Financial Hardship - What it's like living with debt you can't repay


How do we define Financial Hardship? How prevalent is it in Australian society? What are the common 'triggers' that can lead people into a place of Financial Hardship? Evgenia Bourova from Melbourne Law School shares her research on living with debt you can't repay.

The following is a transcript taken from episode 33 of the We Talk Cents podcast. The transcript is created by AI software so it might not be perfect - please forgive any imperfections or grammatical errors.


Blaize Pengilly  00:09

Personal Finance budgeting cash flow and investing don't have to be scary words. The We Talk Cents podcast is here to help you learn more about money and take control of your personal finances.


Blaize Pengilly  00:26

We Talk Cents podcast is not a financial advisor. This podcast is made for entertainment and educational purposes only. All information shared is of a general nature and does not take into account your personal situation. You should consider whether the information is appropriate for your needs and where appropriate seek professional advice from a financial advisor. For more information,


Dan Jovevski  00:46

Please check out


Dan Jovevski  00:51

Hi, everyone, it's Dan and we're here for Episode 33 of the We Talk Cents podcast.


Blaize Pengilly  00:56

I'm Blaize here to learn about money. And then what have you been up to what's been happening in your world? How are you?


Dan Jovevski  01:03

Oh Blaize, I am coming off the back of some sniffles. And I've had this really weird experience where I've got like 25% sick then 50% sick and then back down to zero and keeping Well, just a recurring virus. It's not COVID thank goodness I've been tested. But it is the sign of the times. And being here in Perth, we've experienced one of those bone shattering cold winters, which I think has activated a whole lot of stuff. So I'm sipping some concrete, as they say in drinking my Lemsip and trying to get well.


Blaize Pengilly  01:33

Well, I hope you are 100% better shortly, Dan, I am doing really well. I'm excited about today's episode, I always am because I just have such a fantastic time listening on this show. And today we are having a guest on from the University of Melbourne who would probably laugh at your comment about Perth being quite cold at the moment because I know Melbourne gets some pretty pretty frosty lows. But yeah, we have a guest joining us today to talk about financial hardship, what it's like living with debt that you can't repay. So yeah, I found this a really interesting chat. And we'll press play on that shortly. But before we get into that, did you see this news from PayPal this week, Dan? Because I don't know how I feel about it. If I say PayPal, do you know what I'm talking about?


Dan Jovevski  02:21

I do I do. And just to get straight into it. It is very popular, certainly the last two years or maybe even three years to predict the demise of the credit card. But it sounds like it's coming back with vengeance. And it's coming back in a different variety Blaze. what's what's the biggest takeaway from this use from PayPal?


Blaize Pengilly  02:41

Well, this shocked me. So we've discussed it many times in the show before like you just said credit card use has been in decline. Things like buy now pay later Services has been massively tight, massively adopted by the masses, I suppose, for lack of a better term. But they don't see that they don't seem to think that credit cards are dying, because they have announced that they are going to offer their very own credit card or paper credit card to its Australian uses. Do you know that they rent 9.1 million Australian users


Dan Jovevski  03:13

as a fleet banker? That is huge. When you think about it, why does Commonwealth Bank even have those type of customer numbers or direct relationships with people you know, you would you want to fortnight and so that's that's huge.


Blaize Pengilly  03:25

It is huge. And it's really huge, because PayPal has been sort of existing in the online space in where there's no physical transaction. Usually, when using a paper, usually buying something off eBay, you're transferring money, you can use it to transfer money to a friend or to a seller on the other side of the country or the other side of the world. So by doing by introducing credit cards, paper will now have a way for people to pay when they install when you're down at your local IGA or, you know when you're actually in a shopping center. So I think this is a really interesting move by PayPal. I really did not see it coming. But yeah, how do you think that? How do you think it will go when the rollout happens? Do you think people will adopt it? Or do you think we'll continue this trend of seeing people saying goodbye to their credit cards and adopting buy now pay later instead?


