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#childsafety | Tips for getting out of the red in the new year | #childsafety | #kids | #chldern | #parents | #schoolsafey


This year has been one of the most financially challenging for millions of households around the country.

The cost of living crisis intensified with energy, food, fuel and housing bills soaring as inflation and interest rates continued to climb.

As a result, increasing numbers of people are falling into debt, with many having to take out credit cards or loans to cover their increased bills.

The average debt and arrears amount per StepChange client in October 2022 was £13,440, the debt charity said, while client volumes in the month were 17 per cent higher than the same time a year ago.

UK Finance added there were 74,440 residential mortgages in arrears between July and September 2022.

For some, it will be possible to rid themselves of all debt in 2023, while others will work towards minimising theirs.

To help those who have found themselves in debt, i speaks to the experts for advice on how to reduce your debt in the New Year.

Prioritise what you owe

People who find themselves in debt are encouraged to prioritise what they owe, paying their most important bills first. It is important to work out what you owe and to whom – as well as when you owe the money by.

The priority should always be to pay your most important bills first, for example, housing costs.

After this, you should try to meet the minimum payment on every debt you have each month, to avoid default charges and the effect on your credit rating.

Then you should pay most towards the highest-cost borrowing, the debt on which you’ll have to pay most interest and charges.

This can be achieved by making a list of all your debts and then budgeting to ensure you can pay them.

More from Bills

Sue Anderson, head of media at StepChange debt charity, said: “If you can’t clear your debts quickly, then don’t panic. However, it is important to know how to prioritise. Certain types of debts are considered ‘priority’, as the consequences of not paying them can be more serious than others and therefore these payments must be addressed first. These can include rent, mortgage, energy bills and council tax.”

Andrew Hagger of Moneycomms added: “Use the time off between Christmas and New Year to write down or rewrite your household budget – be realistic with the increased costs you now face for energy, food and transport costs and work out how much spare money you have left after everything is paid and try to stick to this, don’t be tempted to borrow more – it’s a slippery slope.”

Consolidate your debts

Consolidating your debts usually involves taking out new credit in the form of a debt consolidation loan to pay off existing credit.

It can be done by transferring your outstanding balance to lower-interest cards, for example, moving your money from a credit with 19 per cent interest to a new, zero per cent interest card.

This means you will at least not be paying a large monthly chunk on your existing debt and should make it easier to pay it off.

Some of the best fee-free balance transfer credit cards available today are from Barclaycard with zero per cent interest for 22 months on its Platinum All-Rounder Visa card, while Sainsbury’s Bank offers a 21-month period.

Rachel Springall of Moneyfacts said: “Spending using a credit card can have its benefits and protection, but shoppers would be wise to pay off their balance before interest applies if they can.

“If borrowers have debts hanging overhead on an interest-bearing card, moving this debt to a zero per cent balance transfer card can spur them on to sort out a solid repayment plan over the next few months. Consumers can even find balance transfer cards that are fee-free.”

It may also be worth considering a personal loan with a low interest rate that can help you pay off your loans.

Data from Moneyfacts in December 2022 shows the average rate on an unsecured personal loan this month was 9.5 per cent when based on getting a loan of £5,000. This reduces to 7.4 per cent on a loan of £7,500 and 7.3 per cent on a £10,000 one.

Springall said: “Sometimes debts can get out of hand or there are too many credit cards open with various balances, so it would be wise for consumers to consider an unsecured personal loan to tackle their debts.

“It’s important to keep in mind that out of all successful applicants, a minimum of 51 per cent must be offered the advertised rate, and that early repayment charges may apply if customers do switch their loan.”

This means the rate seen right now is not guaranteed to be the same as the rate offered after the application process, nor the rate available moving into 2023.

Move your bank account

One way to boost your bank account is to move provider to one offering a switching bonus.

Use the Current Account Switching Service – it’s risk free plus you can pick up cash bonuses of potentially hundreds of pounds by doing so.

The best switching bonus currently available is with First Direct which is offering a bonus £175 when customers switch to its 1st Account if they pay £1,000 or more in the first three months as well as switch another account into it.

Anyone simply opening an account will receive a £20 bonus.

It may also be worth moving to other bank accounts which offer rewards, for example, Chase which offers 1 per cent cashback for a year on all current account purchases.

‘I have spent years trying to pay off my debt’

Katherine Trigg, 60, has struggled with debt throughout her adult life and is now working hard to improve her financial situation.

Unfortunately, Katherine, a designer from Wales, first started having problems after getting into an abusive relationship with a man she ended up being with for 28 years.

She had one child from her previous marriage and three with her second partner.

She said: “In my second marriage, my new husband was very abusive and very financially controlling. He had a business selling vintage guitars and amps. I spent my time raising the kids while he went out and worked.

“I was completely isolated in Wales with no neighbours whilst he worked and owned a flat in London. I had no control over any of our finances – he gave me cash to buy food, but we had no joint bank account – I had no idea about our finances but I trusted him.”

Katherine was eventually just living off an allowance she was given by her then husband for housekeeping and food, which at the time she thought was normal.

During this time, thousands of pounds of debt was run up on credit cards – some with Katherine’s name added as the second card holder, and on some accounts, such as phone bills or broadband – but she had no idea about any of it.

Over time, Katherine realised she was suffering emotional and financial abuse.

“When I eventually found the courage to stand up to him, I genuinely thought he would want to salvage the relationship even just for the sake of his kids, but he emptied all of our bank accounts, sold everything and stopped paying the rent or any bills on our flat in London.”

