Rethinking the debt dilemma

With household debt in Australia at record levels, the need for financial counselling is becoming ever more important. However, while financial counselling may be a free, community-based service, it is one that is often misunderstood by those who most stand to benefit.

The challenge:
How do we encourage people experiencing financial stress to seek help?
Financial Counselling Australia

What did we do?

We were engaged by Financial Counselling Australia (FCA), the peak body representing financial counsellors across Australia, to look at what behaviour change interventions might encourage people experiencing financial stress to seek help.

We conducted a Rapid Review of the literature on strategies which could be employed to overcome this reluctance.

Key insights

  • Relief from debt often starts with relief from thinking about debt.
  • People in hardship (especially men) experience feelings of shame and powerlessness and that their self-image as capable adults gets threatened by being unable to repay their debts.
  • Many people simply don’t know about financial counsellors or understand the difference between them and payday lenders (who can make the problem far more dire).
  • There is fear that seeking professional advice could affect a credit rating or, if it’s poor advice, make their debt issues even worse.
  • Many interventions focus on “suggestions” only; as such they are yet to be empirically tested.

What was missing?

The existing evidence was missing a more nuanced understanding of how people actually make decisions under conditions of scarcity.

Leading behavioural economists argue that scarcity is not just about a lack of resources, it hinders our ability to solve problems objectively.

In other words, when we struggle to focus on issues beyond the here and now, our decisions are often influenced by a range of cognitive biases – mental shortcuts – which can lead to less than ideal decisions.

What approaches have potential?

The review highlighted a range of behaviour change interventions that may be applied to a financial counselling context.

These include strategies related to implementation intentions, smaller and more frequent goals and incentives, compelling social norms, prompts and reminders, converting the need to be constantly vigilant to one-off behaviours or defaults and identifying greater “bandwidth moments” where people’s cognitive capacity is greater.


Getting advice early is important in the context of  reducing financial stress because both the problem and the ability to deal with it gets worse over time.

Experiencing a scarcity mindset impedes our ability to think about anything else; we become obsessed with immediate problems and these short-term decisions may not be the most sensible in the longer term.

Financial counsellors should focus on providing relief from immediate pressures of financial stress to give their clients breathing space to make better decisions.

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