Dan Jovevski  04:21

Well, the thing that really caught me by the article was Andrew toon who is PayPal Australia General Manager of payments, basically shared some analysis where credit card usage has remained largely unchanged since 2013. So while things have evolved, like reward schemes and things like that, credit card balances going down, maybe the issuance of the credit cards has decreased the proportion of payments being made via credit cards is still the same. Why is that years ago, which is pretty phenomenal, really thinking that because they're going down. It doesn't mean Australians are using them less. It seems like it's still the same. So look, I think that PayPal and this is just me Of course, being a little bit biased about sort of fintechs. And of course, everyone's here to make $1. But I think PayPal in terms of why that they've innovated on some of the payments, and let's face it, PayPal is incredibly useful tool. But if you don't want to potentially give your credit card details away to a company that you don't trust, they accept PayPal, you can have a pretty safe and trusted mechanism to do that. And there's a lot of utility and that kind of explains the dial point 1 million customers because customers are using it because they're receiving some utility. But you know, credit cards, look, I don't know blows I'm torn? is another way to potentially get an all these into potentially more debt? Or is there another way that PayPal is looking at facilitating credit card payments with more rewards or the way that we can use this service to potentially get a benefit? I think the preferably the putting on a launch? And is it going to be a viable alternative against the others. So like another announcement recently that we've heard about Woolworths entering into the payment space, it seems like the banks getting attacked for every single corner, right? And this concept of every single company becoming a FinTech company, and PayPal just crushing their tentacles ever further into our lives. So let's wait and see buyers. Let's just see what they come out with before. Before we given an assessment, but I I'm actually pretty curious to see what they come up with and see if it's, it's kind of like a like a debt net loss.


Blaize Pengilly  06:18

Yeah, same well, credit cut, we'll chat and credit cards, and we're about to check debt, which is a beautiful segue into our next guest. So shall we press play on our interview with Virginia, braver from the University of Melbourne?


Dan Jovevski  06:30

Let's do it Blaizey


Blaize Pengilly  06:37

Hi Dan? Do you remember last week in the news, we talked about the findings, the recent findings by comeback?


Dan Jovevski  06:44

Yeah, absolutely. That were a bit of an eye opener, especially the degree of financial openness, which indicates to me that more people have become more financial. Yeah, that was my takeaway applies. But what do you think about?


Blaize Pengilly  06:57

Well, it got me thinking, right. So if you weren't listening last week, or you missed the news, come back fully some research saying that 61% of millennials, so over half of millennials don't have a savings plan. So it got me thinking this article. What about those people that have no savings and are struggling in debt or experiencing financial hardship? And you spent quite a lot of time in the financial services industry? Is this a people's living, struggling with debt or experiencing financial hardship? Do you come across people in this situation a


Dan Jovevski  07:31

lot, boys, I have come across people in severe hardship. Part of the journey in my career is working for a debt recovery company. And when I got to sit down and listen to some of these phone calls, and people in really financially vulnerable states, ie, people that actually have really good high paying jobs, and also didn't have high paying jobs, just the sense of depletion in terms of their own confidence, their ability to pick themselves up back on the road to fight and get help and support from other people. I felt like there was a bit of an absence. And that's something that's stuck around forever etched into my mind and something I think about quite often. So I'm really excited about the guests that we've got today to talk and unpack this topic, because it's very important for all Australians, and we might not think that would ever come into the situation, but who knows we're all vulnerable to some degree. And I'm Kate explore topic.


Blaize Pengilly  08:21

Yeah, well, Financial Action, something I'm super fascinated by. I'd love to learn more. And to do that, yeah, we've invited a special guest on today. So today on the show, we're joined by research fellow all the way from the Melbourne law school at the University of Melbourne. Our guest has been researching there for the last eight years and is currently looking into financial exclusion, poor insurer practices, and consumer protection. She joins us now via videolink. From the current lockdown in Melbourne. Welcome, Virginia. pourover. How are you? Jr. You surviving lockdown.


