Keeping Young Out Of The Red

Illawarra Mercury

Tuesday February 15, 2005

COURTNEY TRENWITH

Students traditionally live on struggle street, but a small income and constant expenses don't have to add up to an unmanageable debt. COURTNEY TRENWITH reports where to get help if in money trouble.

IMAGINE THIS: You've moved out of home for the first time to study and you're constantly pulling out your wallet to pay for rent, electricity, food, petrol, car parking ...

By the end of the week you have a few coins left to buy something you want - a CD, a ticket to the movies, maybe a beer.

Then your car breaks down and your lecturer reminds you of a textbook you still haven't bought.

Unsure of what to do, you bring out the credit card - the piece of plastic your parents warned you to only use in emergencies.

Of course, this is an emergency; you can't get to your classes without a car and you can't learn without the right textbook.

Annoyed you weren't able to go out on the weekend because you didn't have any money, the next week you make sure to put some aside and go to that concert - and buy a few drinks.

But the rent still needs to be paid. You have to eat. And the car needs petrol. So again, out comes the credit card, which now has a balance around $360.

By the time your bill comes in at the end of the month, you owe $680.

The next day, your mobile phone bill arrives - another $110.

You start to feel sick and wonder how you got into so much debt.

Does this scenario sound familiar?

It can be easy to get into debt, particularly when you are not experienced at handling money. Young people working in their first job or who have moved away from home for the first time are common victims.

Half of 18 to 24-year-olds have experienced serious personal debt or know someone who has, according to the NSW Office of Fair Trading, which conducted a report on youth debt in 2003.

Illawarra Legal Centre Start out Right project manager Sean Farrar says young people are likely to get into debt if unaware of the traps.

"Sometimes it's as simple as inexperience and lack of money-management practise," Mr Farrar says.

"Money is something that, without any experience, can bite you pretty quickly."

The 2003 report, Debt Pitfalls for Young People, found the average debt for people under 18 was $3000, while those aged between 18 and 24 years are on average up to $6000 in the red.

The Start out Right project involves UOW law students visiting Illawarra high schools to talk to students about managing money, their rights and responsibilities when signing a contract, and tenancy issues, among other things.

Mr Farrar says the most common forms of debt among young people include mobile phone bills, costs associated with buying a car and the ongoing costs of the vehicle, educational costs (Higher Education Contribution Scheme), Centrelink debts and tenancy related matters.

"Mobile phone bills are the fastest creator of debt among young people these days," Mr Farrar says.

"We (also) tend to come across young people not being aware of their responsibilities under a contract."

Salvation Army financial counsellor Debbie Hannaway agrees. She sees dozens of young people with money trouble each week.

"A lot of young people just fly (into contracts) and don't think about their actions," Ms Hannaway says.

"(Young people) don't realise that because their phone bill is monthly, they're spending more on a weekly basis than they can afford.

"What they haven't paid rolls on to the next month and then it snowballs until they've got a $1000 bill.

"Gym membership is another (debt attractor). (Young people) don't actually read the contract and the terms of the contract."

The number of young people falling into debt is gradually increasing due to a number of reasons.

Mr Farrar says peer pressure and the rising cost of and demand for today's "necessities", such as a mobile phone and trendy clothes could be blamed for pushing students into the red.

"Peer pressure is definitely a part of what goes on today with young debt," Mr Farrar says.

"(Young people often) want to get their hands on an item now and pay for it later, especially phones, computers and cars."

Access to credit cards is getting easier and young people are often advertising targets.

So, what can you do?

If you do find yourself in debt, don't panic, says Mr Farrar.

"For a lot of young people we talk to, it's a natural reaction to panic and ignore (the debt) at first," he says.

"Don't ignore it - talk to the company you're dealing with, talk to family and friends immediately so you can test your options about managing it."

There are plenty of financial counsellors or similar experts who can help you deal with your debt - whether it be $50 or $1000.

The Salvation Army Illawarra Community Services Centre in Warrawong and the UOW Student Services both offer support to people who are struggling to pay their bills.

"If someone initially comes in and they're in a lot of debt, we get them to bring all their bills in and we quickly have a look and see what they're up to," the centre's manager Captain June Stratten says.

"If it's a small amount of debt, we can do a quick budget. We try to case manage them for one to three months if the bills are manageable."

Those in more serious debt are referred to the Salvation Army Moneycare program in Sydney.

Ms Hallaway said a financial counsellor will point out options.

"We'll help them work out a budget or cost of living and work out minimum payment arrangements. They can pay on a weekly basis instead of monthly, to help catch up," Ms Hallaway says.

"We can help them negotiate with their creditors. There's a lot of hidden things the financial counsellor knows that the everyday person might not know."

Ms Hallaway says it is important people try to manage their debt as soon as possible.

"The last thing you want is to go bankrupt at 22 and you've stuffed your credit rating for the next 20 years," she said.

Bankruptcy or a bad credit rating can affect your daily life, including getting a home or personal loan from a bank, signing a contract for a mobile phone or credit card, which can influence whether you can buy a car, travel overseas or own your own home.

UOW counsellor and psychologist Audrey Lowrie said many students took debt as a natural part of being a student.

"Some students with debt almost accept it as part of the course, as something that they need to accept while they're at uni, that perhaps it's an inevitable problem," Ms Lowrie said.

"When you think that, even full-time, (a university) course is at least four years, it's not a short period of time (to be in debt). It's a long, hard haul for those who don't have a lot of financial backing."

So getting into debt is easy, but how do you avoid it?

Working out a budget is the first step, according to Ms Hannaway.

"I think it's important to realise how much money you've got coming in and where it's going," she says.

"A lot of people go out for coffee with friends or go to clubs and they don't realise how much they spend. They get to the end of the week and say, 'Wow, I've got no money left'.

"You need to sit down and work out how much you've got to spend prior to going out."

A budget should include a column for income and another for expenses.

Income can include paid work (after tax), government allowances or money from family.

When listing expenses, make sure you include small things such as newspapers, coffee and bus tickets.

Ms Hannaway suggests also keeping a spending diary so you can see where exactly your money is going.

"It's also essential for young people to try and save at least 10 per cent," she says.

Who can help?

? Illawarra Legal Centre

7 Greene St, Warrawong

Ph: 4276 1939

? Salvation Army Illawarra Community Services Centre

Cnr Northcliffe Dr and Shellharbour Rd, Warrawong

Ph: 4275 1188

? University of Wollongong student services

UOW, building 11

© 2005 Illawarra Mercury

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