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.
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?