Evgenia Bourova  08:53

somehow we're getting through. Hi, Blaize Hi, Dan. Thanks very much for inviting me on the podcast.


Blaize Pengilly  08:59

Thanks so much for joining us. Now. Tell us a bit about the your the research project you're working on and how you're involved in it.


Evgenia Bourova  09:07

Sure. Well, um, would you like me to talk about the financial hardship project? Yes, that's a so that's a project that wrapped up actually, a couple of years ago, I was the research fellow for that project. So while I was involved in carrying out some surveys, including a survey of 1100 people around Australia, who had fallen behind with repayments on various types of debt, you know, from utility bills to mortgage repayments, council rates, credit card bills, and part of that, we've also done a lot of interviews with financial counselors and other people working, you know, on the front lines of assisting people with debt problems engineer, that's definitely a fascinating topic, and I'm really keen to get them in place to learn more about this. But before we get into it, how would we define financial hardship because it's a term that we've heard about but What what's the best way to describe this? Well, look, it's a term that's quite difficult to define, because it just encompasses a whole range of different situations. And you know, in terms of our research, we use that term to talk about the situation where a person finds themselves unable to pay a debt when it falls due. So might mean falling behind with your mortgage repayments, you know, being unable to make the minimum payment on a credit card being unable to pay utility bills. It might be for some people, fairly short term occurrence such as, you know, needing a fortnight's extension to pay an unexpectedly high bill that comes in. But it can fall in for a lot of the people taking part in our study was repeat or even chronic experience that goes hand in hand with longer term financial stress and disadvantage.


Blaize Pengilly  10:44

So in your research, what did you find out about who was impacted by financial hardship? Is there a particular group of people that seem to be more impacted than others? Is that people is that people with chronic health conditions? Is that people? Like is there any sort of blanket label I suppose for people that are experiencing this? Or can it really happen to anyone? Look, the


Evgenia Bourova  11:10

short answer is that almost anybody can experience financial hardship at some point in their lives, given the right set of triggers or stresses, by kind of way of background to our survey findings, we got a lot of responses from people who we would describe very much as middle class, you know, homeowners, tertiary educated, personal incomes, well above the median for Australians as a whole. But at the same time, certain groups were over represented in our survey. So over 36% of our respondents were relying entirely or entirely or mostly on a Centrelink payment for their income. And we also had a large rate of response from people who were working, but were earning well below the median income in Australia, and also people living in rural or regional areas where there's, you know, there may be additional barriers to employment or climate change related issues, causing debt to build up for people in rural properties. So well, anyone can find themselves struggling to manage debt. We also found that there's just these links between falling into debt and other indicators of disadvantage,


Dan Jovevski  12:19

And what did you research really uncover was a sort of core, you know, the big thing that you sort of uncovered with people that are living with debt that they can't repay?


Evgenia Bourova  12:30

Well, one of the biggest things was just the very large proportion of people for whom falling into debt was preceded by triggers and stresses that were entirely or largely out of their control. So physical health problems, nearly a third of our sample had experienced physical health problems or a worsening in physical health problems in the 12 months before they started falling behind. No, a similar proportion had mental health problems, including anxiety and depression, very large proportion of experience problems with with employment. So, you know, nearly a third had become unemployed, whether for a short period or for six months or more. And then there's also the issue of underemployment. So not getting enough shifts at work, having variable regular work hours, which can make it very difficult to budget. And of course, there was the role of unforeseen expenses and increases in costs. So some of them might be one offs, such as car repairs, or household appliance that is broken down and needs to be replaced. But others also reflecting a rise in the cost of living so high utility costs and rent increases. The other major finding, I would say, is just the extent of the impacts, that falling behind with repayments and have for people for the people going through those things. No, we saw just to what extent financial hardship can be a stressful, socially isolating experience, just for people at all levels of income. It makes it harder for people to look after their health, maintain relationships with family and friends, stay involved in their community, look for work finish their education. So another thing that we saw in our study is that 36% of the people taking part in our survey said they develop mental health problems or that their existing mental health issues worsened after they started falling behind with deaths. Wow. Hmm. And actually just over 27% also saw a deterioration in their physical health as well.


