How many pay cheques from disaster are you?

Do you know how much you’d need to keep the wolves from the door if you lost your job?

Despite the Global Financial Crisis, life goes on much as normal in Australia.

We’re not seeing the queues of people lining up for charitable donations like they’re showing on US news reports every night.

Yes, unemployment has risen, but it’s not been as bad as everyone thought it was going to be. Right?

True. But just because our news headlines are not full of people losing their homes or wondering where their next meal is coming from doesn’t mean it’s not happening.

According to a report by the Australian Institute of Health and Welfare, Counting The Homeless, there are around 100,000 homeless Australians – and families with children are the fastest-growing group among that number.

The fact is that, on the verge of the financial crisis in 2007, the former Reserve Bank governor Ian Mcfarlane announced that ‘Australian consumers have uncomfortably high levels of debt’.

While the GFC put a dent in spending for a short while, stimulus packages that encouraged us to keep outlaying cash meant that you might feel unpatriotic for not ‘doing your bit’.

Which means that personal debt levels in this country are still high –Veda Advantage’s Australian Debt Report (April 2009) found that 40 per cent of those surveyed owed the same amount as they had 12 months previously. The same survey found that one in five Australians (18 per cent) were struggling to make repayments on their debts.

Where do you fit into this picture?
Would you describe yourself as a person who lives week-to-week? Does your bank balance veer dangerously close to the big fat zero just before payday? What would happen if you, say, lost your job? Or the car blew up? Or any one of 100 other financial disasters struck?

One minute you’re cruising along, a little breathlessly. The next, you’ve hit the wall.

Most financial experts suggest that singles and couples have a savings nest egg of at least two months’ wages set aside as a contingency fund.

That’s not the money you plan to blow on a Christmas holiday, that’s serious ‘just in case’ savings. Young families should have an emergency fund of more like three months’ pay. How many of us have that? Wondering how you could ever get to it?

Don’t panic – anything’s possible! Try our three-step plan for starters.

1. Build a buffer
   Step by step, little by little… Your first goal is to keep the bank balance above zero at all times. Each week, plan to leave a little bit more in the bottom of the well. Start with just $5 if you’re really struggling to make ends meet. Set a small goal – make it $50 if necessary – and as soon as you have that, whisk it out into a savings account (online to save fees). Voila – savings!

2. Look at your debts
   While you’re saving your $5 a week, you don’t want to be spending $10 on your credit cards – even if it’s in interest. Nothing will eat up meagre emergency savings faster than having to service debts.

   To get a clear picture of your financial health, you must have a clear picture of your financial drains. Which means writing it all down. If servicing your debts is taking up more than 20 per cent of your weekly earnings, it’s time to take control.

   If you feel this particular step is insurmountable, move swiftly onto step three.

3. Get help
   Financial counsellors help people with money problems. That’s their calling in life. They have seen problems like yours a million times before. No financial crisis is too big or too small. Talk to them to help put your finances in perspective and for a goal plan to getting on top of things. They can even help you to negotiate with creditors and explore options such as bankruptcy.

Choose a counsellor that does not charge for their services (there are heaps available) to ensure you get independent, confidential advice. For more information about financial counsellors, check out www.fido.gov.au, www.understandingmoney.gov.au or http://www.afccra.org/counselling.htm