The Best Way to Manage Personal and Business Debt for a Fresh Start in 2021

“7 million Aussies are losing sleep because of financial concerns” – Spaceship

Australia now has the second largest household debt to income ratio in the world, meaning that for every $100 in income, the average Australian household owes $185.

Headlines like the above are easy to find in today’s economy.  What is not easy to find is what to do about it.

In this blog we are going to let you in on ways you can control your debt, instead of your debt controlling you. Keep reading if you’re interested in:

  • How our EQ beats our IQ and the impact that has on your debt
  • The mistake 1 in 4 Aussies are making when it comes to debt, and how they can change    that overnight!
  • What 86% of Australians aren’t doing, what they should do it, and how.
  • How a tradesman in WA who had $35,370 in debt was able to eliminate it in 8 weeks for $4,500.
  1. EQ beats IQ, what this means, the impact that this has on your debt and how to hack it!

When it comes to decision making, Emotional Intelligence (EQ) basically drives our decision-making abilities based on emotion, or how we feel.  Intellectual Intelligence (IQ) refers to our ability to make decisions based on logic.  It’s commonly known, in today’s world, that we largely make decisions based on how we feel, rather than what is most logical. When it comes to finances this is also known as the psychology of money.

It might surprise you to learn that Australia’s largest industry, which contributes most to the country’s GDP is not mining, construction, agriculture, or tourism…but the finance industry. It should come as no surprise to you then, that the finance industry relies heavily on our EQ overpowering our IQ, when it comes to our money related decisions.

Our drive for instant gratification is at the forefront of this. As humans, our EQ has us wanting things, and we want them now.

We desire rewards, and the less friction, or the easiest, and quickest way to get them is what we want.

Enter the banks. Credit cards, personal loans, car loans, mortgages with offset accounts, are all products that target our need for instant gratification and are on hand to feed our addiction to emotional buying. What is emotional buying? Buying things we want. What is intelligent buying? buying things we need.

Sure, we could start by saying stop getting into debt, and you would say to yourself, “well no sh*t Sherlock, please don’t tell me you wrote a blog thinking you’re going to change anything and gain respect by telling someone that the best way you manage debt is to stop getting into debt. If that’s the case, well I’ll stop reading now.

No, here’s the information that may help you achieve change, and it’s based on …

Credit Cards

Yes, I know they charge interest rates that can cripple you, so you’re probably thinking “I hope this isn’t what he believes is life changing advice”. If you’re a smart cookie, then before you took out that credit card, you promised yourself you had a strategy of avoiding the crippling interest rates by making the payments in full each month. Hats off to you if you can manage that.  However, 2 in 5 Australians don’t – no matter what they promise themselves.

The credit card is actually one of the smartest tools the finance industry has for keeping the financial machine wealthy because it encourages our desire for instant gratification. Credit card users spend 82% more than if they had to pay for it with hard earned cash.

Wow. That’s impulse buying and the psychology of money at work!

Keep an eye out for a blog we will be posting later next month about credit cards, for more information.

Now you are aware the finance industry wants credit cards in circulation, to make us spend more money, as we are more impulsive. To counter this, if you can put a filter in place, where you purchase with your intelligence, not your emotions, you will go a long way to managing your debt.

Here’s a quick guide to a filter I’ve used in the past, that helped me detox my emotional spending, and avoid the debt trap.

Be honest with yourself and acknowledge if something is a want or a need. Have a journal, 1 page with a line down the middle with Wants on the left and Needs on the right. Enter the item into the side you believe it to be. Sleep on it and review it the next day. By then hopefully your emotions have settled and you can make a more rational decision.

We have recently helped out a couple who came to us with $37,000 in debt. The woman had a love of shoes. But by following this, and the other tools I’m sharing in the rest of this blog, within 1 year they went from $37,000 in debt to paying off $111,000 of the life of their mortgage.

She changed her mindset, overcame her EQ and let her IQ make her decisions, and replaced buying shoes with stripping years off her mortgage.  You can too.

Just remember not to deprive yourself of your wants altogether, but like sugar in your diet, manage them wisely.

We will share some other handy tips and tricks during the rest of this blog.

“Stop buying your kids things you never had and start teaching them what you never knew”.

  1. Every journey starts from knowing where you are at.

ING earlier this year reported 25% of the population are ignoring their debt altogether. That’s 1 in 4 Aussies. I’ve tried ignoring the Mrs and she won’t just go away, well it also won’t work for your debt. In fact, it only makes matters worse (with the Mrs too actually).

We all know ignoring things never works, so let’s not delay the inevitable, make a list of your:


  • Credit cards
  • Mortgages
  • Car, motorbike, boat or other vehicle related loans
  • Personal loans including Buy Now Pay Later accounts like Afterpay
  • Student loans
  • Family or friend loans
  • Any unpaid bills or fines.


  • Your home and any other properties
  • Shares/investments
  • Bank accounts – both everyday and savings accounts
  • The stash of cash under the mattress.


  • Any money you have coming in each month, quarterly, whenever


  • Track your spending.

If the above all seems a little overwhelming, do not quit. Reach out to one of our debt and credit experts, and they will give you a hand free of charge.

  1. Create a spending plan

A staggering 86% of the Australian population doesn’t know how much money they are spending every month.

Your perception is your reality. The word budget has a yuk feeling to it. So, let’s refer to it as your spending plan.

