A new report for the Bank of England entitled ‘The financial position of British households’, carried out by NMG Research, is a snapshot of the financial situations of the average British household at the end of September and beginning of October.

The report claimed that the average household had found it more difficult to service existing debts than in the previous year, largely due to higher household bills which reduced ‘available’ incomes. It also said that the purchasing power of this available income had reduced due to high inflation.

More than half of the households in the survey had reported a fall in their monthly available income compared with the previous year.

In total, of those questioned:

• 31% reported a fall of more than £100 per month,
• 20% reported a fall of £51 to £100,
• 12% reported a fall of £1 to £50,
• 25% reported no change, and
• the remaining 12% reported an increase in ‘available’ income.

A spokesperson for Debt Advisers Direct commented: “It’s been known for some time that British households have been under pressure financially in the past year, but these figures demonstrate the extent of the problem. In particular, a drop in available income of more than £100 can make a significant difference to the ability of households to meet their commitments and repay debts.”

The fall in available income was particularly evident amongst homeowners. In both high-LTV and low-LTV categories, 39% of mortgagors reported a fall of more than £100, while a further 19% reported a fall of £51 to £100.

The report suggested that this may have been due to homeowners experiencing higher mortgage costs, especially those who came to the end of fixed-rate or discounted variable-rate mortgage deals.

“Due to rising mortgage costs earlier in the year, homeowners have been particularly hard-pressed, although this situation may have eased since the figures were recorded due to base rate cuts and the subsequent lower mortgage rates,” the Debt Advisers Direct spokesperson said.

“The implications for homeowners are potentially more serious, since homeowners stand to have their homes repossessed if they default on mortgage payments. Homeowners who are paying relatively high interest rates could improve their situations through remortgaging, although they should consider any costs involved.”

The Debt Advisers Direct spokesperson added that there are a number of debt solutions available that could help those who have experienced a fall in available income.

“For people with several debts who want to reduce their outgoings and simplify their finances, a debt consolidation loan might be the best option,” she said. “By spreading the repayments out over a longer period of time than the original debts, monthly payments can be lower, which can make a big difference to available income. However, more will be paid in interest as a result of the longer repayment period.

“For those with more serious debts, particularly if the repayments exceed the household’s available income, a debt management plan could help. This involves working with a debt adviser to negotiate lower monthly payments based on how much they can afford. However, a debt management plan will normally require people to pay whatever available income they have left after payments to household expenses have been taken into account, so anyone entering a debt management plan should be fully committed to repaying their debts.”

For debt help and advice on a range of debt solutions, visit the Debt Advisers Direct website or call 0800 074 8639.

Personal debt is a big problem and with UK consumers owing billions of pounds in credit card debt alone, people are suddenly left in a precarious position of high debts mixed with rising unemployment and costs of living. Inflation at the time of this writing is double what the government anticipated. Mix all of these economic factors and you have a cocktail for disaster waiting to happen. As a result, many are forced to rely on credit cards to pay the bills each month. It’s an ironic yet serious situation if not controlled straight away.

Experts are predicting the economy to only get worse for the rest of the year and most likely through 2009. Interbank lending continues to raise rates as fears of lending to one another permeate the global finance sectors. How does this impact Joe public? As rates and inflation continue to rise, the cost of living compounded by higher mortgage rates, all add to difficult times ahead for most families. Using your credit cards may be a quick solution one month but you not only have to pay that back but the high interest tacked onto the bill each month.

One of the first things you can do is eliminate the smaller luxuries in life, for now at least. For example, you may want to cancel that dvd membership, or buy generic store brand food items instead of name brands. Do you really need cable tv in every room in the house? Go jogging instead of paying high monthly gym payments. These are some of the easiest and quickest steps you can take to help your budget straight away.

Write down your outgoings and incomings and make sure that you are living within your means, not beyond. If your outgoings exceed your incomings, don’t turn to your Visa card, consider getting a second job or selling some valuables to get you through this tough time.

For better peace of mind and a brighter financial future, don’t fight the credit crunch but rather roll with it punch for punch and when the economy does improve, be sure to keep on track of your finances for the rest of your life.

Debt management advice is a good place to begin your journey to a debt free life. There are free services online where you can get advice and direction on which debt management company to contact and discuss a scheme to repaying your debts as quickly as possible. Your adviser will work directly with your creditors to determine the most affordable repayment schedule for you.

Debt Management V Bankruptcy

Depending on your current financial situation, if you can avoid bankruptcy then it is recommended to do so. If you filed for bankruptcy you can expect it to remain on your credit report for up to 10 years. Lenders won’t allow you to borrow money even if you are in a desperate situation.

Debt management services on the other hand will help you devise a plan to get out of debt as quickly as possible and on terms you can afford. Your debt adviser will be the main point of contact with your creditors so no more phone calls and intimidating letters.

