Tackling your debts

3 tips for tackling Christmas debt

Posted 25 January 2017

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If you’ve overspent this Christmas on presents, food and nights out, don’t panic. Here’s how you can start to tackle your Christmas debts.

1. Create a budget

A really good budget can help you deal with your debts. You need to work out how much money you’ve got coming into your household and everything you spend it on.

If your income is bigger than your outgoings, you’ve got a budget surplus – so you can afford to pay off what you owe. And if you have extra money for debt repayments, focus on repaying the debt with the highest APR.

What if you’re just breaking even? In this case, focus on cutting back on some areas of spending to free up more cash. For example, can you save on your energy bills by switching to a cheaper deal? Or there might be something non-essential you can cut out straight away.

If your outgoings are bigger than your income, find ways to increase your income, look for savings to trim your spending or reduce your debt repayments with a debt solution.

2. Pay your priority bills first

If you can’t afford to pay everything, remember that certain bills are more important than others and you must pay them first. Your priority bills include gas, electricity, water (if you pay this), Council Tax, your rent and any secured loans (such as a mortgage or hire purchase) and, of course, food.

It’s important to keep a roof over your head and keep your family warm before you think about repaying unsecured debts like loans and credit cards.

3. Speak to your lenders

Struggling to repay what you owe? Let your lenders know. Tell them that you are in financial difficulties and ask them to reduce your repayments and freeze interest and charges so your debt doesn’t grow any further.

You should also read the letters and statements your lenders send you. The earlier you acknowledge them, the easier it is to prevent serious legal action.

If you don’t feel able to speak directly to your lenders, speak to a debt advisor who can do this for you.

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.