86% of Australian’s do not have a spending plan. If you want to change your current debt situation, and you get your spending plan together, you’re moving into the top 14% of Australians. I feel comfortable to say that most people that are in control of their debt have a spending plan. Most people whose debt controls them don’t. Which do you want to be?

Unfortunately, creating a spending plan is something that many adults were either never taught or have failed to implement, and yet it is essential to your financial freedom – and peace of mind.

Although spending plans are most commonly referred to as a budget, this term can make some people feel restricted. A spending plan is something that you devise (with your partner or spouse if you’re married) that allocates where your income is going to go before the bills arrive in order to cover basic needs and get you to your goals faster. When you implement a new spending plan, it may take a few months before you get into the groove and anticipate all your costs, but stick with it until you see incremental changes.

The Fix Bad Credit team have a free budget template you can use to help you get started. Get in touch if you want some help.

(Click here)

  1. Now you know where we are @ you can figure out where you are going

Once you arrive at this point, you should be feeling pretty good about things. Life is about momentum, and the small changes you have made in steps 1-3 so far are putting you back in the driving seat. Now it’s time to prioritise your debt. An example of things that need considering are:

  • How much debt do you have?

o   If you have more than $10k in debt, and are struggling to make payments, speak with one of our experts, who can provide you some options to reduce your debt by up to 90%.

  • What secured debt do you have

o   Secured debt is associated to something that if not paid, then the bank will take it back e.g. car, house etc.

  • What unsecured debt you have

o   Credit cards, personal loans.

  • What debt is required to keep the business or my personal life running

o   Personal – Mortgage, car- should be prioritised.

o   Business – pay your suppliers first, they keep your business running.

  • What debt can I get myself in a better position with?

o   Terms are things in every agreement that can be changed. They may be interest rates, timing, and amount which in many cases can be negotiated to put you in a better position.

  1. Consider debt solution options

If you’re overwhelmed with too many payments and not enough income you could try to renegotiate your debt contracts with your creditors to pay a lump sum amount instead of costly monthly payments. Alternatively, you might want to consider a range of informal or formal debt solutions, including:

  • Debt Moratorium, also known as a payment holiday or payment deferral, to either stop or reduce your payments and interest over a short period of time (usually between 3 to 12 months) to enable you to get back on your feet or to put other arrangements in place.
  • Debt Consolidation – by bringing your existing multiple debts together into one single new loan, subject to a single interest rate, with a single regular (usually monthly) repayment it makes managing your debts significantly easier.
  • Debt Negotiation – this involves discussions with your creditors to informally renegotiate the terms of your loan, this might mean settling the debt for less than the full amount, lower interest rates, reduced fees and/or extending the length of the loan to reduce the size of your minimum payments.
  • Debt Settlement – If you have access to a lump sum, a debt settlement may help. A debt settlement is an informal arrangement with your creditors that offers less than the full amount you owe in order to wipe out the debt completely.
  • Bankruptcy – Bankruptcy is the formal process of being declared unable to pay your debts.  When you become bankrupt, you don’t have to pay most of the debts you owe.

However, you have to be careful about such strategies. Without the strict combination of budgeting, lifestyle changes and making payments, you may find yourself with even more debt than you had before. Understanding the terms of any debt arrangement, both formal and informal, is critical before agreeing to anything. Ensure you have enough information to be able to select an option which is most favourable to you, so your financial situation isn’t impacted even further. Don’t be afraid to ask questions. If a part of the agreement or contract is unclear to you, make sure to clarify anything first before signing on the dotted line. We recommend you talk to a debt solution expert about your options.

Let me introduce you to Steve. Steve has his own business in Perth as a floor sander. He’s brilliant at what he does, and has work coming out his ears. In fact, if you want a great floor sander get in touch – I’ll hook you up.

Steve was doing a job for a client of ours, who had just bought a house, and he mentioned how he too wanted to buy a house, but unfortunately had to sort out his debt, and credit report first. Our client gave Steve our number, and Steve gave us a call in October 2020

Steve had $35,370 of debt, and a number of defaults on his credit report. As a result, he couldn’t get a mobile phone contract, let alone a mortgage.

However, on the 11th of December I enjoyed making the phone call to Steve to tell him that we had successfully negotiated to eliminate all but $4,500 of his debt, and removed the defaults from his credit report.

As a result, Steve saved himself over $30,000 and his credit score has gone from (awaiting equifax to update). We are now helping him get approved for a home loan.

How did Steve do it?

He called the number below, and we helped him with his own personal debt solution that was best for him, and not us.

If you want an outcome like Steve’s, call one of Fix Bad Credit’s debt solution experts on 1300 406 172 for more information on what might be the best option for you. Our debt solution experts can help you assess your financial situation for free and identify debt solution options tailored to your specific personal financial circumstances, using their in-depth knowledge of credit law and debt processes.

Hopefully, this gives you enough information to get you started on your journey to debt freedom and a fresh start in 2021.

B M Peachey

B M Peachey, has over 15 years of experience investing in property and the stock market, in both New Zealand and Australia. She has a post-graduate degree, with qualifications in Finance and Mortgage Broking and in Accounting and Bookkeeping. She is passionate about ensuring people have access to credible, reliable, and easy to understand information to help them get in control of the life they REALLY want to live.

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    Disclaimer: The information in this article is general in nature as it has been prepared without taking account of your specific objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.