Millions Face Debt Worries in the New Year
MILLIONS face going into 2024 worrying about debt. Half of workers will go into the red to pay for Christmas, reports work benefits provider Perkbox. One in every three expects to be suffering a debt hangover by next month, a separate study suggests.
Why Too Much Debt Can Spell Serious Trouble
But racking up too much debt can spell serious trouble. We explain how to get on top of your money in 2024.
Step-by-Step Guide to Tackling Debt
Two thirds of all households across the UK have some form of debt, says Karen Barker, head of policy at Abrdn Financial Fairness Trust – whether that’s overdrafts, credit cards, personal loans, car finance, buy-now-pay-later or store cards. Used carefully, debt can help you improve your credit score, netting you lower credit card and loan rates. But borrow too much and it can start to go the other way. Before it gets to that, there are simple steps you can take to start paying it off.
Step One: Know Your Debt
See how much you owe who, by checking statements and bills or contacting your provider. If you’re behind on regular bills, Citizens Advice has a list of "priority debts" such as the rent or mortgage, energy bills, council tax and court fines to clear first. Fail to repay these and you risk losing your home, having your energy supply cut off or even going to prison.
Step Two: Understand Your Income and Expenses
You need to know how much you have coming in and going out each month. Recording your income and what you spend on essentials helps you see where you could cut back. The Government’s MoneyHelper website has a free budget planner with tips on how to manage your cash. MoneySavingExpert has a simple budget spreadsheet you can download for free.
Step Three: Seek Help and Negotiate
Talk to your provider or bank if you are having trouble keeping up with payments. Most banks, energy firms and other providers will help you negotiate a repayment plan. Financial support site Lightning Reach lists other grants you may be eligible for, from charities, local authorities and other organisations.
Step Four: Choose a Debt Repayment Strategy
Paying back debt can feel overwhelming without a plan in place. But there are several tried and tested techniques that have worked well for other people. The "avalanche method" means paying back the most expensive debt first. The "debt snowball" method means paying off your smallest debts first and the largest last. "Stealth saving" apps can also help by quietly taking small amounts of money from your account for savings.
A Real-Life Debt Success Story
'Talking about £53k debt was turning point'
KATIE JOHNSON hit "rock bottom" after maxing out 11 credit cards and racking up £53,000 in debt. Then she finally sought help. She and husband Mark reached out to StepChange to set up a free debt-management plan and began manageable repayments. It took them 11 years to clear the debt. Katie, now a debt coach, said: "Talking about my debt was the turning point."
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