David shared his story in a study released by the Wesley Mission last week to shed light on the increasing number of households which are technically insolvent or in financial stress. The report found spending outstrips earnings for more than one million households, and 44 per cent are in financial stress. This includes being unable to pay bills on time, afford medical treatment or home maintenance and going without meals. A quarter of households in financial stress are those of middle income earners, who make $52,000-$104,000 a year and have been hit by rising property prices, childcare costs and health insurance. The Wesley Report: Facing Financial Stress found the predicament for many households had worsened over the past four years, despite low interest rates. The proportion of technically insolvent households had increased from three in 10 to almost four in 10 between 2010 and 2014, and the number of financially stressed homes grew from 37 per cent to 44 per cent.

The chief executive of the Wesley Mission, Keith Garner, described the trend as worrying, driven by an uncertain job market, wages that have not kept up with inflation and steep rises in the cost of essentials such as energy and phone bills. "Utility bills, food and medical bills are not luxuries," he said. "These are the things that people are struggling to afford when they are under financial stress and I think that should be a concern for all Australians." Adam Mooney, chief executive of Australia's largest microfinance service, Good Shepherd, has observed a growing number of middle class households finding themselves with unmanageable levels of debt driven by aspirations they cannot afford. "A lot of marketing these days is specifically designed to make people feel like they're not keeping up with the Joneses," he said. "That's a phenomenon around the world – people want the nice home and the nice car and the kids in private schools. At the same time you have big mortgages and a rapid rise in cost of essentials such as utilities and telecommunications. It takes one unexpected event, such as someone getting ill or losing their job, and the debt becomes a problem."

The report financially stressed households owed an average of about $7000 on credit cards, $250,000 on mortgages, almost $100,000 on investment loans, $12,000 on personal loans and $18,000 on student loans. Credit card spending was identified as a key issue, a finding borne out by research released last week showing near-record national debt on the plastic that, according to Reserve Bank of Australia data, hit $51 billion in February. While more cardholders are paying down their debt, an estimated $467 million was spent on credit card interest in February alone. "The amount of credit card debt some people carry can be shocking – it's one of the biggest issues we deal with," said Penelope Hill, manager of the financial counselling team at the Melbourne-based Consumer Action Law Centre. She has noticed an increase in demand for the centre's services, with a small but growing number of higher income earners.

"We do get people on higher incomes, particularly those affected by an unexpected event such as a small business failing, illness, an injury or a separation," she said. "Everything collapses unless they have got reserves somewhere." Principal solicitor with the NSW Financial Rights Legal Centre Alexandra Kelly has witnessed the same phenomenon. "I have been here for seven years and in that time I have noticed a shift towards middle class clients who can't afford everyday expenses – they have no savings and no financial buffer in case of emergency," she said. One group of particular concern is older people facing retirement but still paying off sizeable Sydney mortgages. "They may have entered the housing market later in life because it's taken them a while to save a deposit," she said. "They still have a big mortgage in their 60s but they can't find work or are reaching retirement age and they don't have enough super accrued to draw on."

While downsizing is an option for this group, it's easier said than done. "They have to make very difficult choices about where and how they're going to live when they're in retirement," she said. "A lot of people end up in a position where they can't afford to sell because there's nothing suitable in their price bracket." On a recent trip to the US and Canada, Good Shepherd's Mooney noticed growth in financial institutions offering reverse mortgages for people who still paying off loans. He believes it's only a matter of time before the trend reaches Australia. "It's no longer targeted at older people who have paid off their homes, it's targeted at people with high home equity but low cash reserves," he said. "People are liberating that equity to have a better life but there is a moral hazard there. It's a live now, pay later scenario.

"There are some serious consequences to going down that path. They might be able to enjoy today but will they have peace of mind for the future?"