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Australia’s average household debt was $261,492 in 2021-22, up 7.3% from the previous year (2020-2021). Meanwhile, the average household gross disposable income was $139,064, only up 3.7% from the previous year.

We might all agree that this is an interesting study. However, it is important to consider what can we do about it. 

Combine high levels of debt with rising interest rates and a cost-of-living crisis, and it’s no surprise that Australian households are reaching out to debt management companies to help regain control of their finances.

Debt management companies are private organisations that can assist by:

  • consolidating and simplifying multiple debts,
  • helping to develop a sensible repayment plan,
  • negotiating with creditors to:
  • alleviate pressure on householders, and
  • satisfy creditors’ immediate payment concerns.

Sometimes, they repay your debts – to a specified limit – and you repay them under a single loan arrangement. Terms and payment amounts can be negotiated, offering a beacon of hope and a sense that you’re taking back control.

If this sounds like the perfect solution, remember that for every pro, there’s usually a con. For example:

  • Engaging a debt management company may affect your credit score. Though you’re making regular repayments, closing or restructuring accounts may be recorded unfavourably on your overall credit history.
  • Fees and charges apply. Debt management companies are not charities. Costs may include setup and monthly fees, usually calculated on the total debt being managed. Fees are added to the overall debt, which magnifies the financial difficulty.
  • Generally structured and inflexible, debt management plans require adherence to a strict payment schedule. This can be stressful if income fluctuates or unexpected financial situations arise.

While weighing the pros and cons of a debt management service, consider these do-it-yourself strategies.

Budgeting (aka Spending plan)

Creating a budget is a 3-step process.

  1. List your income and expenses (debts, rent/mortgage, food, medical, utilities, entertainment, eating out, etc.). For debts, include:
  1. amounts owed
  2. minimum monthly payments
  3. due dates
  1. Categorise spending into a) Needs (needed to survive) and b) Wants (nice to have). Now, look for ways to reduce spending. 

The government’s Moneysmart website lists easy ways of cutting back everyday spending.

  1. Allocate saved money to debts. Identify which one/s to pay first, e.g., prioritising those attracting higher interest, like credit cards. 


Rather than customers defaulting, most banks and utilities companies prefer to negotiate repayment terms, sometimes even offering assistance programs.  

The key is to reach out before it’s too late. Be upfront about your situation and willing to arrive at a mutually beneficial arrangement. 

Remember, nobody wins when debts are not paid.

Government assistance

The Australian government provides a range of financial assistance packages and interest-free loans depending on circumstances. These include crisis payments for unexpected situations and income support payments for cost-of-living expenses.

Of course, there are conditions, but further information, including application criteria, is available from the MyGov website. 

Financial counselling 

Financial counsellors help you understand your financial position and assist you in navigating your way out of difficulty.

Some local communities offer free or low-cost financial literacy programs aimed at providing education about money and debt reduction.

Everyone’s financial situation is unique. There is no one-size-fits-all, so it’s important that your action plan is specific to your needs and that you’re 100% comfortable with any decisions you make.

What’s crucial is that you do something; being proactive is empowering and sets you on the path to financial recovery.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.