Hidden Debts and Relationships

Almost every day, I will have a potential client say something like, “you can’t tell my wife” or “don’t tell my husband”. Of course I always respect the wishes of my clients, but I encourage clients to openly discuss their financial problems with their spouse. I even have clients who want me to tell their spouse about their financial problem, thinking it will make things easier. These conversations generally don’t go very well. The spouse is usually upset and feels deceived, and the client feels an even deeper sense of shame and guilt.

Getting out of debt isn’t easy and you need all the support that you can get. By keeping financial problems a secret, we do not have the support of our number one backer, our spouse. Secret debts can damage relationships, but with ‘the big secret’ out of the way, spouses can share the burden and both work towards a common goal together.

Full disclosure is the key to a clean conscience. A continuing conversation about money will help bring a spouse on board and show commitment towards the relationship. Having two people openly involved in running financial aspects of their life together improves accountability, equalises the marriage in a positive way, and helps each partner to stay on track.

Interview With a Recent Client: Kayla


Can you tell me about your background, and how did you accumulate your debt?

I accumulated my debt through being young and naïve about the interest on hire purchase items. During the financial crisis, I was made redundant at my regular job, and then I was unable to keep up with all the repayments I had accumulated. Even though I had temp work, I wasn’t earning enough. I was okay for a while, but it just got to the point where bills were piling up and creditors were calling nonstop. It was all really overwhelming.

Was there a “light bulb” moment when you decided that you were going to be debt free? 

I was watching TV one night and saw an ad for Debt Mediators, and it felt like they were talking directly to me. So I made my brave decision to call the next day, asked multiple questions, gathered all the information I needed to decide on a debt agreement that was the best option for me.

How long did it take you to get debt free? How did you stay motivated?

It only took me two years, even though my debt agreement was for three years. When I first started the agreement, I was still doing temp work, but once I got permanent work, I increased my payments and ended up paying it all off 12 months in advance.

It was easy to stay motivated because with the help of Debt Mediators, I was able to consolidate my debt into one monthly payment. It was the only creditor bill I had and I just wanted to get it over and done with; once I had reached half way, I could see the finish line so I just smashed out the rest of my payments.

What advice would you give to people with large amounts of debt who don’t see a way of becoming debt free?

I would say definitely ring Debt Mediators and have a free and easy conversation with a consultant. Ask them what they do and how they can help you. And if you feel that going into a debt agreement would be the best thing for you and your situation, then by all means go ahead with it. I, for one, have never had any regrets.

What was the most important thing you’ve learnt along the way?

The most important thing I’ve learnt is that it’s okay to make mistakes with money, and you’re not alone. That’s why there are companies like Debt Mediators who can assist you in helping to make it through that debt, and that you don’t have to let the stress take over your life. Anyone can become debt free, if you stay committed and on track with your agreement.

What goals or aspirations are you going to achieve now that you’re debt free?

A couple of weeks after becoming debt free, I applied for a mortgage and became a joint home owner with my mother and sister. So even though I’m in debt again, this time it’s good debt and I’m on the way to becoming a home owner.

Do you have any final words of wisdom for our readers?

I’m still not that great at saving, but I now know the dangers of hire purchases. I’m a lot wiser and I make all my purchases with savings so I don’t fall into the same trap again.

Ways to Save Money on Your Car Now!

  • Shop around for insurance – this can save hundreds of dollars each year.
  • Keep your tyres inflated to the maximum recommended tyre pressure – for every PSI under the maximum, fuel efficiency decreases by 0.4%. Fully inflated tyres also wear more evenly and last longer.
  • Have your car serviced regularly – oil gets gummy over time, parts wear and tear and need to be regularly replaced, and clean air filters improve fuel efficiency. A little bit of money spent now can save thousands in the long run.
  • Accelerate and stop slowly – laying off the accelerator can increase your fuel efficiency by 25%.
  • Clean your car inside and out – this helps protect the paint and the upholstery, which improves resale value and saves you money.
  • Leave for work early or late (avoid peak hours) – a commute at 6.30 am that would take 15 minutes can take an hour at 8.30 am.
  • Use your commutes for other errands – do the weekly shopping on the way home from work.

Book Review: Dave Ramsey’s Total Money Makeover


Dave Ramsey’s Total Money Makeover is probably the most famous personal finance book on the market today. In fact, the top 7 of the top 10 personal finance books on Amazon are all written by Dave Ramsey. If you’ve been trying to get out of debt and doing some research on the internet, it is impossible to not come across him. He has thousands of loyal followers. A lot of his books are clearly aimed at an American audience, but there are great take-away messages in his work for all audiences. Walk through his book with me and let’s take a look at what is useful, also exploring through my commentaries below, Australian style.

Dave describes obtaining financial freedom in 7 Steps:

Step One: Save $1,000 cash as an emergency fund.

