The aim of this guide is to offer some practical suggestions to help you manage those small debt problems before they escalate and spiral out of control.


Work it out

As is so often the case with life’s troubles; the best way to face your debt problems is head on. By being honest with yourself and not shying away from the issue you can begin to alleviate the stress of your debt problems by spending one afternoon with a pen and a pad.

Working out exactly how much you owe, and who you owe it to, are the first steps towards solving your problems. Once you have this clear in your mind you can begin to prioritise, determine which debts are the most urgent, and devise a payment plan.

Ignoring the problem and sticking your head in the sand is the quickest route to a County Court Judgement (CCJ), with a little prioritisation you can avoid disciplinary action just by allocating the money you do have at your disposal, to your most pressing debts.

By dealing with the debts that carry the harshest penalties first you are practising good debt management and could well be preventing penalties as large as the loss of your home (mortgage arrears), or even a prison sentence (Council Tax arrears), purely by way of sensible allocation of resources.


Budgeting

The easiest method when trying to determine what you can and cannot afford is to divide a piece of paper in half and list your outgoings (in order or importance) on the one side and your incomings on the other.

If you do this properly and list every little thing you buy, over the period of a month for example, in the outgoings list you will begin to see the things that you cannot afford adding up and will understand exactly how many of them you need to cut back on if you are to work towards getting back in the black.

Internet banking can be helpful for budgeting as it is a great, easily accessible, way of visualising your expenditure and income, and it helps you to remember those small purchases that you had put on your card and, subsequently, completely forgotten about.

Another helpful thing about offsetting your income against your outgoings in this way is that you can use your findings to check that you are in the correct tax code and are claiming all of the tax credits or benefits that are available to you.


Being realistic and disciplined

The importance of being realistic with your budgeting cannot be stressed enough, it is all very well deciding that you are going to stop smoking or start taking packed lunches to work, but budgeting requires discipline and strength of conviction.

Writing things down with the best of intentions without following through with actions will only leave you in more trouble as you will become more and more disillusioned as to the severity of your situation.


A simple but effective tip for sticking to budget!

One way to ensure that you do, in fact, follow up your intentions with actions is to budget so precisely that you determine a monthly/weekly allowance, withdraw that amount at the start of the month/week and give your card to a friend until next month/week. This way you can only afford to live the lifestyle you have budgeted for, and you will be forced to take those packed lunches if you do not want to go hungry!

The added incentive of not wanting to appear to have failed in front of somebody whose opinion you value can be very effective. However, a similar tactic can be adopted more privately, whereby you put your card in a draw in your garage for the month/week after withdrawing your allowance. It may not have the same edge as the fear of admitting defeat to somebody else, but it can still be effective when combined with a bit of will power and personal pride.

It’s good to talk

While it is understandable that you may not wish to tell your ‘talkative’ pals about your debt problems or, in fact, trust them with your card, it is important that you do not keep your problems to yourself; there are two main reasons for this.

1. If your debt has the potential to affect others then they have a right to know. More than a third of debt sufferers hide the problem from their partners which is not only often of detriment to their chances of alleviating the problem, but also to their relationship.
2. You are far more likely to solve your problems with the support of those that are close to you. And, more generally, with the support and advice from those who are impartial as well.

Talking to your creditors, though it may be a daunting prospect, is a far better alternative to keeping quiet and avoiding the issue.

You are not going to be the first person who has ever struggled with their repayments, lenders are experienced in helping customers who are in a spot of financial trouble and will do what they can to help. After all, helping you will ultimately help them get their money back.

See our Guide to Debt Management for further advice on negotiating with creditors and IVAs (Individual Voluntary Agreements), particularly if your debts are getting increasingly inflated.

You should also seek some specialist impartial advice on getting help with your debt.

If it is a utility company that you are indebted to, due to the essential nature of their products, you may be eligible for a grant or subsidy to assist you with your payments, speak to your supplier!


Switching

There are a number of things that you may well be paying over the odds for. Simply by changing the suppliers for the services that you use to companies that offer preferable rates can save you a great deal of money!

Here are some of the things that you should consider switching:

• Credit Cards – Find a credit card with cheaper rates.
• Repayment amounts – Avoid paying the minimum repayment amount as it plays into the card issuer’s hands and leaves you paying far too much interest.
• Loans and Mortgages – Do not pay standard variable rates, switching to a fixed rate mortgage repayment can save you hundreds of pounds a year. Be sure to be wary of transfer charges.
• Home Phone/Mobile Phone/Internet Contracts – Hundreds of thousands of people pay more than they need to because they are signed up to an unsuitable tariff.
• Gas and Electricity Suppliers – You may well be paying over the odds for your gas and electricity. Your method of payment may also be unsuitable to you, direct debit tends to be the cheapest way to do it but in certain circumstances you may do well to try a pay-as-you-go meter for easier budgeting.
• Bank accounts – Are you getting the best deal on your overdraft or interest rates? Shop around for the best offers in what is an increasingly competitive market.
• Store cards – If you own any store cards they should most certainly be switched. Switched off! If you are in debt the huge interest charges on store cards are extremely unhelpful. Cut them up!
• Insurance companies – reviewing your protection policies regularly to ensure you are getting the best deals can save you huge amounts of money. Be sure to look out for instances where you may have unnecessary double cover, for example, if your home insurance covers your belongings while you are on holiday then you do not need to pay for the privilege again with your travel insurance.


Don’t get sucked in!

Reaching out for help when your debts are spiralling out of control is both sensible and commendable. However, it is important to be cautious with regard to where you go for your help. There are plenty of adverts on daytime television for companies who are looking to offer advice, but they tend to be for huge premiums.

The Citizens Advice Bureau and PayPlan, on the other hand, are just two examples of reputable debt charities that are there to help you reduce your level of debt for free.

Give them a try before you succumb to the allure of a daytime television advert and you may well be very happy that you did!

Good luck!