Blaize Pengilly  14:34

That is that that is, that's sad to hear, but it's not at all surprising. You know, the second, I know for myself, personally, if I haven't having a stressful time I send her all of a sudden have a cold and get burnt out and then it only takes a little bit of physical and it only takes a little bit of physical sickness to then you'd see your mental health deteriorate as well. So it doesn't surprise me that people going through this stressful time. Have a financial hardship or experiencing these issues as well. And it sort of just makes me think, Dan, and I've spoken many times on this show about the importance of having an emergency fund, and just having that spare cash saved up. So you have that peace of mind, in the instance that something like this happens. And yeah, I thought it was interesting to hear that one of the major triggers or the tipping points was those unforeseen expenses. And I wish there was that education, and I wish people had the access to be able to have things like an emergency fund set up. So in the instance, that these unforeseen expenses come up, that they do have that sort of safety net or the peace of mind so that they can get themselves out of that situation. Were there any triggers that you're expecting to find, that weren't as prevalent as you thought?


Evgenia Bourova  15:51

Well, I would say one trigger that I think that, you know, to some extent, 1100 people, I mean, it's, it's not very large sample, and I think it was just a matter of it not coming up so much in our data, because from our conversations with financial counselors and other workers in the community sector, you know, family violence, and, well, relationship breakdown, especially in the context of family violence is, is something that, you know, is a major cause of financial hardship for the people who who are going through that, especially when it goes hand in hand with economic or financial abuse. Economic abuse, for those who don't know, can include preventing a partner from working or exercising power and control in other ways, such as accessing, preventing them from accessing assets, such as cars or bank accounts, or taking out debts in their name, or in joint names by an abusive partner. So like other forms of family violence, it's a gendered problem, or one recent study by researchers at RMIT found that 15.7% of Australian women will experience economic abuse in their lifetimes. And that's compared to just 7.1% of men.


Blaize Pengilly  17:04

What was that statistic? How many women 15.7%? Wow, that's huge. We actually, we had a guest come in for our 18th episode to discuss financial abuse. So if you want to hear more about financial abuse, and, and have a really in depth, listen and learn on it, tune in to Episode 18. To learn more about that


Dan Jovevski  17:28

you're getting a lot of these statistics are very stark, and that what you just mentioned, is pretty dire, but what it's what is showcasing and some of the research that you've done academically that people haven't seen a snapshot of guineas research, we've got an article that she created in side the conversation, which details all of the findings, you can find out all the stats and figures around this, we'll post that in the show notes below. But again, I'm really I'm really starting to see a lot of things coming together between finances, mental health, work life balance, you being a person that's growing up in this world wanting to get as much as much economic opportunity and, you know, live or live a good life. All these things seem to become very, very interconnected. I'd love to hear maybe some of the, you know, personal stories that you heard about, because these anecdotes I think a lot of people can relate to, right, because we've all been there. We've all had a situation in our lifetime, where at some point, we might have felt vulnerable financially, in some way, shape, or form. And it's going to vary, right? If you're a person that might be a solicitor or a barrister, I'm sure that it affects you to write ad if you're a person that's assembling or struggling to get by, you're living with a disability, that's gonna affect you too. But I'd love to hear if getting one of some of the personal stories really stuck out to you in some of this summons research?


