UK Debt Management

Statistics show that the Average household debt in the UK is approximately £8,577 (excluding mortgages) and £50,091 including mortgages. The average owed by every UK adult is approximately £26,313 (including mortgages). This grew by ~ £200 last month. Debt is an ever increasing problem for many people nowadays.

I myself am in debt, luckily now not by very much but a few years ago it was a very different story. In 1999 I decided it was time to flow the nest and moved out of my parent’s house, a friend and I had arranged that we would move in together. She was already living on her own but it had been agreed that I would move up from the south to the Midlands and some friends had said I could stay with them until my friend and I found a 2 bedroomed flat to share in Nottingham. So I handed in my notice, left my job, packed up a few things and moved.

This was when my debt problem started. I had a few bits and pieces I had collected as part of my bottom drawer and about £750 in savings. Suddenly I had a house which needed to be furnished, I didn’t even have a cooker at first or a light in the lounge as the previous owners had kindly decided to take the light fitting with them. I had an inflatable chair in the lounge and I slept on an inflatable bed, I had a kettle and lived off pot noodles and sandwiches for about 6 weeks till my parents saved me by bringing me a proper bed, a cooker, a light and a fridge. Bit by bit I gathered hand me downs from other people a sofa here, a wardrobe there but I was happy enough.

I was fine for a couple of months and then it started my first round of bills. When I lived at home I gave my mum board and lodgings each week but I never had to worry about things like Council Tax, Water Rates, Gas/Electricity, TV Licence etc etc so it was a short, sharp shock to the system when these all arrived. I was surviving on a temps wage, running a car and now I suddenly had all these bills to pay. What would I do???????? I paid a few, the ones I could but stupidly I thought “I can just pay double on my Council Tax next month”, I paid the gas and electricity but the water rates got left. I thought I could just pay a bit extra next month and if I did that for the next 3 months it would be ok.

I realise now how utterly stupid this was. As time went on of course the money I owed on these things got higher and higher and it was becoming increasingly hard to pay things, especially as working as a temp the jobs came and went and sometimes I went without work for 2 maybe 3 weeks in a row meaning that when I went without work I went without pay. I thought “aaaah it’ll be fine I’ll just take a bit of cash out of my savings” but £750 doesn’t really go a long way and before I knew it, it was all gone. I was getting more and more stressed and worried about not being able to pay.

Then one day a letter arrived it seemed to solve all my problems - yep you guessed it was an application form for a credit card. 0% interest for 9 months, wow that’s great. This means if I can’t afford to pay something I can whack it on that and then just pay it off the next month. So I filled it in and within about 3 weeks a nice shiny card arrived on my doormat, the end of my problems more like the second coming!

So I started out with good intentions the card was only to be used in an emergency but soon it was used for little bits and bobs that I thought wouldn’t matter, petrol for the car, a bit of shopping in Asda, but those bits and bobs add up and soon enough the card was up to its limit. So what did I do? I took out another card with the intention of transferring the balance across because the new card had 0% interest but of course I only transferred half of the balance (god knows why) and then after a few months both cards were maxed out again.

A friend (more like an enemy) asked why I didn’t take out a loan to pay off the cards and all the small little debts hanging round my ankles and then I would only have one thing to worry about paying each month. So I got a loan for £2500 it wasn’t quite enough to cover all my debts but I didn’t want to tie myself into anything too big. I paid off the debts but then I didn’t cut up the cards (yes I know, I know how stupid am I?) so the circle continued.

This went on for a couple of years. I was constantly worrying and stressing about money, robbing Peter to pay Paul without much success. I dreaded the postman coming and every single morning another final demand would drop through my letterbox, I would sit and cry every time I opened my post because I knew I was in deep doo doo and I didn’t know how on earth I was ever going to get back out. I was stroppy and irritable at work and with my partner and family (neither of whom knew that any of this was going on) and at times I felt so desperately low that I even thought to myself “I may as well be dead because that would be better than living like this”.

