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17 November, 2011

The average amount owed by every UK adult is £30,266 including mortgages, according to the debt charity Credit Action. That’s an incredible 133% of average earnings.

Even if you ignore mortgage debt, we still owe an average of £4,708 through credit cards, motor and retail deals, overdrafts and unsecured personal loans.

So we may all have an opinion on how the government should fix the country’s gaping chasm of debt, but it’s important for individuals to get on top of their personal borrowing too. So how do you go about it?

Face the facts
Do you know how much debt you have? This isn’t as flippant as it sounds; many of us hopelessly underestimate the amount of money we owe.

Begin budgeting
Whether you just want to rein in your spending or you’re tackling a mountain of debt, getting a clearer idea of your day-to-day costs is essential.

Avoid living from pay cheque to pay cheque and instead set out an amount you’re allowed to spend each week, then stick to it.

Pay the priorities
Hopefully your debt levels are manageable and you’ll be able to cut back on some unnecessary spending and repay it all quickly.

If you’re struggling to meet all your repayments, though, you’ll need to work out which are the priority debts.

Some debts are more important than others, namely the ones that could cause you to lose your home, have your energy or water disconnected or even go to prison.

Sort some savings
Are you spending more than you need to on household bills? By using a comparison site, the average car insurance customer can save £180 a year, while you could save as much as £325 a year through switching energy providers.

Cut credit costs
If your credit score is reasonably good (and it’s worth getting hold of a copy of your file to see exactly what it contains), then you could potentially move lenders and find a better rate of interest.

Don’t despair
Whatever your circumstances, it’s never too late to take action, so don’t despair.

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