Debt awareness week runs until March 30 and offers people a chance to speak openly about money worries.
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New data from the Office for National Statistics published last month indicates a worrying trend of increasing cost of living challenges pushing people into debt and struggling to make payments on bills.
The data shows that more than half (56%) report that their cost of living has increased over the last year. It also showed that one in five Brits had to borrow more money or use more credit than usual in the previous month, compared to a year ago.
Almost one in ten aged between 16 and 29 had a direct debit, standing order or bill they were unable to pay in the previous month. To help households during Debt Awareness Week (24 – 30 March), personal finance expert Maxine McCreadie has shared essential tips to help regain control over money.
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Ms McCreadie is a personal finance expert for debt advice provider, UK Debt Expert. She said that it’s often a single life event that can push people from having previously manageable levels of borrowing to struggling with problem debt.
Maxine explained: “Most people carry some form of debt and our experience shows that debt can happen for a variety of reasons and in many cases, it’s not a direct result of poor money management.
“Some of the most common causes of debt include a reduction in income or loss of employment, a relationship breakdown, or an unexpected bill like a car breakdown or broken boiler.
“While these life events can’t be predicted, Debt Awareness Week makes a perfect time to review your financial situation and take proactive steps to tackle any debts.”
List all of your debts
Maxine has shared her advice to get on top of debts this Debt Awareness Week.
The personal finance expert said: “The first step is always to get a clear picture of how much you owe and who you owe it to. Only when you have this list in place can you begin to understand how long the repayment process is likely to take.
“From here you can begin to make a plan to deal with the debt. Although some prefer to remove the smallest debts first – known as the snowball method – it’s often more cost-effective to make a start with high-interest debts.”
Create a budget
Maxine explained: “Budgeting is key to remaining in control, or regaining control, of your finances. Once you know what your debt repayment process looks like, you can create a monthly spending plan to manage all incomings and outgoings.
“While this can feel like a daunting task, setting up (and sticking to) a budget on a monthly basis can save you a huge amount of time and money in the long-run, all helping to speed up the repayment process.”
Tackle priority debts
Maxine explained: “As well as avoiding taking out any new debt, making sure priority debts are dealt with first is vital to avoid any more serious consequences. Rental and mortgage arrears, gas and electricity bills, Council Tax arrears, child maintenance and court fines are some examples of priority debts.
“Ignoring these debts could result in your home being repossessed, your energy supply being disconnected or bailiff action. Non-priority debts should still be repaid as quickly as possible to avoid enforcement action.”
Address the situation
Maxine said: “Debt is stressful and can feel like a taboo subject, often leading people to feel overwhelmed and under pressure. However, all of our experiences show that burying your head in the sand and hoping the situation resolves itself is not an effective strategy.
“Taking the first step of opening up and speaking to a loved one or trained adviser about debt can take a huge amount of pressure away and can help you feel more confident in finding a way to resolve your situation.”
Seek free advice
Maxine explained: “Seeking debt help and advice can feel like a really difficult step, but there’s always help available and expert advisers can offer tailored advice and signpost you to the best route out of debt.
“Seeking out free and confidential advice as early as possible could help prevent the situation from worsening and escalating to more serious legal action. There are a range of debt solutions available to help provide a structured path out of debt.”
Establish an emergency fund
Maxine said: “We already know that one unexpected bill can cause debts to spiral out of control and an emergency fund is a vital part of creating financial stability.
“Saving little and often towards a minimum of three months’ living expenses will mean that you are better prepared the next time an unexpected expense hits, reducing the need to rely on credit cards or loans to cover costs.”
For more information about UK Debt Expert, visit the website here.