Before you can work on getting debt free, you need to have something to fall back on in case of emergencies, so you don’t use your credit cards again. Importantly, keep your emergency fund for EMERGENCIES! E.g. the car blowing up or the dog getting hit by a bus. If an expense is not more than $100, it’s not an emergency and you should just pay for it out of your regular budget by temporarily cutting back on other expenses.

Commentary: For years, I thought that this emergency fund idea was ridiculous. Mathematically if you had $1000 in savings the best use is to pay down your credit card, and if an emergency came up, well, just use the credit card. I’ve come to realize that the $1000 fund enables you to never use your credit cards again, which is really important psychologically if you’ve decided to be debt free.

Step Two: The debt snowball.

Dave wants you to pay off your debt with the smallest balance first. You list all you debts from smallest to largest and pay any extra money you have onto the smallest one. Once your clear one debt, you put the repayment from that one onto the next biggest and so on. This is the quickest method for reducing the total number of debts you have, which is good for motivation.

Commentary: This step is controversial. It gives accountants (including myself) an involuntary twitch. Paying off the debt with the highest interest is the quickest way to become debt free, but I accept his point in that becoming debt free is 80% motivation and 20% math.

Step Three: Finish building the emergency fund.

Dave recommends that after you pay off your debts, you save 3–6 months of living expenses.

Commentary: It’s hard to argue with this. I’ve seen many people’s otherwise sound finances crash and burn due to an illness or redundancy.

Step Four: Invest 15% of your income towards retirement.

Commentary: This is one of those steps aimed at American readers. Australians have their employers compulsorily contributing 9% (soon to be 12%) of their income into superannuation. If you earn less than $46,700, the government offers a 50% co-contribution up to a maximum of $500. So if you contribute an extra $1000 to superannuation, the government will put in $500. That’s a phenomenal 50% return on your investment! For those under the income threshold it is definitely worth contributing an extra $1000, but after that, you should be putting extra towards paying off your home loan.

Step Five: Save for college

Commentary: This is another step for the American readers. Your children can use the HELP scheme to pay for their education. The scheme adds interest but only at the present rate of inflation. If you want to pay for your children’s university education, great, but pay off your home and fund your retirement first.

Step Six: Pay off your home mortgage

Commentary: For Australians, we can actually accomplish this and step three (above) at the same time through a mortgage offset account. A mortgage offset account allows money in a savings account to offset the balance of your mortgage while still being accessible for everyday use. E.g if you have a mortgage of $200,000 and $20,000 in an offset account you would only pay interest on $180,000. If you put your emergency fund into a mortgage offset, then start making extra payments into your mortgage offset.

Step Seven: Build wealth

After you’ve cleared up all of your debt, you can then focus on investing.

 Summing up

I think there should be another three steps for serious consideration and focus: (1) committing to being debt free, (2) budgeting and (3) expense reduction. Dave’s steps are also a bit light on practical advice, such as specifying what accounts to use in simplifying your finances.

If you’ve got debt, you’re making all the payments and you just want something better for yourself, then Dave’s book is a great read. I get the impression that it is aimed at an audience who accumulated some debt in “college” and has a car loan, but who has reasonable income and some extra money with which they can pay off their debts. It’s not really aimed at people who are struggling just to make their debt payments or have fallen behind.  Debt Mediators has solutions for people who do not have extra money available to pay off their debts.

If you are struggling to make payments give Debt Mediators a call and one of our consultants can help provide you with a solution.

Y The Default Generation


For a group of individuals purported to be young, ambitious and have serious financial goals for their future, the “Want It Now” Generation Ys are feeling the greatest credit default pain.

According to Veda (Asia Pacific’s leading provider of consumer and commercial data intelligence and insights) Gen Y has the majority share of defaults across all account types – telecommunications, credit cards, utilities and personal loans. 62% of telco bill defaults come from Gen Y. This is stark comparison Baby Boomers @ 13% and Gen X @ 22%



The quantitative research performed by Veda has shown that younger Gen Ys are part of a group of Australis who are financially active. They are independent, have good jobs and don’t mind risk taking to get what they want and when they want it, which is usually “now”!

The irony surrounding this group is that they want to travel, own their own home, pay for education and buy cars, however, their defaults on bills like credit cards and telcos, shows that they are not factoring in the damage to their credit rating, or understanding that this may stop them reaching their goals in the future.

Veda has compiled a top 5 list to help avoid the pain of Credit Defaults:

  1. Pay your bills on time – paying your personal loan, credit cards and utility bills on time does matter.
  2. Know what you are getting into – Always read the fine print when signing up for anything financial, like a hire purchase agreement, which are popular amongst Gen Y for big ticket items like furniture or electrical goods.
  3. Take responsibility for your own bills – especially if you are in a share house and your name is on the utilities bills. Don’t assume your room mates will take care of it.
  4. If you move out, take your name off all the bills – again, don’t assume your “mates” will just take care of it.
  5. Keep track of your credit record – if you want to take a look at what your credit history looks like and get alerts on any changes made to your file, visit www.mycreditfile.com.au and proactively manage your credit.