How to deal with post-Christmas debt

Christmas Debt

As the trees and tinsel come down for another year, thousands of Britons will face a different sort of new year hangover: post-Christmas debt.

The British Retail Consortium (BRC) expects us to spend £11 billion on Christmas presents, food and decorations in 2006 – up 10% on last year. Each household spends an average of £975 during the Christmas period alone!

Unfortunately, much of the spending is made with credit and debit cards, which may lead some families into debt for the new year.

If you do find you’ve over-spent at Christmas, Citizens Advice have this advice:

• Don’t panic and don’t bury you head in the sand.
• Avoid borrowing further to try and pay off existing debt – this is likely to lead to more problems in the long run.
• Talk to your creditors - don’t just stop payments without explaining why. They can sometimes be more understanding than you’d expect.
• Sit down and work out how much you owe and how much you need to pay your priority debts, like mortgage, rent, gas and electricity bills and council tax. Don’t fall into the trap of paying whoever shouts loudest first.
• Make sure you pay the priority debts first every month and then work out how much you need for food, travel to work and other everyday expenses.
• Once you’ve done all of that, you can start to work out what you can afford to pay each month to non-priority creditors like credit cards, store cards etc.
• If what you have left doesn’t cover what your non-priority creditors are asking for each month, speak to them and come to an arrangement about how much you can afford to pay them.
• Only offer to pay off debts at a rate you can keep up – it is easy to be panicked into offering more than you can afford.
• If you need help to do that or they won’t listen, make an appointment to see a money adviser at your local Citizens Advice Bureau – it’s free and they have extensive experience in dealing with creditors.

Make a resolution to stay on top of your finances this year:

• Use standing orders and direct debits to meet regular outgoings such as rent/mortgage, utility bills, council tax etc.
• If you can pay for goods outright, don’t be persuaded to take out credit unless it really does work out cheaper or better meets your budgeting plans.
• Try to save something every month, especially for planned spending like holidays and Christmas.
• Set up a standing order to a savings account. You will be surprised how quickly you will forget you are saving!

Remember, if you do find yourself in debt this year, you are not alone. Ask for help as early as possible, and make a budget so it doesn’t happen again next Christmas!