Your Debt Free Plan

If you’re working with a good debt management adviser you have a good chance of becoming debt free in as little as 3 to 5 years. It’s possible to improve your credit rating with in 1 to 2 years so by the time you’ve finished your debt management plan (DMP) you might see your credit history completely repaired in addition to being debt free. Ask your debt adviser for any tips on staying debt free and maintain these good practices for the rest of your life. Remember, it’s never too early to start financial plans for retirement so developing good spending habits now will really pay off in the future.

First of all, you must know exactly how much you are spending each month and subtract that from what you earn. If you earn less than your outgoings, you could be in trouble, or heading that direction which is something we want to avoid.

For example, if you earn £1,000 take home each month, your rent or mortgage is £500 per month, food, utilities, petrol, and any other necessities come to £300 per month then you effectively have £200 left each month as “disposable cash”. This money can be used on whatever you like. However, if you are using credit to purchase “non-essentials” then you must factor in this amount and deduct it from your disposable fund at the end of each month.

In most cases, people begin to feel the “crunch” when the bills roll in and they are sat there after paying the essentials, and now faced with minimum monthly repayments on credit cards or personal loans, wondering where their wages just went. This is probably the first sign people recognise when faced with the possibility of falling into serious debt.

So, what can you do? First of all, stop spending! Cut up any cards you have that you simply do not need and avoid excuses such as “I’ll save these cards for an emergency”. If you have multiple cards, you really only need one at the most. The others should be introduced to your scissors and waste bin.

If you find you can only repay the minimum monthly bill then you could be headed for serious debt problems. Try to consider the minimum monthly charge as just that, the “minimum” the bank will accept as your next payment. Always send your creditor more than the minimum as this will help repay your debts quicker and save you from paying high interest payments too.

If you are beginning to get calls from creditors and think “why do they keep calling me?” then you probably have had your head buried in the sand for too long. Being immersed in debt is no fun and many people don’t want to think about it because it’s too painful. Some even continue to spend thinking a bit of “retail therapy” is the answer. As we know, it only makes matters worse so once again, get the scissors out now!

If you are forced to find additional work, such as a part time job, then at least you have acknowledged the problem and are making steps to repay what you owe. However, working extra hours does not justify spending more. If you have to work overtime at your primary job or take on a second job then be sure you have a plan on how you’ll use the extra money to repay your debts. If you are going to sacrifice some “me time” by working extra hours, then make your efforts work to your advantage and use the extra cash to pay more than the minimum monthly payments.

In conclusion, if you are just now realising, or admitting you could have a debt problem then it may not be too late to make positive changes now. Cut up existing cards, including store cards, that are only adding to your mounting debts. Write out exactly how much you take home from your wages and deduct what you spend each month to see where you stand. Do you have any disposable income left? Are you in the red?

Worst case scenario is you contact a debt management adviser however, if you can reduce and eliminate your debts on your own then you will teach yourself some valuable life skills. And, once you are debt free, remember the struggle you endured to get there and avoid applying for and using so much credit in the future.

In the beginning of your search for a debt management company, do some research first and speak to or write to any local government agencies that may offer free advice on which route to take as well as which company to consider.

Below you’ll find several reasons why a debt management plan may be right for you.

• In most cases your debt could be reduced by as much as 75%. Speak to an adviser to find out the exact amount you may write off.
• If you opt for a debt management plan (DMP) your agency will be the third party who will work directly with your creditors on your behalf. They will arrange the amounts to be repaid and you should not receive any more hassling phone calls or letters. If you do, contact your agent straight away.
• A good proportion of debt management schemes are backed by the government.
• You will be placed on an affordable repayment scheme which is highly structured to help you know exactly how much you need to repay each month. This will help you organize your monthly outgoings until you have fully repaid your debts.
• When you choose the right debt management company, you will feel more in control because you are working with a team who has your best interest at heart. This should help you sleep better at night.
• By taking the steps to implement a DMP you will be able to avert legal actions that otherwise may have been filed against you had you not taken a step toward repaying your debts with the help of a debt adviser.
• You have a qualified adviser to call up anytime for free advice.
• Reputable debt management companies know how to help you get back on track. You will feel less stress knowing your debts will be paid as soon as possible.
• Applying online can be a simple first step. The majority of debt management companies provide a simple, non-intimidating form to help you get started.
• Instead of sending out several cheques each month or setting up multiple direct debits to repay all your creditors, your plan will allow you to make one affordable payment per month.
• A debt management plan is a good way to write off a big chunk of your debt legally.
• A DMP could be what you need instead of filing bankruptcy or for an IVA.
• Your debt management plan will help you repay your debts over an indefinite period. With affordable repayments, you can extend the period to suit your needs.
• Interest charges that are sinking you deeper and deeper into debt can often be stopped by your debt adviser. This alone could save you thousands.

