F
inancial distress occurs when a per-
son or family is struggling to meet
their personal or business expenses.
We saw widespread mortgage stress across
the US during the GFC and a correspond-
ing rise of the debt consolidation industry
in Australia during the same period. But
what do you do when you can’t pay your
bills, and how can you help friends and
family in times of financial distress?
Let’s face it, most of us struggle to man-
age the family budget. It’s not easy and
we’re certainly not taught how to do it in
school. Consequently, there are around
30,000 bankruptcies each year and that fig-
ure has been fairly consistent for some
time. So, too, the level of business adminis-
trations has been sitting around 10,000
since the GFC 10 years ago, with some
slight upward inflection in recent quarters.
According to the Australian Financial
Security Authority, the key reasons for per-
sonal financial distress are consistent and
include unemployment, excessive use of
credit and relationship breakdown.
Importantly, if you, a friend or family
member are in financial distress, it’s just so
important to seek help. Asking for help is
okay. Many people feel too proud to reach
out to a professional or friend, or too
embarrassed about their financial situation.
As I always say to my kids, “a problem
shared is a problem solved”.
Rest assured, there’s a whole industry to
help people in distress. A financial counsel-
lor is trained to assist you with advice
about managing your creditors and istrained in the workings of the Bankruptcy
Act (1966), to either help you avoid bank-
ruptcy or deal with it in the most con-
structive fashion.
So there are plenty of willing and capa-
ble professionals trained to assist you or
your friends and family to restore finan-
cial control and stability.
Financial distress comes alongside
other distressing events such as relation-
ship breakdown or unemployment. These
are common and easily overcome if you
are open to seeking help. People love
helping you anyway, so let them do it.Where to go
One of the best sources of help is Lifeline
(13 11 14). Wesley Mission also takes around
6000 calls a year from financially distressed
people and there are also state-based organi-
sations that specialise in assisting people
during financially demanding times.
An essential port of call is the Money
Smart website (moneysmart.gov.au),
which recommends these organisations:-^ NSW – Financial Rights Legal Centre,
phone 1800 007 007.
-^ Tasmania – Consumer Credit Helpline
(Hobart Community Legal Service),
1800 232 500.
-^ Victoria – MoneyHelp, 1800 007 007,
and Consumer Action Law Centre,
(03) 9629 6300.
-^ South Australia – Consumer Credit
Law Centre, (08) 8342 1800.
-^ Western Australia, Consumer Credit
Legal Service, (08) 9221 7066.
My advice is to try to avoid bankruptcy if
possible. Although it does offer protection
from aggressive creditors and in many cases
involves wiping away the debt. That can cer-
tainly help in relieving the mental anguish
of constantly owing money.
Bankruptcy does, however, stay with you
for a long time and can affect future credit
applications, travel plans and the ability
to act as a company director, so counselling
and seeking help to flesh out the options and
ramifications of your decisions is essential
in creating a clear path forward.
Another option is debt consolidation.
There are companies that package your debt
for a fee and help you manage your budget.
This is a good option if you have a house to
refinance because it can lower your interest
repayments and reduce no-payment fees.
But only enter an agreement if, in fact, it
does reduce your overall fees, and always get
a second opinion before committing yourself.
Don’t let financial stress ruin your life or
the life of your friends and family. Always
reach for help, which is available in many
directions, and make sure you take care of
yourself by enjoying other areas in your life.
Turning your financial life around can
be a hugely rewarding, positive and empow-
ering process, and often leads to financial
abundance as you learn the hard way to
enjoy a prosperous life.Sam Henderson is CEO of Henderson
Maxwell (hendersonmaxwell.com.au)
and host of Sky News Business’s
Your Money Your Call – Super.Don’t suffer in silence
CRISIS MANAGEMENT Sam Henderson
MONEY TROUBLES
TAKE A HIGH TOLL-^ Financial issues were rated as the top
cause of stress from 2011 to 2015, according
to the most recent Stress and Wellbeing in
Australia survey from the Australian Psycho-
logical Society. A study by National Australia
Bank found that 2 million people experience
severe or high financial stress or vulnerability.
Here are a few things you can do if you find
yourself in financial distress.