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Post-Christmas debt blog


The average family is going to take on debts this Christmas that will take until June to pay off and the Trades Union Congress has carried out research that shows that the typical UK family will have added £685 to its borrowing this festive season, in comparison with the Christmas before where one in six families borrowed money to pay for food, drinks and presents, with households borrowing an average of £654 per adult.

This year alone, consumer debt has increased by 4.9 per cent and the TUC’s calculations estimate that it will take four more weeks for an average income earner to pay back the extra debt burden they will take on. If a minimum wage worker were to borrow the same sum it would take them an entire year working full time to pay it off.

With the holidays now behind us, it is now time to assess how we fared with our spending over the Christmas and New Year festivities. Not only is it a time to start paying this Christmas off, but also to start planning for next Christmas!

Saving for Christmas early is a good idea

At the start of the year why not set yourself a target as to how much you want to put aside each week in to a Christmas fund for 2014? Putting a little way each month will help act as a buffer so that the expense of Christmas doesn't interfere with normal monthly budgeting. Now is the time to start thinking about saving something each month so you can be ready for next Christmas.

It’s important that you work to a budget and stick to it. A good way to make a savings target is to list the names of all family members with an amount available to spend on each one, along with a list of what you would like to buy for each family member, along with an alternative gift should the first choice not be available.

Paying off your Christmas Debts first

So, you went over budget this year and you have Christmas debt? Now is the time to start thinking about how you can pay it back in time to get prepared for the next year. You’re not alone in having debts, its how you deal with them that matters.

According to ‘theMONEYcharity’ the debt statistics in the UK are startling:

• £54,124 is the average household debt (including mortgages)

• Average household debt in the UK (excluding mortgages) is £6,004

• The UK’s total interest repayments on personal debt over a 12 month period would have been £59.2 billion. This is equivalent to £162 million per day. This means that UK households would have paid an average of £2,243 in annual interest payments!

So how do you banish those Christmas debts?

Get better at budgeting

If you’re facing a financial headache, a good place to start is by sitting down and drawing up a budget so you know exactly where all of your money is going. If your outgoings are pretty extensive, you’ll need to make some cutbacks to reduce your outgoings and free up a bit of spare cash. A good idea is to set yourself a budget for different categories (such as petrol and food).
This could also be a good point for you to consider your options and really take control of your debt. Click here to read our blog about taking control of your debts.

Pay more than the minimum

If you have a lot of debt sitting on a credit card, try and pay off more than the minimum monthly repayment each month. This is because the minimum payment on credit cards is set very low, often as low as 2% of your total card debt, and as a result it can take a very long time to pay off your debt in full.

What’s more, if your credit card is charging you a hefty rate of interest at the same time, the amount of interest you’ll be paying out overall will be far greater too.

Get an interest-free credit card

The very best way to tackle credit card debt quickly is to transfer the debt over to a 0% balance transfer credit card. That way you don’t pay any interest on that debt for a set period of time.

Just make sure you’ve paid off your debt in full before the interest-free period comes to an end to avoid being whacked with a hefty interest rate.
However, if your debt is considerable, you may struggle to pay off your debt in full by the time the 0% deal has expired. In this case, you might be better off moving your debt to a lifetime balance transfer credit card instead.

Prioritise your debts

An important step is prioritising which debts you should to pay off first. When you’re in debt, it is important to know exactly what type of debts you have (priority and non-priority), in order to know which you should be tackling first.

It makes very little sense paying off an overdraft when you have missed a TV licence payment. Yes, you may continue to incur interest by staying in the red on your overdraft, but that won’t be anywhere near as bad as the prosecution, court appearance and a fine of up to £1,000 you might face it you don’t pay your TV licence.

Knowing which debts should take priority and understanding what happens if you don’t pay, should help keep the roof over your head and you and your family out of trouble.

Read our blog about prioritising your debts by clicking here.

Seek advice

If your debts have really got out of control and you have no idea where to start, it’s a good idea to talk to someone about your concerns.
There are plenty of free debt advisory services that will give you advice on how to tackle your debt, such as the Consumer Credit Counselling Service, Citizens Advice, The National Debtline and Christians Against Poverty.

You don’t have to cope with your debt on your own, so if you’re really worried about your financial situation, make sure you ask for help.

Need advice?

If you need any further assistance with any of your finances, then please contact one of our advisers by asking a questions in the question box, or by phoning us on 0800 092 1245.

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