This left Katherine with no money and no support. She had to move to London as the house was under her ex-husband’s name into their flat before having to claim housing benefit and find a small property for her and her children.

“Desperation set in, and I went about contacting everyone I knew to do any odd job that in order to even get £10 to feed my kids, I was getting multiple buses across London to clean houses for wealthy people – and had to clean up some pretty horrible messes to earn small amounts of cash.

“We lived on universal credit topped up with around £150 of earnings per week for years, which doesn’t stretch far when you’re a single parent with four children to support.

“I can’t describe how hard it was. It’s like a massive punch in the stomach daily, just terrifying. I thought about ending everything, just to make it stop, but I knew I had to carry on for the sake of my kids.”

Fortunately, the turning point came when another friend put her in touch with a lawyer, who suggested that she get in touch with StepChange.

“Everyone I spoke to was kind, calm, clear and understanding, which is exactly what I needed. We started sending out letters to all my creditors and I went on a debt management plan, which I’ve been on for five years now.

“My ex-husband hasn’t paid a penny of the money that the judge ordered him to, which stands at over £120,000 so we’ve had to survive without it, and I’ve come to terms with the fact that we’re never going to see it.”

Despite working for years now to pay off her debt, Katherine said she is concerned about the cost of living.

“I’m glad that StepChange is there to advise us but I’d like to be able to continue paying off my debt as I am currently. I want to become debt free as soon as possible and move on with my life.”

Avoid relying on your overdraft

For many, an overdraft is a safety net but in fact they can be a slippery slope to debt as it allows people to borrow money through their current account by taking out more money than they have.

Once people start relying on this, the amount they are overdrawn by can build up, making it hard to get out of completely.

Overdraft debt has continued to tick up over the year, according to UK Finance, as the cost of living crisis continues, although it adds the figures are still down when compared to during the pandemic when many were left out of work.

Getting out of your overdraft is a good step to help rid yourself of debt entirely.

Most people will have to pay a daily fee when they are overdrawn, something that can soon mount up if you are regular using it.

In some cases, it may be cheaper to rely on a 0 per cent interest credit card than it would be to have an overdraft.

But it is important to consider this carefully. If you think you might not be able to make the minimum repayment, you could end up in more trouble.

Speak to your bank if you feel like your overdraft is becoming uncontrollable. It is possible to limit how much you can take out so putting a stopper in place could help control your usage.

People that find themselves in debt are encouraged to speak to experts for advice
(MartinPrescott/Getty Images)

Cut down on spending

Cutting down on spending may sound like an obvious way to cut down on debt but it is one of the major ways you can transform your finances.

Of course, the challenges of rising inflation and interest rates this year have made that more difficult, and with rising energy bills, it may seem impossible but there are still ways to cut back.

Creating a budget, again, may sound like the most obvious way to save money but it is a quick and effective measure to ensure you can see where you may be overspending.

Springall said: “Budgeting can be done in a simple way, by drafting up a quick spreadsheet and keeping hold of bills and receipts each month. Keeping sight of how much is going out is essential to be more mindful on how much someone spends.

“There are efficient ways to start budgeting and to keep tabs on income and outgoings, such as with an app like Money Dashboard which connects current accounts, savings accounts, credit cards, and even a mortgage all in one place through Open Banking.

“Consumers can even set up goals and scrutinise each category that they spend their cash on to try to cut down on non-essentials, which could be wise if a household needs to cover rising utility bills.”

Hagger also recommends that people place extra focus on their food shopping as there could be big savings to be made if you’re organised.

He suggests that consumers write out a meal plan for the week and put all the products and ingredients on the shopping list.

“When you get to the supermarket, be strong willed and don’t deviate from the list – avoid food shop top-ups during the week. By doing this you’ll save money and drastically reduce how much food you throw out because it’s gone off in the fridge.”

Alongside this, people are encouraged to try to ditch their takeaway habit.

It is also important to look for areas where you can cut back on non-essentials. This could include a gym membership, dental plan or magazine subscription.

Alternatively, are there ways you can bring in some more money? There are lots of ways to make a few extra pounds, such as by using cashback websites or selling unwanted clothes and household items in online marketplaces.

If you’ve recently seen a reduction in your income, for example because you’re working on reduced hours or have been made redundant, you may also find you can claim support from the Government. StepChange offers a benefits calculator that can help you make sure you’re receiving the help you are entitled to.

Speak to debt experts

If none of the above tips are enough to help you, it may be time to speak o a debt expert.

There are many who can offer professional advice on how you can get out of debt.

Several charities, including Citizens Advice, StepChange and the National Debtline will give free support and can help you devise a plan to get out of the red.

These services are judgement free and will offer a variety of sources and people to speak to who can help you.

Anderson of StepChange said: “If you’re worried about your finances or experiencing problem debt, please don’t delay getting in contact with a debt advice organisation for free and impartial advice.

“Many people who come to StepChange tell us they wish they had contacted us sooner.”

Contacts for debt advisory services

Stepchange: You can call 0800 138 1111 Monday to Friday 8am to 8pm and Saturday 8am to 4pm or chat online here, 24 hours a day, 365 days a week.

Citizens Advice: Call the debt helpline on 0800 240 4420. It’s available 9am to 5pm, Monday to Friday. Or you can use their online service here which is usually available 8am to 7pm, Monday to Friday.

National debtline: The charity is available to speak to on 0808 808 4000 from Monday to Friday: 9am – 8pm and Saturday: 9:30am – 1pm. However, it will be closed over the Christmas period. A webchat is also available here.

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