My gas provider had fitted a repayment meter to my property because I owed them so much which I couldn’t afford to keep topped up with gas so I used to make do without heating because I couldn’t afford it. I can remember being sat in the height of winter with snow outside wrapped up in a duvet with a hot water bottle drinking tea constantly to try and keep warm.
It got to the point where my minimum payments on my credit cards alone where almost as much as I was earning each month. I was at the end of my tether and I knew I couldn’t carry on like this but what made me get help was a letter from a Bailiffs who had been passed my account because of my outstanding Council Tax. I was so petrified I went to my local Citizen’s Advice Bureau to seek help. I went and explained my situation, they listened and were very sympathetic and didn’t judge me and they asked if I had problems with any other bills. They assigned me a debt counsellor and he then got in touch with my local council and arranged a payment plan for me which would ensure that I had no more visits from the Baliffs. I was so glad I had made the decision to go and see them.

My bank account had been suspended and I was having real trouble getting another, a problem that a lot of people in debt face. The CAB gave me a list of banks and building societies who offer basic accounts that do not provide an overdraft, debit card or cheque book and guarantee card. Most people should be able to get a basic bank account even with a hefty debt. By this time my debt was around £10k and growing all the time due to fees for unpaid payments and interest accruing. I approached the Nationwide for a basic bank account and they gave me one, finally I had an account I could pay my wages into without them being swallowed by my stupidly large overdraft which was a problem I had encountered before.

I had realised there were people out there who could help me. I researched on the internet companies that could help me try and get myself on the right tracks again. National Debtline (http://www.national-uk-debtline.co.uk/) were one of the next organisations I rang followed closely by The Consumer Credit Counselling Service (www.cccs.co.uk) they are a charitable non profit making organisation that help offer advice and support for people with debt problems. You can request a pack from them which I found to be extremely helpful and I would recommend anybody who is having debt problems should get hold of this pack. To be honest it is even helpful for those who aren’t in debt just in case any problems ever arise.

Included in the pack were various template letters that you can send to your creditors - I found these especially helpful. There was one that basically explained that you are experiencing problems and requesting they freeze your account and any further interest charges to it. You can also offer to make a payment plan to them. At first because I had such a high level of debt and a minimal amount of money coming in they allowed me to make a token payment on my accounts of £1 per month to enable me to assess my situation and try and work towards sorting it out.

I entered into payment arrangements with all my creditors agreeing that each would be reviewed after a certain amount of time (usually 3 or 6 monthly). Each time it was reviewed I was asked to increase my payment by a small amount. This does mean that you will not be able to use your cards and you will receive a mark on your credit record to say that you are undertaking a payment arrangement but then to be honest my credit score was shot to pieces anyway!

I have to say that my interest being frozen has made such a huge difference in allowing me to work towards paying off my debts. Now any amount I pay off my account is deducted whereas previously I was paying an amount each month and then having 5 times as much interest added so I was never actually paying anything off at all. This is what causes most people problems when they are experiencing debt problems - interest charges being added on will cause your debt to steadily grow. Do something about them!!!!!!

6 years after I first stared getting into debt I am now starting to come out the other end of a very long, very dark tunnel. It has been a roller coaster of emotions and I am not going to pretend that it has been easy going because it most definitely hasn’t but I am finally feeling positive about my situation. I have a debt which is less than £2k now I am still paying some things off but I am paying a decent amount each month and I love the fact I can see myself becoming closer to being debt free with every payment I make.

I don’t splurge on luxury items and I have become very savvy with my spending. If it’s one thing that I have learnt through getting myself into trouble is - don’t live beyond your means.

Now you may read this and think “you stupid girl it’s all your own fault” and not for one minute do I deny that fact. It was my own stupidity that got me into this mess and I am not pitying myself or blaming anyone else but my case is similar to hundreds of thousands of people across the UK. Credit cards and Loans are available from all kinds of companies and every day people are receiving leaflets, it is so easily done and more and more people are affected by debt every day.

