Get on top of your debt

By at home

If you’re struggling to manage your borrowing, you’re not alone – the Citizens Advice Bureau deals with 9,500 new debt problems every day in England and Wales.

Even more astounding is the fact that the level of personal debt in the UK stood at £1,460bn at the end of March 2010. Although trying to sort out your finances can be stressful and confusing, these pointers should help to ease the situation and make you feel more in control.

Shuffle credit card debts 

‘The interest rates on existing cards are not as good as new-customer deals, but they’re better than most cards’ standard rates’, says Martin Lewis, money-saving expert and author of The Money Diet (£7.99, Vermilion). ‘For the latest deals, visit Then call your provider and ask what rate you’ll be charged if your transfer the balance from another card. Check your credit limit and if need be, ask if it can be increased. Once you know what rates are available, ‘shuffle’ debts using balance transfers, using the cards with the lowest rates first.’

Hide your problems

The first step is to face the facts and find out the extent of your financial problems. Gather your latest bank statements and open any bills you’ve been ignoring. Make a list of all your creditors and debts and the rates of interest you are paying. By doing these things, you can start to confront the problem. Letting people close to you know about your debts could reduce the pressure to keep up appearances, too.

Start budgeting

Drawing up a plan for how to spend your money can help shift debts. It doesn’t need to be fancy. In fact, the key to sticking to a budget is to make sure it’s simple and realistic. Get a notebook and pen. Write down everything you spent money on today, from the electric bill to your bus fare. ‘Repeat this exercise for a month as this is the only way you’ll know where your money is going’, says Alvin Hall, psychologist, money expert, author and TV presenter of Your Money Or Your Life. At the end of the month, draw up a list of basic categories – like food, clothing, household bills and savings, then allocate your expenses accordingly. If you can put them on an Excel spreadsheet, it will make the process even easier.

Now you know how much money you spend (and on what) each month, you can divvy it up in ways that are more satisfying. ‘Your budget should reflect your personality, priorities, interests and dreams. So if you need to make spending cuts, trim the things that don’t matter to you, while preserving as much as possible for things you really do care about,’ explains Alvin. ‘Don’t try to live by a budget that allows you no room for self-indulgence. Sometimes a little ‘luxury’ makes all the difference between happiness and depression. You should end up with a list of all your expenses and how much you would like to spend on them each month. Use this as a guideline for future spending.’

Consolidate your debts

The term consolidating means that your debts are in one place. ‘Most consolidation loans are secured, which means the lender could take your house if you can’t pay,’ says Martin Lewis. And in many cases, these loans are more expensive than negotiating with creditors or shifting to several credit cards because they have variable rates.

Seek assistance

If you’re having problems managing your debts, approach your creditor as soon as possible. Explain your situation and highlight your willingness to pay whatever you can, and you should be able to organise a more feasible repayment plan. Alternatively, there are a number of organisations that can offer advice, such as the Consumer Credit Counselling Service, Credit Action and the National Debtline.

Lose hope, just get help

Whatever your situation, remember it’s never too late to do something about it. Remaining calm and proactively getting help will make controlling your debts that bit easier. And the sooner you act, the better so you feel like you’re in control again.

Prioritise your debts

Focus your repayments to pay off the balance on the most expensive credit card first. To do this, pay the minimum repayment on all your debts except the most expensive. Throw any spare cash you can at this one. As soon as it’s paid off, shift your focus to the next highest-rate debts, until all the debts are paid. Taking this approach will reduce the interest cost, even if you’re unable to move or shuffle your debts. ‘Every six months or so, transfer your balances again to move debt from the most expensive card to fill up the credit limit on the cheapest,’ says Martin Lewis.

Buy unnecessarily

When you shop, it’s buying the things you don’t need but just have to have that are the problem, says Martin Lewis. He advises: ‘The next time the urge arises, stop and ask yourself: Do I need it, Can I afford it? Can I get it cheaper elsewhere? If the answer to any of these questions is ‘no’, don’t buy it. But if it’s ‘yes’, or ‘I don’t know’, then go check. Now if you make the purchase, you’ll know you’re doing the right thing.’


Pictures: getty images

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