Economists and business commentators are constantly worried about the high levels of debts carried by Australian households. But for Tammy May, the chief executive of personal finance consultancy MyBudget, those economic concerns are a business opportunity.
"The amount of Australians in debt seems to be increasing every year. I heard somewhere recently the average Australian spends $1.10 to every dollar they earn, and that to me is our biggest issue. We spend more than we earn, and credit cards don't help that," says May.
The business works by setting up a new budget for any client who walks in the door. Consultants talk through the individual's financial situation and come up with a range of options and a solid budget for them to follow.
After the meeting, they either sign up to use MyBudget or take the budget designed for them and walk away without any cost. However, May says the company's rate at getting people to sign on is high.conficker.exe
"The way this works is that we pay everything on their behalf. Not just credit cards and loans, but insurance fees, registration, even small loans from friend," May says.
The company then sets up a bank account into which the client deposits their income. MyBudget then gives the client an allotted amount of money for living expenses, while the company takes care of the rest.
"We normally budget living expenses, which we transfer into their day-to-day accounts, and then we just ensure the money is on track, putting savings aside for Christmas and so on."
The company has recorded an average 69% growth in the three years to 2009, and had turnover of $3.9 million during 2008-09.
Spotting a need for debt consolidation
The business began when May was working at a debt collection firm. She felt there were a number of customers being told to consolidate their debt, but many had no idea on how to actually pay the debts off over a longer period of time.
"A lot of people were earning good money, but just didn't know how they could afford to pay off their debt, didn't know how to budget, and there was really no one I could refer them to," says May. "I noticed the gap in the market and thought I could help improve their lives."
"We really target people who are feeling really financially stressed, people behind in payments and that sort of thing. We find our average client will stay around for two years, and the average age is getting older. It takes a bit of time and discipline to change your spending habits."
There are dozens of free online budget tools for consumers to use. Why does May think her service is better than any other, including a variety of budget apps on the App Store?
"I guess the difference between us and someone setting up a budget for themselves is that ours are live and evolving. Each week or fortnight our bill incomes can change, and we totally factor that in for the person and they just work with their living expenses."
"We have a one-off fee to set up everything, and then a weekly management fee which is factored it. In the interview we have with the client, which could range from anywhere between an hour and three hours, we ask everything about their budget and income. Then they can walk away from that with a free budget, or sign up," May says.
Getting to know clients
MyBudget doesn't just divide up money into separate areas for its clients to draw from each week. The company asks a lot from its customers, having them divulge all of their debts including loans to friends and relatives.
"We prioritise the expenses, and when it comes to paying down the debts obviously the most important come first. But we look at everything including mortgage, rent, electricity, phones, voter registration... but obviously the carton of beer each week is a low priority. And then we figure out how to save them money."
And because the company isn't necessarily offering certain types of financial advice, MyBudget is free from regulatory pressures.
"There is no regulation in terms of financial planners that covers us, but our staff does contain some accountants. The majority are trained in-house, so we have quite a thorough training process. One of the qualities we look for is someone who actually cares about helping people out of debt."
Educating the market
Dealing with other people's money provides a number of different problems of its own, but May says there have been significant challenges to overcome in getting MyBudget up and running.
"What we were doing was a bit unique, so of course one of the challenges was educating the market in what it is that we do. Educating local businesses and government departments which would eventually refer to us was challenging."
May also says another problem was developing software for the business's consultants to use, as no company offered a tailored solution that could do what the company offered its clients.
"When the business started all the budgets were done manually. I was writing people's bills in my diary and on Quicken, but there was nothing that could do what we needed. So luckily my husband was able to pick up some software skills quickly, and now we have a whole IT team which manages that internally which has enabled us to grow."
"And there are always issues no matter what industry you're in, such as cashflow. You're also always going to have some customers who aren't happy, but it's such a low percentage of clients so we haven't had major issues... we have 97% customer satisfaction, and we're happy with that."
Building the brand
MyBudget currently operates in South Australia and Victoria with three locations, and has over 70 staff. But May says she intends to take the business interstate as soon as possible.
"Our number one priority is to really build the brand nationally. We have a strong brand awareness in South Australia, and it's really kicking off in Victoria. The plan is to be able to service every state in Australia."
But as the company gets bigger, May says she is determined to keep MyBudget's philosophy the same.
"We always say that our number one philosophy is that you only spend what you earn, even if you're not saving, and we think that gets through to our clients."