Evgenia Bourova  18:48

Oh, that's a great question. Well, we heard all kinds of stories about just the overlapping circumstances that push people into financial hardship. And I think that's, you know, one of the key things, it's usually it's a combination, it's a combination of events. Often, though, despite your barriers, the barriers for example, these stories were often about long term factors, such as living on a Centrelink income or being in insecure employment or living with a chronic illness or disability that might carry a very high costs, medical costs, even for someone whose income is not necessarily very low. So these long term factors that then intersect with unexpected financial shocks so say a reduction in work hours or urgent dental work that needs to be paid for broken down car household appliance that needs replacing even Christmas when people are facing pressure and social expectations around hosting and gift giving. We did hear especially from people living on unemployment benefits, so then known as New Start now called job seeker. People in this group often describe basically having to make fortnightly choices between buying groceries. other essentials such as prescription medication Paying utility bills or paying rent, they could not do all those things. They also describe some very significant barriers that actually lift limited their options when it came to walking for work. So, for example, we heard from a single parent who described raising her son in a rural area with only sporadic access to part time employment, saying she just would not have survived if not for emergency relief, and financial support from family and friends. You know, another story we heard was from a middle aged respondent who had applied for 56 jobs, and had only four unsuccessful interviews come out of that after being made redundant. We also saw how the low level of payments for people on job seeker below the poverty line for a single person could be its own barrier to finding work. So one of our respondents said, it's difficult going to interviews when you're hungry and can't afford nice clothes, or even the basics to get there.


Blaize Pengilly  20:59

That is so heartbreaking.


Dan Jovevski  21:03

Just to begin here, if you need a better picture of your finances, you want to track multiple cats. And so you're spending all in one convenient place, then give away money epikgo, head to the Google Play Store or the Apple App Store, and download WeMoney. And hey, if you use the referral code podcast, then we'll give you five bucks simply for signing up a Canadian eligible account packet is that Yeah, back to the show.


Blaize Pengilly  21:30

 I would love to know. So this study was conducted in 2019. And then obviously, in 2020, the pandemic happened or is happening still currently. And the Centrelink payments essentially doubled for people on New Start or job keep up because of the COVID-19 supplement. Now, how do you think that would have impacted people like these people that he interviewed that were surviving solely on a Centrelink income? What How do you think the impact of having of COVID and having the extra funding would have impacted them? Well, look,


Evgenia Bourova  22:06

you know, it was great to see the federal government being pressured to respond by taking measures, such as increasing that payment, you know, community organizations have been pushing for job seeker to be increased for a very long time now, over a decade really, job seeker and the use allowance payment, which are for those who don't know, they're paid at a rate that's below the rate that's paid to pension recipients, so people who are in the age pension or the disability support pension. Now, unfortunately, you know, while that would have brought some relief, unfortunately, those increases have now been working back. And we've also say, so we've seen job seeker payments returned down close to their pre COVID levels. Now, as I mentioned before, so job seeker and use allowance payments for single people without children. They're generally below the poverty line as measured by kind of 50% of median income in Australia. So, the other thing I wanted to mention is just that lockdowns as we've we've seen in Victoria, you know, lock downs have had a cumulative impact. You're even for people who have been in no permanent or full time work. People are running out of leave entitlements following the lengthier lockdowns that happened in Melbourne last year. No parents of school aged children are of course, especially affected this time around with schools with schools being closed. Even people who had money put aside for in case of emergencies, you know, at the beginning of 2020 would have run through those savings in a lot of cases and the sheer just extent of the need that has that these lockdown situations have created you know, we can see that with soaring demand for emergency relief services in Victoria, where people have been turning to community organizations for help with food parcels and vouchers, transport, chemistry archers financial assistance with utility bills. We also heard last year that community organizations were seeing an intensification and just requests relating for help relating to family violence during periods of lockdown. And of course lockdown conditions also make it more difficult for people facing these issues to seek out the support that they need.


