James Walker: Get to base station on the mountain of debt

I’ve been particularly annoyed lately by businesses offering debt management solutions. These are legitimate businesses – they have to be regulated by the FCA – but they charge you for a service that you can get elsewhere for free. Our friends at StepChange can help you with a payment plan with your creditors if you are in financial difficulties and it’s free. So don’t just search online for debt advice and end up paying more. There’s usually a free option if you need help with your cash.

Consider cancelling that rarely used gym membership

Should we be worried about debt? Well, the figures make grim reading.

 The Bank of England says we spend an extra £800 in December on top of the average household spend per month of £2,500.

 According to the most recent ONS estimates there are 27.2 million households in the UK and 19 million families, giving an overall extra spend in December of £21.7 billion.

 People in the UK owed £1,661bn as of last September, up £930 per person on the same period last year according to the Money Charity

 Over 8 million people are regularly struggling with problem debt where they “frequently have difficulty meeting their bills and credit commitments, or feel their debts are a heavy burden”.

Options for people struggling to stay afloat can seem limited. On one hand, organisations like payday lenders charge people struggling with their finances huge amounts, but on the other, if no-one else is lending, where can they go? And as the banks announce huge interest payments on agreed overdrafts, it’s clear that something has to be done.

I’m working with leading consumer organisations and experts to come up with plans for affordable lending for people who need help to stay afloat. And I’d love to hear your ideas too.

In the meantime, if you’re struggling with debt, here are a few tips:

 Acknowledge the problem. This is the hardest bit. Work out your incomings/outgoings for the month. Once you’ve made a list of what you owe and what you have coming in, you’ll feel a real sense of achievement. And if you’re finances are overstretched, it will help you get the kickstart you need to find help.

 If you don’t need it, cancel it. Not using that gym membership? An old insurance policy that you forgot to cancel? Every little bit adds up.

 Contact your creditors. The rules about financial difficulties are clear. If you’re struggling to meet your financial commitments and ask the business for help, they should come up with some solutions to help you buy some time. They should also consider suspending interest and charges for a short period if it’s making your situation worse.

 Get a (free) plan. If your financial difficulties are ongoing, then speak to a free service like StepChange, a charity set up to help people get back on top of their finances. They’ll contact your creditors for you and negotiate payments you can afford.

 Be realistic. This bit sucks but I’m afraid it’s necessary sometimes. There are times when you look at your finances and it’s apparent you can’t afford your property. If that’s the case, speak to the mortgage provider about downsizing to a cheaper property. It’s a better option than defaulting on your mortgage.