Even during a good year, January is a tough month as we recover from excessive Christmas spending and try to sort out our self-assessment tax forms. However, in 2008 January is not just tough, it's cruel, with the after-effects of the credit crunch hitting us hard and energy prices rising.
According to a recent study by moneysupermarket.com over half the population are worried the credit crunch is going to make them poorer in 2008 (54%), and over one in four (27%) believe they may even struggle to meet some of their payments - which can only cause more problems for the 53% of us who already consider ourselves to be in debt.
If you feel like your debt problems are insurmountable then my first piece of advice is don't panic.
There's no point in burying your head in the sand because the problems won't go away. Help is out there, but you must make sure you make the right choices from now on.
That's why I've compiled a two part step-by-step guide to help you get back on track. This week I'll look at debt issues for those with mild debt problems - and for whom it may well be possible to turn things around with some simple financial planning:
Step one - Prioritise
The first step should be to gather all your paperwork together and find out the true scale of the problem.
Once you have a handle on the situation, prioritise the bills you have to pay. Mortgage payments or rent will usually be at the top of the list, followed by household necessities such as utility bills. At the bottom of the list should be your 'luxury' items - such as magazine subscriptions.
Step two - approach your creditors
Your creditors will be much more receptive if you approach them rather than them having to chase you for bill payments. Show them your budget and explain your circumstances - they may show some leniency.
Step three - Look for cheaper deals
Next think about whether or not you can make any savings. Are there cheaper products on the market that could cut your bills - such as your gas and electric or your broadband or mobile phone bills? If so, then consider switching.
It's also worth looking at your credit card debt and considering moving to a 0% balance transfer card where you won't pay any interest for the duration of the introductory period. Mortgage payments should also be examined. If you're currently paying on a standard variable rate you can almost certainly save money with a remortgage.
Step four - reduce outgoings, increase income
Look if there are any non-essential items that you can cut down on and think if you could earn a little extra cash legally - such as by taking on a part-time job.
Step five - seek help
If the previous four steps haven't solved your problems then seek some independent and free advice from the Citizens Advice Bureau (CAB) or Consumer Credit Counselling Service (CCCS). The CAB speaks to more than 6,600 people about debt problems on a daily basis at this time of year and it should be able to offer some useful guidance about your course of action.
No matter how you choose to handle your debt, remember this - do not randomly apply for more credit in an effort to solve your problems. There's simply no point in applying for loans and credit cards that you will only be rejected for. Rejections harm you credit score and make your problems worse.
If you think that applying for another loan is the right move, use our loans Smart Search tool - this doesn't just show you the market-leading deals, but actually matches loans to your circumstances so you'll have a better idea about the deals you're likely to qualify for. It's the savvier way to search and it doesn't leave a footprint on your credit profile.
Next week I'm going to take a look at some solutions for people with larger debt problems - examining debt consolidation loans, debt management plans, IVAs and even bankruptcy. I'll explain how each option works so you can make an informed decision on the right move for you.
If you can't wait until next week then visit our debt solutions channel now and read our debt guide. Just remember that help is out there - so don't go through this alone.
THINK CAREFULLY BEFORE SECURING DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
DISCLAIMER: Please note that any rates or deals mentioned in this article applied at the time of writing and may no longer be available/applicable today.
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