According to the Australian Bureau of Statistics, the average family with a credit card debt owes $3,433.00 compared to the $580.00 owed by each household in 1998-1999. The more alarming thing is that these figures are growing. This is not surprising considering the ‘credit’ on the card often seen as actual cash just waiting to be spent. To add to this, credit card reward programs are leading people to spend more than they should for extra points. Small wonder that bankruptcy rates are rising. Bankruptcy does come with a price but for many, the price of staying in debt is higher. Read some of the other bankruptcy blogs on here for more information.

I was having a cup of tea with my Grandfather during the week who brought up that his “daily accounts” hadn’t balanced, apparently he was a couple of dollars out.  I don’t know how I didn’t know this, but apparently he has kept a record of every dollar he’s spent for years.  He was always someone I looked up to, particularly fiscally.  He kind of embodied this idea of frugal morality that I admire but really haven’t lived up to.  I have no idea where my money goes but I’m about to find out.

I’m trying to think of financial goals at the moment, too.  I want to think big.

Most financial writting is opinion, not fact, which is a problem when you’re recomending things to clients.  Do they try debt consolidation? Payment Arrangements? Or Debt Agreements?  However there is some good research emerging on consumer finance and financial counselling.

One excellent study looked at “behaviours” in financial counselling clients and  found there were 4 “behaviours” associated with having low financial stress.  (“Financial behaviours of consumers in credit counselling”, Jing Jian Xiao, Benoit Sorhaindo, E. Thomas Garman)

1. “make plans on how to use their money”
2. “write down how money is spent”
3. “evaluate their spending on a regular basis”
4. “Use a written budget”

A recent Wesley Mission Report found that financial stress is associated with “adverse relationships with your spouse,” “problems with family members,” and, “the inability to think clearly”.  Their reseach had several financial indicators that were associated with significant adverse effects on family relations.

• Being unable to take a week’s annual holiday away from home;
• Inability to afford a night out once a month;
• Inability to pay a utility bill ontime;
• Seeking financial assistance from family or friends.

If you’ve experienced any one of these indicators or you’re experiencing financial stress maybe it’s time to try these behaviours.  In the coming weeks I’m going to work on implementing these. I’m going to record my expenses. Evaluate my spending. Make plans on how to use my money and use a written budget.  It’s called the Financial Freedom journey and it’s about to kick off!

• Repay Debt;
• Adjust Spending; and
• Save for the Future.

They’re the only options. Everything else falls under these 3 concepts.  You have to choose one or all of these options.

In order to fast track repaying your debts you might look at payment strategies or debt consolidation.  However the only major thing that will repay debt fast is paying more.

The only way to pay more is to adjust spending.

Sometimes our clients have got a debt consolidation loan and have paid out their debts but haven’t closed the accounts. These accounts start to accrue fees and charges, mainly through having direct debits dishonouring repeatedly on these accounts.  With no payments penalty interest rates kick in and the balance of the zombie debt grows.

The second way zombie debts occur is when a creditor might sell, or “charge off” its overdue debts to a debt collector who starts fresh collection activity.  This might happen years after you thought it was dead and gone.  Suddenly 10 years latter you’re getting calls, letters and legal action.

There is a statute of limitations on debt of 6 years. So if you haven’t heard from your creditors for 6 CONTINUOUS years, the debts is gone.  However if you didn’t update your contact details with that creditor, the statute of limitations doesn’t apply.  The statute of limitations is 12 years if the creditors have successfully obtained a judgment for the debt.

Zombie debts don’t go away unless you pay them. Just like zombies keep coming back to life in horror films, to make sure they’re dead, CLOSE THE ACCOUNTS!

Since July 2006, Trustees have been able to void transfers to superannuation.  To void a transaction the trustee must show that:

• The transaction happened;
• The transaction occurred within a specific time period, or while the debtor was insolvent but not yet bankrupt;
• The property would have been distributed to creditors if the transfer hadn’t been made; and
• The main purpose of the transaction was to keep the asset under bankruptcy.

Transfers made to superannuation by third parties on behalf of the debtor might also qualify.

Generally superannuation is safe under bankruptcy; if you haven’t tried to hide assets from creditors you will usually be fine.