Rising costs of living, easily available credit and limited savings, has left many young people in precarious financial positions – so what are their options?
With the cost-of-living crisis appearing to have no end in sight, and personal bankruptcies expecting to increase more than 20% in 2025, a recent article on news.com.au revealing that a 24-year-old declared bankruptcy with “no regrets” as an easy way out of her staggering debt, shocked many in the collections industry.
Despite many years in the collections industry, Trevor Greenhill, Managing Director of Cloud Payment Group was still shocked by the story.
I was dismayed to read the story – I really felt for the situation she found herself in, and it just demonstrates how easy it can be to get into that debt spiral. There are so many alternatives to bankruptcy that won’t impact your credit history for life – we really hope that even just one person reads this article, and it helps them find an alternative that won’t impact the rest of their life.”
The stats
Research from October 2023 by ASIC’s Moneysmart indicated that 82% of 18–26-year-olds currently feel financially stressed and have higher levels of personal debt than other generations. With just one in four having only $1,000 or less in savings, they are also more likely to use buy now pay later products.
- Gen Z are twice as likely than others to want to learn how to better manage their finances in response to the rising cost of living
- 90% of Gen Z’s want to be confident in managing their finances
- More Gen Z’s (49%) than any other age group reported feeling overwhelmed about where to start in managing finances
- Plus more Gen Z’s confessed not knowing who to trust with getting information on how to manage finances
These jarring statistics combined with real barriers such as growing costs of groceries and rent (not to mention a housing shortage), and easy access to buy now pay later products, is a perfect storm for more younger Australians declaring bankrupt.
What are the options?
The danger of the recent story of the young Gen Z woman declaring bankrupt as a “fresh start with no regrets” sparking similar behaviour is concerning to Trevor Greenhill.
“Bankruptcy should not be seen as an easy solution. Whilst in some situation’s bankruptcy may be the only choice, it can have many negative repercussions for young people who are just starting out on their financial journey.
They may experience difficulty getting future loans such as a mortgage, will have restrictions on travelling overseas and may not be able to work in certain professions as their name will permanently appear for the rest of their life on the National Personal Insolvency Index which is a searchable public register.”
Trevor shares five options to consider if personal finances are getting overwhelming before heading into bankruptcy conversations.
1. Reach out
Financial institutions such as banks have many programs in place to help customers who are struggling to make repayments on credit cards, loans or mortgages. Have a conversation as soon as possible and reach out to all the companies that money is owed to early on as they can offer solutions such as payment plans.
2. Seek professional financial help early
Contact a free confidential financial advisor, the earlier this is done the more options you have. The National Debt Helpline is free, and open from 9:30am to 4:30pm, Monday to Friday.
One of their trained financial advisors will give advice on what to do if you’re struggling with bills, including setting up a money plan and helping with budgeting, plus they can also negotiate on your behalf to get additional time to pay.
Another great online tool for financial help is Moneysmart with great tips and advice on how to get on top of personal finances and how to strengthen your financial position.
3. Consolidating your financial debt
When finances get overwhelming it easy to miss payments if you have too many monthly outgoings. There are many online services offering a consolidating payment plan that bundles multiple debts into one monthly payment, this can also help individual credit scores. Find them via your search engine.
4. Set financial goals
Get on top of your debt by communicating honestly – there is no shame in admitting you’re in a pickle. If you create payment plans or consolidate your debt to make things more manageable, we recommend then setting short term financial goals such as bigger emergency savings fund or creating a personal deadline to pay off a specific loan such as a credit card or car. Try and stick to it.
5. Consider a debt agreement
If your financial situation hasn’t improved within three months, and you have lost your income or are on a low income, consider a debt agreement. This is a situation where you and your creditors agree to reduce your debt to what you can realistically afford and set a time to pay it off. Just remember this option should be considered carefully, as it has implications such as being listed on your credit report and the National Personal Insolvency Index.