How do you clear debt when you’re on an Age Pension?

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By Claire Tacon

Myrna is worried that she’s falling further into debt and needs to know what to do to minimise her debt damage. We’ve asked National Debt Helpline Financial Counsellor Claire Tacon for her tips on how to avoid the debt spiral.

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Q. Myrna
I’m on a part-Age Pension and I always seem to need my credit card to make ends meet. Recently, I’ve had more expenses than I can manage and I’m almost reaching my credit limit. What can I do? Will my bank increase my limit? Should I borrow money to pay it off? I’m worried that I’m starting to go down a debt spiral. Can you help me?

A. First, congratulations on taking the first step to take control of your finances. Asking for help takes a lot of courage.

Your situation suggests that you are spending more than you are receiving through your part-pension. But you already know that. The tricky part is changing this.

This general advice will hopefully give you some good ideas to get started. 

The first step is to work out whether it is possible to either increase your income or reduce your expenses. Completing a thorough budget will give you insight into how much you are spending as a proportion of your income and whether there is any way to cut back. The government website Moneysmart has some very user-friendly budgeting tools and lots of useful information.

As you are on a part-Age pension, I assume you have some assets. It may be possible to offload some to improve your situation. I would recommend having a chat to a Financial Information Service (FIS) Officer at Centrelink before making any decisions. The FIS Officer will be able to tell you how any changes to your assets would affect your pension.

If you own your own house, is downsizing an option? Or could you make some extra income by renting out a room? In some cases, a reverse mortgage may be an option. But approach with caution, and have a look at what Moneysmart and the FIS Officer say about this first.

If you are renting, have you considered moving to a cheaper property? Housing support agencies provide housing assistance for over 55s and may be able to help. You can call Home at Last on 1300 765 178, and there are agencies that can help in every state.

Energy bills are a big problem for anyone on a low income. If this is the case for you, have you checked whether you are receiving all the concessions available to you? You are entitled to a free energy audit from your electricity company if your bill is higher than expected. If you owe money on your utilities, you may be entitled to a government grant to reduce your bills.

Finally, in relation to your current credit card debt, I would recommend ringing the National Debt Helpline on 1800 007 007 where I work, and speaking to a financial counsellor. This is a free, confidential service and the best place to go for unbiased, more specific advice about your situation generally and about that credit card.

Do you have any tips for Myrna? Have you had experience with any of these services?

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25 Comments

Total Comments: 25
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    This time of year is when all our big bills tend to arrive. Well, at least mine do, and yes! It is a struggle to keep on top of the finances. I broke free this time round ie: my outgoings equalled my bank balance. But I am left with no money in the bank. Not a nice feeling. And I am on a defined benefit pension well above the Old Age Pension. So I feel for those on the OAP as the cost of living these days is well in excess of what the Government hands out to those on the OAP. Thank good for the accompanying handouts for those on the OAP. I think that is your only saving grace?

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    Myrna is on a part pension which means she has assets
    Sell your assets to pay off the debt in full
    Then start living within your means

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    True, CoogeeGuy, with the age pension my only income, I find it hard to make ends meet. It was worse when I still had a mortgage, which I paid off last year. Even without that expense it gets harder. But thanks goodness there is an incomes, and at least I know what it is each fortnight, unlike so many who are underemployed.

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      Yes patti. It seems strange that prices are rising consistently as incomes stagnate or fall. Something doesn’t feel right.

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      Yes Patti it is getting harder, but on a single pension, it is still possible, just.

      The biggest problem is greedy state governments & councils. The most rapidly increasing costs are council rates & electricity, with car registration & licence fees close behind.

      I use a very simple, but totally effective budgeting system. I figured out what had to stay in the bank each fortnight to pay rates, power, registrations & insurances, phone, internet, & all the other fixed costs. I leave that much & $40 in what I call my bill paying account. I draw out the rest, & put it in my wallet. Most of my major expenses come in July, so I know I can’t spend any of the $5000 + that is in the account in June. Despite greedy governments, that account has met my bills for the 13 years I have been on the pension.