Dan Jovevski  24:20

Give me a sounds like the Padre because he celebrated some of these issues. And people are getting help and support from a lot of different places, even with the government reducing their degree of support in terms of financial commitment to a lot of Australians. And I think this is important research that I think should continue. But it sounds like if there was a pandemic or there was a pandemic, there's a portion of the population or the portion that people end up falling into this trap of becoming in a place of financial hardship. Can you talk to us about some of the some of the ways that people are looking to help themselves in terms of more sort of practical measures, so somebody that's listening to this this podcast today. What were some of the, you know, bright spots in terms of help and support that people got that really helped them overcome their own situations? What were some of the things that you heard,


Evgenia Bourova  25:12

in terms of bright spots, I think that we didn't see many coming out of our own research. A lot of our, you know, a lot of the coping mechanisms that people use to deal with debt, usually not even to pay down debt. For some that goal was kind of was essentially impossible, you know, more to avoid more immediate threats, such as eviction from a rental property or being disconnected from the utility service. So the strategies people used, were not necessarily positive in the long term, nor overwhelmingly people cope by reducing their spending, especially on food, recreation, utilities and medical care. Now, that sounds pretty straightforward. But what our study showed is just how different this looks at different levels of income. So some people were able to make lifestyle changes, like cutting out or reducing spending on things like takeaway foods, or eating out alcohol holidays, some were able to adopt pretty savvy strategies for sticking to a budget. So buying in bulk and meal planning were among the examples that we heard about, but many others, especially the central increase up it's taking part in our study, we're forced to forego what we consider to be essentials in ways that would ultimately impact on their physical and mental health in the long term. So we had some of our respondents describing skipping or saving gold coins, or skipping meals, for going prescription medication and dental care going without heating was a common one, some of the strategies had a very clear isolating impact as well, you know, going to bed early to save on food and electricity, avoiding driving and taking public transport, and even avoiding social activities. Another finding that we saw that actually only a very small proportion of people of people taking part in the survey had actually accessed some form of hardship assistance from predators, such as a bank or utility company, or a phone and internet company. So while there are laws in place that actually allow people to ask for a variation to their payment arrangements, say a payment plan, an extension of time to pay, this wasn't for a lot of people, this was something they didn't know about, or didn't use for various reasons, you know, in some cases, because they were, they were just caught up in a very stressful and chaotic situation,


Blaize Pengilly  27:27

I guess, had a quick Google and the job seeker payment is currently 44. If you're single, we're excited about $44 per day, and after everything you've just listed there, Virginia, it sort of sounds like people can't cut out regular things like their Friday trip to the movies or their Saturday at the pub with their mates, people are really cutting out real essentials, because they are finding themselves in situations where they literally have no other choice to, to cut out things that are so important and fundamental to survival. When if you find yourself in a situation like this, and maybe Dan, you could speak to this to from your past experience, if someone's in this situation currently, what can they do to get out? Is there hope? Is there a way out of this?


Evgenia Bourova  28:18

Well, you know, I would say that the first thing people should do is actually to get in touch with a financial counselor, that's a free service. So it's very different to for profit budgeting, and debt management services that are out there. financial counseling services are provided by a whole lot of organizations around Australia, you know, including the including the national debt helpline, but not limited to that. You know, I think one of the best things, there can be just people being in touch with a variety of support options and referrals that might assist them with, first of all, accessing all the government entitlements that they might have, but also actually negotiating more affordable arrangements with utility companies and others that might prevent at least the debts from building up or spiraling as fast as they as they can in those situations.


Dan Jovevski  29:12

That's really good advice. And getting it sounds like to me that, you know, I just had a sense there's something deeper here that's going on, because it seems like your research is really focused on people that low income earners or people that are on Centrelink, which, you know, seems to be the people that are disproportionately affected by some of these some of these instances of financial hardship, but what are some what are some recommendations? You know, what are some some government policies, what was what is the sort of next steps here in terms of overcoming a lot of these core issues that face a lot of a lot of people in this country?