So what can you do if you are in debt and want to get yourself out of it? I will now give you my tips to decreasing your debt.
* Don’t bury your head in the sand. If you are having problems than don’t keep thinking it will sort itself out, it won’t. You need to stop burying your head in the sand and face up to the fact that there is a problem that needs to be addressed. The sooner you can do that the sooner you will be on track to getting the problem sorted out.

* Get advice from professionals. Here is a list of good organisations that offer free, help and support.

- Citizens Advice Bureau, you can find the number for your local CAB in the yellow pages
- National Debtline (http://www.national-uk-debtline.co.uk)
- Consumer Credit Counselling Service (www.cccs.co.uk)

Be very wary of companies that claim to provide debt advice and debt management plans. I would always advise anyone to seek the help of one of the organisations above before contacting any other places which claim to provide help and support. You can always check with the above organisations if another company offering advice is above board and worthwhile contacting too.

* Sit down and go through all your financial paperwork. Get all your bills, statements and letters. Put them into piles relating to companies, you will need all these if you make an appointment to see a debt counsellor at the CAB. I personally found it very helpful to set up a spreadsheet that listed all my creditors and the amount I owed them. When arranging payment plans with creditors you will need to provide this information so it is worth doing so that you always have it to hand.

My spreadsheet enabled me to also put in when I made a payment and the new total of my debt. I found this so useful and a great motivation as I could see the amount I owed going down with every payment.

* Keep a ’spending diary’. Buy yourself a small notebook and keep it with you at all times, every time you buy something or spend some money, no matter how small. It will amaze you the money that you spend on stuff without even really thinking about it and this will highlight areas in which you can maybe cut down on your spending.

* Sort out those cards! If you have debt problems the first step to take is to look at who you owe your money to. If you owe a lot on credit cards then I would suggest you transfer the balance on your cards onto a long term 0% interest card and then cut all of them up!!!!!!! Make sure you do cut them up and if need be have a friend or partner watch you cut them up too just to make sure you actually do it. When the interest free period has run out you can transfer them again onto a new 0% interest card. Do not be stupid and pay interest on your debts!!!!!!!

* Save money on work lunches. If you buy a lunch from the sandwich van everyday or a coffee on the way to work from the coffee shop this can add up over the course of a week. You can save money on lunches by preparing sandwiches the evening before and taking a packed lunch to work with you everyday.

* When cooking at home make big batches of food and freeze any that is spare. I will cook a family sized lasagne even though I live on my own and then eat one portion when it is cooked for tea and the rest I will cut into separate portions and pop in the freezer for another day. It is as cheap to make a large sized lasagne as it is to buy separate frozen ones and a lot tastier too.

* Think about taking on a second job. Do you have time in the evenings or weekends to work a second job? Doing a few hours extra work could get you some extra money to help pay off some bills.

* Ask yourself the magic 5 questions when you are thinking of buying something, these are:

- Can I really afford it?
- Do I really need it?
- How much will I use/wear it?
- Do I have anything the same as it?
- Is it worth it?

It is amazing how many times when buying something you will ask yourself those 5 questions and you will realise that actually you don’t need it or you already have something like it that you can use instead. Even now I still use this mantra every time I buy something, once you get into the habit of asking yourself the questions you find that you carry on doing it even when your money problems aren’t so severe.

* Have a good rummage round the house, can you do a car boot sale or do you have anything that you can sell on Ebay? Car boots are a fantastic way to make money, it’s amazing what you can sell - one mans rubbish is another mans treasure or so they say. As spent at a car boot can usually net you on average between £25 - £50 sometimes more and it is also a great way to have a spring clean around the house too.

* Do not withdraw more money than you need from the cash point machine. We’ve all done it, you know you really only need £20 but you withdraw £30 just in case. If you withdraw extra money from the cashpoint then you are bound to spend it on stuff that you don’t really need. I find if I don’t withdraw any extra cash then I only spend what I have in my purse as I can’t be bothered to go back to the cashpoint. Another good tip is take out what you need for the week and then leave your card at home that way you can’t be tempted to take more cash out if you see something that you fancy in the shops.

