The Blog

What the Bank Won’t Tell You About Spiraling Into Debt

In 2015, the Organisation for Economic Cooperation (OECD) revealed that Australia had the highest level of personal debt in the world. High personal debt can lead to depression, relationship breakdowns, and a distressing cycle of shame with tragic consequences. Yet, sometimes borrowing or using buy-now-pay-later options can be financial lifesavers during tough times.
There was a time when I harshly judged debt, especially buy-now-pay-later and payday loans. But the truth is, these loans can be the only way for some people to buy school shoes for their kids or put food on the table.
What I now know is that many reasons can lead people to be weighed down by debt, and it’s easy to judge from the outside. For many, especially women, applying for a mortgage, credit card, or personal loan is impossible after leaving a marriage without a credit history or with a credit history ruined by their partner. In these cases, a buy-now-pay-later loan or payday loan might be the only option.

The real challenge comes in paying back the loan.
Debt is not just about what we buy; it’s about the emotions tied to those purchases. Have you ever felt obsessed with an outfit for a specific event, maybe thinking it would make your partner find you more attractive or help you fit in? For me, sometimes a new outfit feels like a suit of armour, giving me protection at social functions. Clearly, it’s more than just the fabric or design.

Buying a new makeup or outfit or whatever isn’t wrong, but problems arise when these purchases take priority over paying off debts or essential bills. Living beyond our means and using debt to soothe uncomfortable feelings can lead to a slippery slope.

Applying for and getting approved for a loan can also be addictive, much like gambling. It triggers a release of dopamine, giving you a sense of reward that can lead to a debt spiral. Breaking this cycle can be as challenging as overcoming other addictions.

Debt is often tied to deeper issues, like financial denial, gambling, or compulsive spending. Here are six compassionate steps to break the debt spiral:

1. Seek Help and Release Shame: Talk to someone you trust and explore support groups like Debtors Anonymous or financial counsellors. Remember, you’re not alone.
2. Understand Your Behaviours: Learn what drives your debt. A process like the Raw Money Cycle can provide valuable insights.
3. List Your Debts: Document what you owe, including interest rates, creditors contact details and reasons for each debt. Speak to your creditors and let them know you’re facing financial difficulty. Facing your financial reality with clarity is empowering.
4. Create a Spending Plan: Be mindful of your spending habits and the emotions tied to your purchases. This awareness can lead to healthier financial decisions.
5. Tackle High-Interest Debts First: Focus on paying off high-interest debts before smaller ones to prevent balances from growing. This strategy can make a significant difference.
6. Set Up a Savings Plan: Consider superannuation or protected savings accounts to build disciplined savings and secure your financial future.

Debt is more than just a financial issue—it’s deeply tied to our emotions and behaviours. By understanding and addressing these underlying issues with compassion, we can work towards achieving financial wellbeing. Remember, support is available, and you don’t have to navigate this journey alone.

Talking about and addressing money stuff can be really hard if this article has triggered some painful feelings or would you like to seek help the numbers below are a start:
Further help in Australia: Lifeline 13 11 14, Debtors Anonymous (www.debtorsanonymous.org.au), Financial Counsellors (https://financialcounsellingaustralia.org.au), Moneysmart (www.moneysmart.gov.au); Gamblers Anonymous, (www.gaaustralia.org.au), Alcoholics Anonymous (www.aa.org.au), Narcotics Anonymous (www.na.org.au), AlAnon (www.al-anon.org.au)