It doesn’t take much to turn affordable credit into spiralling debt and resultant poverty.  Many Australians live their lives on the edge of poverty and about 1 in 10 live in poverty. 

Recent statistics indicate that 3.6 million Australians live on a household budget of under $400 per week.  The number of people declaring personal bankruptcy or entering debt agreements as at July 2007 was about 32,000 per annum and this figure is increasing. 

There are many reasons why people find themselves in serious debt.  It may be due to:

• retrenchment or unemployment
• relationship breakdown or divorce
• illness, accident, death or tragedy
• low income
• sick, disabled or dependant family member
• addiction
• unwise use of credit
• fraudulent or improper provision of credit
• not knowing how to budget and manage money

Whatever the reason, the consequences can be poverty, stress, shame, family breakdown, eviction, disconnection of utilities, repossession of goods, bankruptcy or even suicide. 

Australians have ready access to credit, high interest rates and too little education on financial management.  In this environment, financial disaster is often only one small “mishap” away.  Many Australians find themselves facing increasing monthly credit charges which are forcing them and their families into poverty. They are being forced to cut their expenditure on priorities such as housing, food, clothing and utilities in order to meet their rising monthly debt repayments.

Escaping the “poverty trap” can be very difficult for many Australians because of their exposure to high interest rates and the fact they have little or no ability or motivation to save for future needs.  This means that when a large or unexpected need does arise, they are dependent on increasingly expensive credit which only worsens their overall situation and forces them further into poverty.

sustainable poverty relief

We believe that the only way to sustainably relieve poverty in the Australian context is to work with families on a one to one basis to help them break the cycle of debt and poverty.  This means finding a way for them to cease their dependence on credit, live within their means, and repay their creditors at an affordable rate which ensures that they live a reasonable standard of living whilst they repay their debts in full.
 
This often means seeking to get interest stopped on unsecured credit so that debt repayment can be made in a reasonable length of time. Without this relief from high interest rates, many Australians would be condemned to a lifetime of poverty and debt repayment at the minimum monthly rate.  Our experience shows that a maximum of five years is a reasonable length of time to repay most unsecured debts.  That is because it is too difficult for most people to sustain a tight budget for a longer period than that.

“CAP’s mediation with creditors takes the stress away from me and while they are empathetic, compassionate and supportive they always maintain professionalism.  I’m thankful to Centrelink for telling me about CAP.”

Sustainable poverty relief also requires effective financial education through helping (or requiring) people to stick to an agreed budget that is fair and reasonable to both them and their creditors.  Such a budget needs to prioritise expenditure so that housing, food, clothing, utilities, education and similar essentials are always given priority over other expenditure, including unsecured debt repayment.

“We can now talk openly about money – we couldn’t do that before.  We are so grateful to CAP because we have a future.  We were shown through actions and regular contact that the people at CAP cared about us and that God cares about us.”

Sustainable poverty relief also requires a greater emphasis on savings.  A reasonable level of savings needs to be built into every budget.  Developing the habit of saving for irregular expenditure (such as car registration for example) as well as future needs will ensure that dependence on credit is broken forever. 

“I can’t believe I have savings!  I have never had savings in my life!  I’m now debt free, have peace of mind and their very helpful, friendly way never made me feel embarrassed.”

Sustainable Poverty Relief is first and foremost about changing attitudes toward money.  But any system of debt counselling also has to provide immediate relief or otherwise people will simply never be prepared to make the radical changes that are required to move from poverty into prosperity.  In our opinion the only way to do that is to provide a debt counselling service which :

• is intensive (one on one), client focused (in the home) & thorough
• lifts the burden of dealing with creditors off people so they can focus on their priority expenditure
• helps people to stick to a budget by providing accountability and by simplifying their finances
• breaks the cycle of debt and poverty by ensuring that people begin to save
• helps people to repay their debts in full by providing ongoing support until they are debt free

The CAP Account service which is provided free of charge to our clients does all of these things.

“My life doesn’t revolve around bills and no money any longer!  It’s a real freedom.  It’s fantastic!  I’m using a budget and my credit card debts are going down, but I’m not being harassed in the process!  Thank you for this life transforming service.”

This is sustainable poverty relief.