Not waving but drowning… are you already struggling to pay off your Christmas debt? If so, did you know there’s no need to make debt repayments you can’t realistically afford?
The British Government has put in place laws to help people like you, who are finding repaying their debt a problem. The idea behind it is this: you have to be able to pay your day to day living expenses before repaying debts.
Obviously it’s best to keep your finances under control in the first place, but if you find yourself in trouble you might be able to reduce your repayments to something more affordable.
Government help with debt comes in several forms, with special schemes to reduce payments or freeze your interest, whether it’s via a Debt Management Plan, an IVA (Individual Voluntary Arrangement), a Debt Relief Order or – worst case scenario – bankruptcy. But they’re only viable solutions if you’ve got yourself into a proper mess. Yes, there’s government help available in serious cases. But most of us just need to clear Xmas debt as efficiently and painlessly as possible before it turns into a nightmare.
Xmas debt in the press
Here’s what the Mirror says about how the festive period has affected our finances:
Christmas has left nearly half of us with a financial hangover as we had to rely on credit cards, loans and overdrafts to pay for the festivities .
Figures from Payplan, the free debt help and advice service, show a third of people hit the plastic and have built up debt on credit cards, while 13% turned to loans or went into the red using bank overdrafts.
The group says last January it saw a 71% increase in people requesting help with debt and it expects a surge again this month.
We currently owe £159 billion on credit cards, unsecured loans and overdrafts, and that is before the debt of December is added on to bills.
If that’s you, you’re probably feeling pretty stressed right now. There’s nothing worse than being in debt. It’s a constant worry. Your first step is to acknowledge there’s a problem, your second step is to organise yourself, the third step is to make a plan and your fourth step involves sticking to it.
The Mail article also talks about self-discipline, just knuckling down and getting on with it. And it makes sense. So cut back on treats. Know exactly how much you owe. Decide an affordable sum to pay back every week or month – week by week is often easier to handle just because the amounts are smaller. And apply a stiff upper lip until you’re free and clear.
January is a crappy month, dark and cold, and it’s tempting to spend your way out of it with plenty of treats. But hold firm and you’ll soon make a hole in your debt, which means you’ll be able to sleep soundly without waking up in a sweaty panic. Taking action always feels better than doing nothing.
What can you cut back on? Make a list and pin it up somewhere prominent to remind yourself not to buy that cake/pair of shoes/glossy motorbike magazine/Starbucks coffee or whatever. It feels a bit miserable at first but once you see the debt steadily shrinking, you feel absolutely fantastic about it. Such a relief.
How to organise yourself
- Take a cheap box file and put all your financial paperwork in it, all in one place
- List all your monthly outgoings for the past 6 months so you have an accurate picture
- Don’t forget annual or twice annual outgoings like car tax and holidays
- Be bold and brave – decide what you can do without: gym membership, a magazine subscription, insurance you don’t really need
- Find out if you can reduce the repayments on any of your debts
- Use the money you save to pay off the debt faster
- Research consolidating your debt – it’s sometimes a good way out of a nasty hole although you need to be wary of the trap, where you keep on consolidating and the debt never gets any smaller
- Gird your loins, get your head down and clear it