      With the cash in my wallet, I have another account, my fun account, & anything left in the wallet at the end of the fortnight goes into that, even if it is only a few dollars. It is used for things like household maintenance, clothes, presents, treats, or internet purchases. If the wallet goes empty during a fortnight, I simply can’t spend any more until pension day. If the fun a/c is empty, then no more fun until it has built up again.

      So far money may be tight, but I have not had to worry how to pay any bill.

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      Hasbeen, you’ve done well – and you know you have, you have developed a means of maintaining control of your circumstance. Your method is commendable, I wish you well.

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    Go to the bank and get most of the pension in cash. Divide the pension into cash allocations according to regular fortnightly expenses, especially electricity. It will be necessary to keep some money hidden at home.

    Save all loose coin and bank it.

    Buy nothing with credit card, the record is often out of sequence and sellers have more than one name.

    Note that anything you sell when you are old, you may never be able to replace, so choose wisely if you sell something to get money

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      Agree Charlie – so much easier to pay for everything with a tap card and one loses track. When having to hand over notes one is more careful.

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      I even draw a heap of $20 notes for my daily spending. Cant afford to drop a $50 or get short changed with one.

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      Sheer brilliance Charlie, and so simple. If only others could see how easy it is but too many of em are their own worst enemies. Easier to blame someone else to excuse their own failings.

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    First go to centrelink and sign up for centrepay. They will then pay your major bills fortnightly from your pension,(Rates, Electric, gas Etc.) Based on your previous bills. This helps to prevent sudden bill shock. It is then far easier to make a budget from whats left of your income. There may be a small makeup at the end of the billing period but no large shocks.

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    Carry a pen and paper and write down everything you buy. You’ll soon see where leakage occurs.
    Use the library for books, magazines, to read the newspaper and to borrow DVDs.
    Suggest you meet friends for picnics or walks instead of in the cafes or clubs.
    Don’t gamble on lotto or the lottery.

    The interest on a credit card is the killer. Stop using the card. Freeze it in a block of ice if you have to. Pay at least 10% of your income off each month until it’s paid off then save the 10% in an emergency fund. Put the 10% away first before anything else. Saving or debt paying must come first rather than be what is left over. It’s easy to never have anything left over.

    You are going to have to earn more or spend less as Claire so wisely suggests.Claire has made some great suggestions here.

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    Yes, I have a tip. Toll over your card to a new one and earn an interest free period. Increase your credit limit. Sell everything you have an move all assets offshore. Keep doing this until you can’t increase your debt any further. Then get out of the country and never come back.

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    The is Australian system problems were pensioners have to life as dogs or on the str.you not have rights to life the is not any rights in the all system

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    One solution, DON’T HAVE A CREDIT CARD. I DON’T. If you own a home then start making payments fortnightly either into a savings account for when the bill comes in or anything like rates and water ask about paying fortnightly. Second, When renting with the huge rents $600 a fortnight Rental Assistance is $135, then car rego, insurance, phone, electricity I pay all of these fortnightly except Rego which you can’t but should be and whatever is left then divide for scripts, food, etc. Sometimes I have to not buy scripts if I run out during the fortnight as I have nothing left to pay for anything. THESE POLITIANS IN THE LIBERALS DO NOT CARE AS LONG AS THEY LOOK AFTER THEMSELVES WITH THE HUGE INCREASES.

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    An elderly lady in her late 80’s had a Credit Card Debt of $12,000 that was one card, another card had a debt of $4,000 different Banks. Both Banks wiped the debt’s for this lady because they know that she would never have paid them off and they know that they shouldn’t have given a pensioner with no assets that much credit.

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      She obviously knew what she was doing and took advantage of the banks

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      The banks cover the high risk of losing by the very high interest rates on these products. It’s a gamble really with unsecured lending.

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      Smart lady, the world, the government is all coluding to rip off every boomer who saved for old age. If you don’t know it yet, you’re an ignorant old coot. Smart lady.

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      whatupdoc, please explain what facts you can direct our attention to that might substantiate, however small, the ludicrous claim you’ve made. In the unlikely event that you can produce proof, please be assured I will be the first to retract and apologies, otherwise, I beg you to refrain from posting comment of unsubstantiated claptrap.


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