Managing money and debt

Find out how to manage debt to pay it off faster and feel in control of your money.

Managing debt

Debt occurs when you owe more money than you have. When you can’t pay off your debts you can find yourself in financial hardship. Debt can easily get out of control if you don’t know how to manage it.

When there isn’t any room in your budget to pay all your debts, you need to put together a plan. Use the steps below to come up with a plan. You can find a financial counsellor on the Financial Counselling Australia website to help you get started.

Step 1 - identify and prioritise your debts

Identify and prioritise your debt by listing:

  • who you owe money to
  • how much you owe, and
  • the interest rates you’re paying

Step 2 - identify your expenses

Identify what your expenses are. It’s always good to have a budget. When you know what you spend your money on, you can then decide what’s important and what could be stopped while you pay off your debts.

Read more about how to budget.

Step 3 - decide on your spending priorities

Once you know your debts and expenses you can decide on your priorities. Think about which items you really need and which are extras you could do without.

Step 4 - take action

Take action as soon as you know you are in debt. Talk to the people you owe money to. Many businesses have options that can help you get out of debt.

By taking action, you can stop a small debt from getting bigger.

Talk to your creditors

Talking to the people you owe money to can be stressful. Financial Counselling Australia has developed a range of tools on the Debt Self Help website.  

The MoneySmart website provides practical advice about managing debt. Read their tips on:

Ask about payment plans

A lot of businesses offer payment plans to help you pay off your debt without increasing it. MoneySmart’s approach to trouble with debt can help you better manage particular debt issues, such as utility bills and credit cards.

Overdrawn accounts

An overdrawn account is when more money is taken out of your account than you have. This may lead to a debt or fee that you have to repay.

We have an agreement with major banks, building societies and credit unions. This protects you from having to pay too much at one time for an overdrawn account. The Code of Operation agreement sets out how much your financial institution can take from the money that goes into your account. This ensures you have money left over to cover living costs.


If you get a pension payment of $200 a fortnight, the Code of Operation says you should get at least $180, or 90%, of your payment.

This means your financial institution should only take up to $20 to repay any overdrawn amount, including fees.

You’ll also need to talk to your financial institution to see how they can help you manage an overdrawn account.

Read more about what to do if your account is overdrawn.  

Overdrawn accounts after 60 days

If you don’t make arrangements to pay your debt, financial institutions may take action seeking payments for overdue payments, debts or overdraws. After 60 days they could:

  • report your debt to a credit reporting body, which could affect your credit rating, or
  • take legal action against you for the amount you owe

You can avoid getting a Centrelink debt by keeping us up to date with your income and any changes in your circumstances.

If you owe us money, we have arrangements in place to repay a Centrelink debt. Read more about owing money to us and the options you have.

Avoiding debt

Reducing your spending can help you:

  • to avoid debt, or
  • repay an existing debt sooner

Have a budget to track what you need and what extras or things you can perhaps do without. Find out whether you can reduce your bank, building societies and credit unions account fees. If you get one of our payments or have a concession card, you may be eligible for a fee free account with your financial institution. The Australian Bankers’ Association provides information on which Australian banks offer basic bank accounts. Before changing your banking arrangements, talk to your financial institution to check that any change is right for your situation.

Find out more about loans, debt services or getting credit before you make a purchase.

Read MoneySmart advice about:

Professional help

Getting out of debt or financial hardship may take some time. You may find it useful to talk with a financial counsellor, and in some cases, you may need to seek legal help.

Financial counselling

Financial counsellors provide a free, confidential and independent service. They can suggest ways to improve your financial situation, negotiate repayment options and can refer you to other services such as a gambling helpline, personal counselling or community legal aid.

Financial counsellors can provide advice about:

  • repaying debts
  • debt collectors
  • debt recovery through the courts 
  • house eviction, disconnection of utilities such as gas, electricity or phone
  • uninsured car accidents
  • tax debts, and
  • unpaid fines

There are counsellors near you that are provided by community organisations and community legal centres. You can find a financial counsellor on the Financial Counselling Australia website.

The Department of Agriculture and Water Resources Rural Financial Counselling Service supports primary producers, those in the fishing industry and small rural businesses that are suffering financial hardship.

Read more about the Rural Financial Counselling Service on the Department of Agriculture and Water Resources website.  

Legal help

If your debt becomes unmanageable you may receive a court order, summons, statement of claim or liquidation claim. You must take these legal notices seriously. Do not ignore the notice or you may get a judgement against you. This may mean that your goods could be sold to settle your debt.

Read about where you can get free legal advice on the MoneySmart website.

Page last updated: 26 May 2016