If you are worried about your mounting debts spiraling out of control and you simply cannot afford to make your repayments, you should consider speaking to a debt management adviser as quickly as possible.

You owe it to yourself to find the best solution to get out of debt and to eliminate your stress along the way.

Depending on the individual there are several options. Some people will resolve their debt problems simply by cutting back, getting a second job, working overtime, basically getting out of debt on their own initiative. Unfortunately for others, the only recourse may be filing for an Individual Voluntary Arrangement (IVA) or worse case scenario would be bankruptcy.

Pertaining to credit card debts specifically, you will want to avoid accumulated interest rates which add more and more debt to your balances every month if you’re not careful. Remember, if you are already finding it difficult to repay what you owe then you need to take action immediately. Do not bury your head in the sand, it will be much more difficult down the road if you choose to ignore what can be fixed today.

If you see your interest continually adding to your credit card debt then why not contact your creditor and attempt to persuade them to lower your interest rate. Explain that you are making every effort to repay but you could use some assistance. The worse they can say is “no” and if they say yes, you are already 1 step ahead of the game.

There have been circumstances where the creditor’s employee, for example the person you speak to when you call their number, will not offer you a lower rate automatically. In other words, you must ask for their assistance in lowering your rate. Also, while you have them on the phone, ask if they are able to wave any late fees for the short term explaining your efforts to make a payment as soon as possible. Be sure to honour your claim of repayment on the date you say you will.

Another option is to ask if you may have an extension of your credit line. Be careful though, do not be tempted to use this extra available credit and sink deeper into debt.

If you make the decision that your only recourse for help is through a debt management company, be sure to do your research. Contact local or national free debt lines to ask for recommendations on whom to contact.

If you can, try your best to sort out your own debts. Be realistic, no matter which decision you make.

If you have no money left at the end of the month to put toward your savings or a nice holiday because all you do is pay bill after bill then perhaps its time for a serious life change? We live in a culture of “buy it now” and rarely think about the “pain of tomorrow” from the decisions we make today. Credit cards, if used incorrectly, can be much more of a burden than the momentary satisfaction we get when we charge it to buy something we don’t really need. Not to mention the stress factor can really downgrade our quality of life.

OK, so, we agree that owing more than we can possibly fully pay off is a burden we could surely live without, right? It’s time we got rid of those credit cards that keep us shackled to our creditors until all debts are repaid.

Below you’ll find a few basic first steps we all can take to cut down the burden of debt in our lives. Mind you, these steps are physically easy to accomplish but mentally and emotionally for many it could be a challenge.

Step 1: Cut Up Your Credit Cards – Get out the scissors! Find ALL cards that are truly unnecessary and especially those with high interest and cut them all up. Keep one for emergencies only, and the rest get rid of. This includes store and petrol cards too. If you really want a credit card then consider a pre-paid card as you will have to fund these first so you are not being charged high-interest.

Step 2: Watch What You Spend – Note down all your expenses and quickly you’ll realise how much is spent on items that simply aren’t necessary. Remember, it’s not just the amount you charge on your card but an added 12-20% in interest or £20 or more per late fee. If you can’t afford to buy something in cash, simply don’t buy it until you are able. Makes sense right?

Step 3: Pay More Than The Minimum – Another great tip when attempting to repay your debts is to always repay more than the minimum monthly amount. This small monthly charge is designed to help you during months where you have difficulty making repayments. If you only pay the minimum each month you are not only prolonging your debt burden but you are paying additional cash toward your interest that could have been avoided.

Simply removing some of the tools that allow for impulsive spending, such as credit and store cards, can help you avoid further accumulation of debt. Easy wasn’t it? Now, the next task is to get yourself out of debt entirely and this takes planning.

With the right mindset and determination you can, and will, get out of debt. There are always alternatives such as debt management schemes if you simply cannot repay what you owe but if you can manage on your own, you’ll feel better and rest easier and build the self confidence needed to steer you clear from potential financial quicksand in the future.

However, if our goal is getting out of debt in 2008 then we need to try and only use a credit card if it’s an emergency. If you are using your high interest credit cards to pay for essential living expenses then your outgoings (bills) are higher than your incomings (wages). If you cannot afford to pay your regular bills with your wage then you need to try and get a better paying job, work overtime, find a second job, or stop spending beyond your means. I know, easier said than done right? Well, if you want to get out of debt this should be one of the first steps.

Never pay just the minimum amount on your credit card bills. Remember, most are usually high interest so paying the bare minimum will help keep you in debt longer. Strive to pay at least an extra £5 or £10 per month on top of the minimum, even more if you can afford it.

Make your lunches to bring to work. Prepare healthier meals and avoid processed foods as much as possible. Buy generic brands for certain items like toilet paper or cereal.