Evgenia Bourova  29:48

That's a great question, Dan. I mean, look, one of the, one of the main arguments that we have been making just because of our focus on people, you know, relying on Centrelink as their primary source of income has been a Around the level of payment for recipients of what's now called job, job seeker. So, for people who are unemployed, you know, we also talk a bit about a broader trend, you know, increasingly insecure work, unfortunately, you know, in in the lockdowns that we've seen in Victoria casual workers who lost their shifts or had their shifts reduced, and who have no sick leave, or annual leave entitlements that they can draw on, to allow them to get paid during these periods have been so the sort of the worst hit, and it's an issue that just doesn't seem to be you know, every time there's, I know, we've had a recent new payment announced by the federal government, temporary COVID disaster payment for people who lose work during a lockdown of seven days or longer. But, you know, again, there's gaps where certain people are going to be left out, including casual workers who are listed as receiving job seeker but who don't regularly climate because their work is sporadic or regular, you know, they're not eligible to receive this, this payment, nor is anyone else who already received a Centrelink payment. So there's just it seems to be that there's kind of gaps that are particularly affecting people in casual and irregular employment, and leaving them quite vulnerable to escalating debt problems. Now, I know also, in terms of things that can be that can be done. I know you've mentioned a few times, no idea of savings, having having savings in case of emergency. And I just wanted to mention just the very low, you know, the figures that we have recent research on financial resilience by NAB and the Center for Social Impact from 2018 showed that actually, more than one in eight Australians had negligible or no savings at all set aside, almost one in two had less than three months income saved up that they could draw upon in case of emergency, and almost one in three Australians had less than one month's income. Now, I think that a lot of people are just in this situation where if faced with any unexpected disruption or expense, so a period of unemployment or even having having their shifts reduced unexpectedly. There's a whole lot of people out there who have little in the way of income to put put aside to allow them to where are these situations?


Blaize Pengilly  32:24

I think it's time we start campaigning, Dan, we've got to make it known emergency funds, bring it on emergency fund, something I didn't know about even existed until we started this podcast. And since then, I've been thinking, How did I live my life? 27 years without having one? I think we need to start championing it and educating people so more people can have. Let's change those figures less than one and two, let's make it everybody has one, I think, do you reckon we can do it Damn.


Dan Jovevski  32:53

I absolutely think that applies and FEMA, like the way it is talked about this problem and the way that, you know, one of our some really long term solutions to this, that's what I'm sort of more interested in, and I'm okay to get the guineas views on this. Because if you really think about where a lot of these financial issues, start compounding it often, you know, I think, and I'm not a researcher, but I have a very strong intuition that it's you know, if you're a person, that's you know, growing up in a household that is financially vulnerable, you get exposed to these types of activities, your parents will go through your day pick up, you know, potentially sort of habits or ways of thinking about money that can carry on for generations and generations. And every time I speak to people that are in severe financial hardship, I often hear this sort of this ghost of a story that often isn't talked about, and I was thinking to myself the other day, you know, where's where's a way that we can, you know, really course correct society where more people can live a better, you know, more equal life and a better starting line and sort of grow up in a way that they can, you know, enter the childhood, their teens or 20s, and, you know, Middle Ages with, you know, enough empowerment, so they can, you know, get ahead, you know, for some people that might be possible because they're living with disabilities or situations outside of their control, but often often think that, you know, starting a lot earlier in life can have long term benefits. And one solution that I've heard about the United States, which maybe we can champion alongside emergency vandalize is giving it is called like a freedom dividend where people are given the opportunity to get an asset, which they can't touch until they're 18 years old, but it's an opportunity to allow them to invest into something so they can feel like they're owners in an asset class, that could be you know, shares or equity or you know, maybe even savings or a fund or whatever else, but it teaches them the principles and dynamics of what it's like to actually save this knife, a lot of other people that can sell a very scary topic. And if you're in financial, a state of financial vulnerability, well, that's the last thing that you want to be thinking about. Right? But You know, we are going to make the lives of our citizens much better. How can we really start this education piece as soon as possible, and I'm keen to get, I've given you views on this, because there's been so many government programs and initiatives, you know, money being thrown at the problem, but it seems like, you know, a good portion of Australians, and I'm gonna take a stab here and Guinea will correct me, like 25 to 30% of people that end up being in this really, financially vulnerable state, you know, is getting what do you think, you know, how do we how do we really, really solve, you know, this problem for the long term, because there's other countries in the world that are not like us that don't have these types of mistakes? what's what's your take?


