Struggling to make ends meet? Here are your options

Marianne Curphey

If you’re struggling to cope with credit card bills this month then you are not alone. The Bank of England has revealed that borrowing on credit cards, loans and overdrafts was more than £1.25 billion before Christmas. As a consequence, debt charities have reported a sharp increase in requests for help in January.

For many people, worrying about bills and debts causes them sleepless nights and family stress, says clinical psychologist Dr Richard Sherry.

"Debt has a much greater effect than people talk about," says the founder and clinical director of Psychological Systems Ltd.


Seek help

According to Sherry, the first step is to seek help, and to do that as early as possible. "Often people are in denial but the longer they leave things, the more debt racks up," he explains.

Debt counsellors are trained to help, not to judge, and there is a lot of free help and information available so you should never have to pay for advice.

Many debt management companies will charge a fee for their service, so it is a good idea to contact a charity like StepChange or National Debtline (see below) who can help you reorganise your finances, negotiate with creditors and ensure that all the money you pay goes towards your debt solution.

They will look at your individual circumstances—from how much you owe to your incomings and outgoings, assets and possible changes in the future.

Read more: How to clear your credit card debt quickly


Be honest with yourself

Philip Pearson, independent financial adviser says that it is "vitally important" to be clear about what you owe. "You need to see the figures written in front of you so that they become a reality," he explains.

List all your debt, and have a goal in mind of where you want to be in six months’ time. Visualise what being debt-free would mean to you, for example not worrying about money, enjoying your income.

Recognising that you have a problem is a major first step in finding a long-term solution, he says.

Read more: Break the habit, 'I've spent myself into debt'


Draw up a budget

Whether or not you decide to seek help from a debt charity, you will need to be careful about your spending and have a budget plan which you stick to.

You might need to keep a daily spending diary and record each transaction that you make—from your morning coffee and newspaper to your expenditure on cash, direct debits and credit cards. This will show where money leaks out of your account, and where it might be possible to economise.

Once you have a record you can start to make some choices about where you are going to spend your money and what your priorities are.

Options include: changing the supermarket where you shop, sharing a lift to work to save on petrol, shopping around for a better deal on TV or broadband packages, cancelling magazine subscriptions and gym memberships, and swapping services with friends such as babysitting, rather than paying for them.

You should also look into whether you are claiming all the government benefits to which you might be entitled.

Read more: How to budget for your retirement


Prioritise your debts

There are some debts which are an absolute priority—and these are your mortgage or rent, utilities, council tax, income tax and any other form of debt which is secured against your home.

Contact your mortgage lender as soon as you are having difficulties, as they may be able to help you draw up a new repayment scheme.

Professional debt counsellors can help you draw up a plan, although there is no guarantee that all your creditors will accept the repayment term they suggest.

However, some creditors will be more open to things like freezing interest and charges than others.

Don’t be tempted to take on more short-term debt like personal or payday loans as the interest charges can quickly rack up and it can be difficult to escape the cycle.


Be aware of the warning signs

It can be hard to acknowledge that you need debt advice, as you may not feel your situation is serious enough to seek help. Here are some of the signs that you are struggling to cope:

  • Falling behind on essential household bills
  • Borrowing to make it through to payday or to pay off existing debts
  • Only making minimum repayments on credit agreements
  • Making payments late or getting hit by charges.


Don’t feel too ashamed to go for help

The good news is that debt advice really can help. Research by the Money Advice Service in England and Wales found that nine out of ten people who sought debt advice saw an improvement in their financial situation. This included taking action such as making reduced payments to creditors or setting up a household budget to address their debt situation. 

As a result, 76 per cent reduced or cleared at least some of their debts within three to six months of receiving advice. Six per cent were able to pay off their debts in full.


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