To properly understand your incomings and outgoings you’ll need to sit down and write out exactly what you need to pay each month to survive. Everything else should be considered “extra”.

Write two columns on a piece of paper. Column one we’ll call “Must have” or “Must pay”. This column will include necessities like rent, mortgage, food, utilities, petrol, and so on.

Column 2 we’ll call “Extras”. This might include going to the pub, dvd rentals, buying computer equipment, unnecessary clothing, and so on.

You can even expand this to include food. Do you really need that 3rd pack of crips or that “special deal” on 24 cans of beer? Write down what’s absolutely necessary and what is extraneous.

With the credit crunch upon us for over a year now, most of us are discovering how much we’re forced to sacrifice. Take advantage of a time where we need to watch what we spend and work toward paying off your debts as quickly as possible so when the economy rebounds, we’re in a much better position than prior to “the crunch”. Work toward being debt free in the near future and for the rest of your life.

If you are like most people, chances are you are too afraid to seek debt help. Here in the UK this could be in the form of a debt management scheme or an IVA (Individual Voluntary Arrangement). If your debts have become so severe that you simply cannot repay them, it may be time to speak to a professional debt adviser.

One of the first things you’ll need to consider is being honest, not only with yourself by asking questions of how you got into debt but if you do eventually work with a debt management adviser, you will need to declare everything. Both are important to face, even if at first it is painful. You’ll be taking the first steps toward understanding your past habits of spending in order to make better choices in the future. There is still hope, even if it means restarting all over again. Your debt adviser will also require you to be forthright and honest or it could jeopardize your agreements with your creditors.

If, after careful consideration, you choose to seek debt management help, you’ll be required to list all of your debts. You’ll want to know which debts have the highest interest rates. A good place to start is to list each creditor from highest interest rate to lowest as you’ll want to pay off those creditors first.

Before you do anything, change your spending habits now. Recognise and avoid “emotional spending” also known as “retail therapy”. Whilst it may help you forget your troubles in the short run, you are only postponing the inevitable as well as taking on much more debt than you can afford.

Sit down and write out your monthly outgoings such as rent, mortgage, food, gas and electric, petrol, and any other “must have” expenses. This way you’ll know the bare minimum you need each month to survive. Subtract that from your wages and you’ll begin to have an idea of how much “extra” cash you have at the end of each month. This spare cash should be used to pay your bills. If you do not have extra money at the end of the month you are spending more than you take in and this could be one, of many, reasons you are in financial trouble.

You may need to consider taking on a second job, work overtime hours, sell some personal items such as jewelry, furniture, collectibles, etc. Your financial situation will get better but you must take action now, recognise where you overspend, change bad habits, work toward rebuilding your credit, and be on your way to a happier, healthier life and financial future.

The problem with many unsecured debt companies is they may not be able, or willing, to help. Despite your dutiful efforts to contact them about your situation most times they will pass your details onto their collection team or a private debt collection agency. This is when the phone calls and threatening letters start to appear.

Before your situation gets any worse you need to seriously consider what debts you are able to repay. If you determine that it’s impossible to make the minimum payments then it is recommended to seek the advice of a debt counselor to discuss your options.

However, just because you cannot make all your payments does not give debt collection agencies the right to hassle you to breaking point.

Did you know?

1. You are not obliged to speak to your creditors about your debt problems if they concern unsecured debts? Secured finance, such as a mortgage, is different because your home is used as security and if you do not repay the amount borrowed the lender has the right to force you to sell your home to recoup the loan amount, fees, etc. Granted this tends to be a last resort.
2. You do not have to accept phone calls from hassling credit agencies. You might want to use an answering service or message machine instead of feeling obliged to speak with them each time they call.
3. If debt collectors are incessant with their calls, you can change your phone number. Tell your phone provider you want your name and number excluded from the directory to make it more difficult to find you.
4. You do not have to read the threatening letters sent by unsecured debt collection companies. They are aimed to intimidate you with lies and threats which will only stress you out even further. However, pay attention to any letters from the court, such as County Court Judgements (CCJs).
5. Although highly unlikely, there may be situations where a debt collection agent will show up at your home. You do not have to speak with them. If you ask them to leave they must comply. Do NOT let them into your home, even if they claim they need to use your facilities or telephone. It could be a façade to try and enter your home to confiscate goods.

The above advice is not meant as an excuse to disregard your debt problems. Far from it actually because you need to focus on resolving your debt as quickly as possible to avoid further interest charges and sinking deeper into debt.

However, you do have rights and collection agencies are designed to scare you into repaying your what you owe. This is fair because you did borrow money after all.

Acknowledging the fact that you do need help is the first step. Once you determine your ability, or inability, to repay your debts in a timely manner you should take this time to either construct a workable plan to repay your debts or contact a debt management consultant to begin the process of becoming debt free.