tips on debts

Many thousands of people in the UK find themselves struggling with debt every year. The total UK personal debt at the end of August 2008 stood at £1,448bn. The average household debt, including mortgages, is £59,350 and one person every 5 minutes is declared bankrupt or insolvent. Chilling statistics but how have we got here? Understanding money no longer means understanding the currency itself, since actual physical money is now less than one tenth of all currency. 'Money' is now credit cards, travelers' cheques, shares and electronic funds transfers, all of which require proficient knowledge of todays complex financial world.
Debt is a scary place to be. Everyday our mailboxes are flooded with advertisements, catalogues, and "pre-approved" credit card offers hoping to deplete our savings and draw us deeper into debt. It can be emotionally as well as financially threatening, putting a strain on families and relationships which in turn can potentially increase the chain of financial difficulties. Permanently resolving your debt situation involves three things: gaining an awareness of the different types of debt, understanding the psychology and circumstances that led to your current situation, and devising an effective debt reduction, savings, and wealth acquisition plan.
Eleven steps to reducing your debt:
1. Don't Ignore It The worst thing you can do if you have debts is to bury your head in the sand and pretend they don't exist. Admit to yourself that you have commitments beyond your control and face up to your problems. Throwing away your bank statements without opening them and ignoring letters from companies you owe money to, will only get you further into trouble.
2. Budget The best way to start reducing debt is to set up a budget to know exactly where your money is going. You'll need to add up your income and subtract your expenses, then set up a plan. Your budget will dictate how much you can devote to paying down your balances each month.
3. Take Control Don't be tempted to borrow any more, even off family and friends. If possible get a part time or evening job. Spring clean your home and sell unwanted clothes, CDs, books, electrical goods and pretty much anything you don't want at a car boot sale, garage sale or online auction website such as ebay.
4. Switch Your Utility Suppliers You could save a substantial amount by finding your cheapest utility companies. Moving to a new utility supplier is not risky, most suppliers are large, trusted companies and all of them are regulated to ensure standards of service. Often you can get further concessions if you obtain your gas and electricity from the same supplier - a facility known as "dual fuel".
5. Switch Your Mortgage The mortgage is probably your biggest expense each month, so it's important to ensure you have the best possible deal. Just because you have got into financial difficulties doesn't mean that you aren't eligible to switch to a cheaper mortgage to reduce your monthly outgoings. If you have equity in your home you could also re-mortgage to increase your borrowing and use the extra money to pay off your credit cards, store cards or overdraft.
6. Cut Up Your Store Cards Store cards are one of the most expensive ways to borrow money and are best avoided if you don't repay your balance in full each month. Rates on some of these cards are nearly 30% APR. That means that a £100 pair of trousers can cost you £130 after a year if you haven't paid the amount off. Cut them up, shop around different stores and pay cash.
7. Handle Your Bills Assess your ability to pay bills as you develop your get-out-of-debt plan. Pay all your utility bills by direct debit. It's much easier to manage as you won't have to worry about sending cheques on time and many providers offer discounts for direct debit payments saving you money. You can get further discounts by opting for paperless billing. Save yourself a pretty penny by reviewing your car insurance, phone and broadband suppliers.
8. Manage Your Credit Cards Switch to a cheaper credit card and you could take advantage of one of the many 0% interest balance transfer offers to provide a breathing space. Cut up any spare credit cards to avoid temptation and write or call the companies to cancel your account
9. Shop Around The Banks The rise in the number of internet banks means there is far more choice, so it makes sense to switch and take advantage of offers such as fee-free banking and lower overdraft rates. If you have savings, shop around for a high interest account or open an ISA.
10. Watch Your Daily Spending Cutting back on non-essentials can make a instant difference. Planning meals, using a shopping list and doing a weekly food shop will save you a fortune. Buy supermarket own brand products, take a packed lunch to work and eat at home whenever possible. Avoid buying take away coffees, fast food, magazines, CD's and sweets and you'll be amazed at how much you can save.
11. Visit A Debt Management Company If you can't afford to make repayments for all your debts, don't worry! - It's not the end of the world. Get in touch with a reputable debt management agency, explain your situation and let them handle all the stress by setting you up with a personalised debt management plan. Turning all your debts into one single monthly payment making your finances much easier to manage. A debt management company can also speak to your creditors in order to negotiate reduced payments and request that the interest and charges are stopped or reduced. This means your monthly payments go towards clearing your actual debt