Managing your finances
By October 2007, the total amount of money loaned on credit cards and unsecured loans in the UK was £222 billion - up 5.8% in the last year alone. If that sounds like a lot, that's because it is - it adds up to £8,920 per household, excluding mortgages - and it's getting higher: Britain's personal debt is growing by £1 million every four minutes.
Debt can include arrears in your council tax and rent, gas, electricity and water rates as well as court fees. You may also have credit card debts, outstanding loans and store cards.
So what should I do if I'm in debt?
- Don't panic, but don't bury your head in the sand either. You need to know what you're dealing with - however scary that might be. Sit down and make a list of exactly how much you owe and who you owe it to.
- Tell someone else about your financial worries, whether it's a family member, friend or one of the many charities which deal with debt management. They will help you cope with the stress of the situation, and will be able to come up with practical suggestions about how to resolve it. You should also contact the companies you owe money to - most of them will be sympathetic and will work out a way for you to pay it back in smaller amounts or at different times.
- If you owe money for your rent, mortgage or utility bills, you should try to pay this first. Your next priority should be paying off your credit and store cards. Make sure you pay off those with the highest rate of interest first so that you avoid paying more for longer. You could also switch your balance to a credit card which charges a lower rate of interest - many companies provide special 'balance transfer' deals which you could take advantage of.
- If you are trying to save money but creeping further into debt, stop! Sort out how you will pay your bills first, and only start saving again when you are sure you can afford it.
A debt-free future
There are some simple steps to avoid debt.
- It may seem obvious, but avoid overspending. Keep a note of everything you spend on a weekly or monthly basis and what money you have left. Some people find it helpful to give themselves an 'allowance' each week, taking out just this amount of cash and avoiding using their debit card. If you are spending too much, look at where you can make savings.
- Many people get into trouble with credit cards. If you can't trust yourself to pay the money back quickly, avoid them. If you feel you can manage a credit card, make sure you choose one with a low interest rate.
For free advice on managing your debts, contact:
Consumer Credit Counselling ServiceTel: 0800 138 1111
National DebtlineTel: 0808 808 4000
Citizens Advice