Is your level of debt spiralling

12:01pm Friday 13th October 2006

Comments (0)   Have your say »

Getting into debt is only too easy. Fancy this season's must-have dress or the latest flat screen TV but don't have the cash? No problem - just whack it on the credit card.

But this kind of attitude - living a champagne lifestyle on a beer budget -- has to catch up with you sometime. Record numbers of UK under-30s are in the red and a recent Scottish Widows poll showed 70 per cent of young adults fear for their financial future.

If letters from loan sharks and credit card companies are piling up on your doormat, don't panic. There are ways of making in-roads into your debts.

BANISH YOUR DEBTS

If you need to start paying creditors now, independent financial adviser Martin Bamford, author of The Money Tree, says you need to stop making your debt worse. Don't take on any more loans and cut up your credit cards.

"If you lack self control, it's one thing you can do to ensure you don't spend. The physical act of slicing through the card is a therapeutic way of making that relationship with debt end," Martin says.

Know your enemy. Make a list of all your debts in terms of pounds and the interest percentage rate, and then order it not by how much you owe, but how much interest you have to pay.

"Lots of people move towards paying off the highest value debt first, but that's the wrong approach - look at what you're being charged," Martin says.

He says it's important to allocate your resources by drawing up a budget and looking at all your sources of income. Then work out how you're going to manage each month, he advises.

If you have a credit card balance you're struggling to pay, swap to an interest-free offer.

"It's becoming harder - lots of interest-free deals charge an administration fee when you move across now," Martin warns. "The alternative is balance transfer cards which offer low interest for the balance history."

Next, try consolidating your debts - but make sure you shop around.

"It has to be your final attempt at getting rid of your debt. Don't be a sales victim - try and find the lowest interest rate."

COST-CUTTING TIPS

Thrift expert Jane Furnival, author of Smart Spending, believes there are ways to save without living a monastic existence.

MOBILE PHONES: Change to pay-as-you-go so you know what you're spending, and limit SMS messages.

"You don't have to give a running commentary of your life, what's happened to the good old fashioned phone call?" Jane asks.

FOOD SHOPPING: Make a list so you don't deviate, and never shop while hungry - a Somerfield survey found we spend 20 per cent more if we do.

Shop after 2pm - that's when supermarkets start slashing prices on food past its sell-by date.

"Buy loose fruit and veg, pre-packed is always more expensive," she warns. "Also, remember brands in the middle shelves are the dearest - they pay a premium to be at eye level. Look down to find bargains."

TRAVEL: Getting to work can cost a small fortune. Contact your local authority about car sharing, and speak to your company about help buying rail tickets.

"They should loan you money for a season ticket interest-free," Jane says.

CLOTHES: Jane says we're too quick to throw stuff out instead of mending it. Don't chuck last year's coat because the lining's ruined - take it to your dry cleaners who'll fix it for a fraction of the price.

The same applies to shoes: "Don't think there's a god-given right to a new pair of boots every winter. Get extra tough soles from shoe repairers. And don't wear the same shoes every day. If you alternate them with another pair they'll both last longer - leather needs a chance to relax."

If you like designer gear but your wallet groans at the thought, get on to designers' lists for their end-of-season private sales.

PRESENTS: With Christmas approaching don't panic about all those gifts you have to magic out of thin air, you can get plenty for free if you look in the right places. Try www.freecycle.org, a site for people giving away all sorts of goodies.

OUTGOING BILLS: Always contact brokers about mortgages and insurance.

"They have access to deals you don't get on the high street and fill out the forms for you. It doesn't cost you anything."

SAVINGS: Back in the black? Now's the time to start building up your savings.