Evgenia Bourova  35:47

I think that just the sheer breadth of you know, the issue of financial hardship makes it really difficult to identify a kind of a solution that works for everyone like, because our research have focused so much on people who are in a vulnerable position, I would say that one of the biggest changes we need to make is to deal with rental affordability in Australia, or more investment in public housing and address the situation that some of the poorest people in Australia are spending a huge proportion of their income on rent and leaving next to nothing to meet other expenses. You know, we know anglicare, Australia, is a community organization that conducts annual research on rental affordability. And they measure is that for people on a low income rent needs to be no more than 30% of household income to be considered affordable, rather than a source of financial stress. Now, in their most recent report for 2021, looking at over nearly 75,000 rentals across Australia, they found that just three properties, three properties were affordable for a single person, on job three


Blaize Pengilly  36:53

things, three individual houses, three individual properties, yes, in the entire country, in the entire country.


Evgenia Bourova  37:00

And for a couple for a couple living on the age pension. So that's indexed higher than job seeker, you're 2% of rentals were considered affordable, just this tiny proportion. So, you know, for people, for people on the lowest incomes in Australia, rent is takes up such a large proportion of income that it just does not leave room for, you know, emergency funds, but also for, you know, day to day in the most immediate necessities of life.


Blaize Pengilly  37:30

That is a phenomenal amount of three properties in the entire country and 2%. For those living on the age pension. That is astounding, I hope that we can see some change in this area, because I want also would like to pay less rent. So hopefully, we can see some policy change or something change in the market where living situations and the basic need of having a house have a roof over your head can be met in an affordable way that's not going to put people in a difficult situation with their money. Absolutely was everything at that. So that's all we have time for today. I just like to thank you so much for joining us and sharing all this research that's been really fascinating. learning all about financial hardship, and how people what's, what's the triggers and how people are coping with it. If our listeners want to find out more about you or the research that you do, where can they go


Evgenia Bourova  38:22

check out the financial hardship project website at Melbourne law school.


Blaize Pengilly  38:26

Beautiful, I will Chuck a link to that in the show notes. It's a really fascinating read. So I'd highly recommend taking a look at it. And there's all the graphs and all the tables in there. So I highly recommend having a look if this is a topic that interests you. Jamie, thank you so much for joining us today. I hope you have a lovely week ahead and enjoy the rest of your hopefully short lockdown in Melbourne.


Dan Jovevski  38:49

Thanks very much, Blaize and Dan. Thanks so much, Chris. Great to be on the show.  you


Blaize Pengilly  38:54

See youlater. If you are struggling in debt and you need assistance, you can call for help call the national debt helpline they offer free financial account. They offer free financial counseling and the number is one 800 double 07 double 07


Dan Jovevski  39:17

Thanks for tuning in  we'll be back again next week.


Blaize Pengilly  39:20

Don't forget if you want to keep track of your spending know your credit score, track your net worth or see where your money is going at download the free way money app. And if you use the code word podcast on sign up, you'll get $5 when you connect an eligible bank account, and you'll be able to make a budget of your very own.


Dan Jovevski  39:38

And if you wanna get in touch with us, please send us a message Instagram at a handle getWeMoney. And if you wouldn't like the show and you feel like you've got a friend or a family member that could be helped by the contents of today's episode, share the podcast that would mean the world to us. Looking forward to getting in touch with you guys next week. Thanks so yeah,


Blaize Pengilly  39:58

see you later.


The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.



Turn your learnings into practice
Try WeMoney today.