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Personal Budgeting Assistance

Case Study

Catriona called us in mid-December for help negotiating with a personal budgeting assistance company. Two years ago, Catriona received parental responsibility for her grandchildren. As a result she struggled financially due to the transition from an income to a Centrelink benefit payment. The following year Catriona obtained a part time job and decided to use this income for her personal expenses whilst retaining the Centrelink payments for the purpose of raising her grandchildren.

With the income generated from her part time job, she started spending this money on gambling. Catriona recognised that she needed to seek help for her uncontrolled spending on gambling (i.e. income management of her part-time income only, not the payment she received from Centrelink).

Catriona contacted a personal budgeting company in 2012 for assistance with managing her budget. A consultant from the company failed to give her a proper opportunity to read the terms of the service agreement. Furthermore, the consultant also failed to disclose to Catriona that she was able to contribute a portion of her income instead of all of her income to the service.

Ten days later Catriona received a call from New Zealand stating that her 86 year old mother had broken her hip. Catriona needed money to fly to NZ to visit her mother. She was told by the budgeting company that she could have $400 but would not be able to access any money over the weekend because the company did not operate on the weekends. The inability to access money over the weekend was of concern to Catriona and she decided to cancel her contract with them. She is notified by the budgeting company but they demanded she pay a $1210 establishment fee.

There are several companies that offer consumers hands-on budgeting assistance. These companies don’t just give advice about how to budget and save but they will actually pay your bills for you. The general idea is that you arrange for your income to be paid into a special account that the budget company manages. They will then pay you a regular stipend for living expenses, and use the rest to pay your bills and pay off your debt. They will also pay themselves a tidy sum for this service and their fees often get paid first as a priority.

The real hazard of this financial product is that if your budget is unsustainable, or you have too much debt to reasonably pay off with your current income, these companies do not have to help you find a solution. They can “let Rome burn” while subtracting their administrative fees. All the while you are getting closer to defaulting on your debts when perhaps you should instead be applying for financial hardship, disputing debts, selling your home or filing for bankruptcy.

Instead of signing up for personal budget assistance where you will have to pay an initial set-up fee and continuing monthly administrative fees, you should contact a financial counsellor. You can get FREE and confidential budgeting advice from someone who can also assess whether you situation is critical enough to make some tough decisions (like selling your home while you still have some equity in it). And if you have already received notice of a legal problem (a Statement of Claim, Judgment or Bankruptcy Notice) you need legal advice and should call the FREE Credit & Debt Hotline immediately: 1800 808 488.

If you haven’t reached the point of needing legal assistance, there are steps that you can take, with the help of a financial counsellor that will reduce your financial stress. If you don’t want to deal with so many bills arriving every month, think about setting up direct deposit payments for all of your regular expenses. Often simply rearranging your finances to make payments affordable will get you back on track towards paying off your debt, and you could save thousands of dollars in personal budgeting assistance fees.

Here are some great resources for getting your budget back on track:

ASIC Money Smart Budget Planner: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/budget-planner
Money Help Budget Calculator: http://www.moneyhelp.org.au/tools-tips/budget-planner/
Advice for Trouble with Debt: https://www.moneysmart.gov.au/managing-my-money/managing-debts/trouble-with-debt
Contact a FREE Financial Counsellor: http://www.financialcounsellingaustralia.org.au/Corporate/Find-a-Counsellor