your mortgage and HECS-HELP debt. You don't need to consider interest rates at this point. Whichever account has the smallest balance is the account you make additional payments into and you pay off first – then the next smallest balance, then the next smallest, and so on until you are out of debt. This method helps get more accounts closed quickly, saving you interest and fees and gets you motivated by paying off debt. If two accounts have similar rates, pay off the higher interest rate account first. Remember to keep paying the minimum balance on all accounts and to consider early repayment fees for your personal loans.
  • Pay off your highest balances first. Another strategy is to pay your highest interest balances first. Paying off these accounts will save you money on interest repayments and have the same benefit as the "snowball" strategy in that it will help get your accounts closed. Start by writing down all your accounts, the balance outstanding on each and the interest rate. Remember to consider the balance of credit accounts when starting to pay them down and to keep making minimum repayments on all accounts.
  • Lose your loyalties. Finding the money to make additional payments can be a struggle. When was the last time you compared your savings accounts? Before making a purchase, have you looked to see if you could find it cheaper with a coupon code? Saving where you can and putting all your additional funds into your prioritised debt (according to the strategy you've adopted) is key to being debt-free.
  • Budget, budget, budget. Developing and sticking to a budget is of paramount importance when it comes to getting out of debt. There are a wide amount of budgeting websites and tools available that can track your spending, saving and expenses, so see which one works for you.

If you're stuck in a debt rut, picturing yourself finally getting out of it can be difficult. However, it is possible. With the right tools and the right strategy under your belt, you can be debt-free.

Picture: Shutterstock

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14 Responses

  1. Default Gravatar
    GeoffreyApril 4, 2019

    I currently have a credit card with approx $10000 remaining, I have been paying $359 a month on this card and have not used the card for over 8 months. I was working full time and it was easy to maintain payment. I have since had a heart attack and am now on the age pension as is my wife. I am finding it very difficult to now maintain this payment.
    What would you suggest as the best way to go.

    • Avatarfinder Customer Care
      MaiApril 5, 2019Staff

      Hi Westernbodycare,

      Thank you for getting in touch.

      I hope that you are doing good. You may want to contact your credit card provider to check if they can consider restructuring your payments to something that you can afford. Alternatively, the page above discusses different options and approach on what you can do to deal with your debt. You can head to the part that says What debt consolidation methods are available? and Debt reduction strategies you can consider. You will be able to weigh your options based on your financial circumstance and what you think will work best for you.

      I hope this helps and wishing that you can get back on track the soonest.

      Kind Regards,

  2. Default Gravatar
    KApril 3, 2019

    i have around $21000 debt but when i applied for a personal loan, credit card or balance transfer credit card or store card, all times, i got refused message. WHY i didnot know? i want get out from my debt as soon as possible, advice my how to get out

    • Avatarfinder Customer Care
      JohnApril 4, 2019Staff

      Hi K,

      Thank you for reaching out to Finder.

      The page provides you tips and guides that could assist you in getting out of debt. Once factor that you would need to check is your credit report. Ensuring that you make regular payments towards your debts do help in making a positive impact on your score. Hope this helps!


  3. Default Gravatar
    katrinaJuly 25, 2017

    How do I find out what I’m owing and where

    • Default Gravatar
      JonathanJuly 25, 2017

      Hello Katrina,

      Thank you for writing to us today. :)

      You can generate your credit file on this page, which summarizes it. Click the “Get your free credit report” green button to proceed.

      Hope this helps.


  4. Default Gravatar
    BelindaJanuary 15, 2017

    I have 2 loans – car loan & personal worth $40k from different banks. I have no credit cards and want to consolidate. My monthly payments are $650 per month.
    One loan is with Audi Finance & the other ANZ through a broker.
    What are my chances of a Top 4 taking my loans?

    • Avatarfinder Customer Care
      DeeJanuary 16, 2017Staff

      Hi Belinda,

      Thanks for your question.

      Your chance of getting approved for a loan consolidation ultimately depends on the overall status of your financial condition.

      You may want to visit this page to check and compare different loans for consolidation. To check how to apply, simply click the name of the loan product on our comparison table. Additionally, the ‘go to site’ button will lead you to its application page.


  5. Default Gravatar
    PatriciaFebruary 1, 2016

    Hi. I am currently under a debt agreement and have been paying every fortnight for 2 years now without any defaults but I have a few other debts around the amount of $4,000 that have accumulated from a few months ago and am struggling to pay off.I am hoping that there might be some help available like a debt consolidation loan where i could pay these off and get my finances back on track. The stress is affecting my health. Please advise best solution for me.

    • Avatarfinder Customer Care
      ElizabethFebruary 2, 2016Staff

      Hi Patricia,

      In your current situation it may be difficult to access a debt consolidation loan from a traditional bank or lender. However, you do have the option of varying your current debt agreement to possible include your current debt. You just need to contact the Australian Financial Security Authority to discuss your agreement.

      I hope this has helped.



  6. Default Gravatar
    MarieJuly 23, 2015

    I have several credit cards that I would like to consolidate to the lowest rate.

    What is the best way for me either Personal Loan or any other suggestions?????

    • Avatarfinder Customer Care
      SallyJuly 24, 2015Staff

      Hi Marie,

      Thanks for your question.

      As a financial comparison service, cannot recommend any specific product, process or strategy to our users, as the ‘best’ option will depend on your individual financial situation and needs.

      Our Loans for Debt Consolidation, Debt Consolidation and Repayment, and Consolidate Your Debts guides could help you narrow your choices down to arrive at the best decision for you.

      I hope this has helped.



  7. Default Gravatar
    KerryMay 19, 2015

    We are married couple M 56 F 59, both made redundant & business failed/closed Receiving approx $900 per fortnight total thru Newstart Allowance/Centrelink. F has picked up 5 hours per week ($150 gross per week) ON TRIAL ONLY at this time. Have total debt of $13,000 on two credit cards, GE Mastercard $2,000 & ANZ Low Interest Card $11,000. Own outright house and Land Rover 4WD 2004 model S Series 7 leather seats etc. Can we and how can we borrow some money or at least, consolodate our debts. As struggling with DD’s for health insurance, life insurance, house and contents insurance, credit card repayments, rates, other cost of living bills and trying to eat! What do you suggest please? Ray & Kerry Atkins

    • Avatarfinder Customer Care
      ElizabethMay 19, 2015Staff

      Hi Kerry,

      Thanks for your question.

      We aren’t at liberty to give personal advice, but there are free financial counselling services in every state that you may want to get in touch with. The general call number is 1800 007 007. You can also do a search of free financial services available in your state. You might also want to have a read of our debt consolidation guide to see some of your options.

      I hope this information will be of use.



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