* If you buy online then go through a referral site such as Greasy Palm or Free Fivers as this can then earn you cashback on your purchases. You can usually get cashback on a variety of things such as insurance products, holidays etc so it is well worth a look to see if you can get something back, if you were already going to buy it then how can you lose?

* Shop around. It always pays to shop around, I never just buy something I’ve seen in a shop now I will always look round other stores or on the internet to see if I can get it cheaper now before resorting to buying from a shop. Ebay is great for getting things like books, DVD’s, CD’s cheaper than the retail price and you can buy almost anything on there too. It is especially important to shop around for things like car and house insurance as the price can differ so greatly - for instance quotes for my car insurance ranged from £220 right up to £550 this year so by shopping around I managed to get the best deal which could’ve saved me a huge amount per year had I been previously paying the higher end of the scale (which I hadn’t because I always shop about for insurance).

* Look at your utility bills. Can you save money by swapping your gas/electricity provider, can you have a water meter installed at your property, can you find a better deal on your landline/mobile phone/ISP provider. If you look on www.uswitch.com is a website where you can see if you can reduce your monthly utility and service bills. It is easy to use and you can check all kinds of things on there from telephone and internet providers to credit cards and current accounts.

* Be sensible. I know this seems like common sense but if you are really serious about getting your debt sorted you must realise that you will have to tighten your belt and cut back in certain areas. Things like going out must be cut down upon, food shopping may have to be reduced or you may have to opt for choices from supermarket value ranges (they aren’t even that bad most of the time), you may have to stop treating yourself to things as much. The harder you work and the more effort you are prepared to put in and the more you are willing to cut back the more you will save and the quicker you can start paying stuff back.

* Use coupons. You may not know this but you know those coupons you get in magazines for 20p off butter and 30p off dog food, well you can use those in your local supermarket even if you don’t buy the product usually. Check with your regular supermarket what their policy on coupons is. I always save up any coupons I do get in the post and take them to Tesco as they accept up to £10 worth in one shop. When I am at the end of the month when money is usually a bit tight I take them in and get a bit of food shopping with them. Even if it’s only £1 it’s a £1 saved. Look after the pennies and the pounds will take care of themselves.

* Check out this website www.moneysavingexpert.com they have loads of great hints and tips on how to save money and they also have a forum where people post up helpful tips and advice. They do a weekly email with the latest news and tips for how you can save money. I have found it to be really, really helpful and is a good place to speak with people who are in the same situation.

It has taken me 6 years to get to the point where I feel positive about my finances. Yes I am still paying off a few small debts but I know that these will be clear in the not so distant future. If this experience has taught me anything it is the true value of money. I suppose before when I lived with my parents I had a much greater amount of disposable income and the shock of going it alone combined with my stupidness and naievity caused me a debt that has taken me a long time and a lot of struggling to pay back. I now know what it is like to be so penniless that I have to eat beans on toast everyday for a month and I never wish to find myself in that position again. I have steered clear of credit cards and loans even though I am now in a position to have them again. I don’t even have a debit card on my current account as I find I survive well enough just having a basic cashpoint card. I do not want to find myself back in that dark tunnel as I was then.

I can keep going on with hints and tips for you all but it will make this really, really long so I am going to leave this here and I think that when I think of more things to add I will start a second review on debt advice for people to read. I reckon there’s enough info here for people to be working on for the time being.

My last piece of advice is don’t ever think that you are alone, there are many, many people in this situation. Always remember there is light at the end of the tunnel and with hard work, determination and motivation you can work towards getting these debts cleared. Yes you may have to spend a while going without the little luxuries that people take for granted but what would you prefer the worry and stress of having big debts around your neck but having life’s luxuries or being debt free and being able to have life’s luxuries. I know which I would prefer!

I hope that this has been helpful for some people. If you would like anymore advice on debt or any tips on how you can cut your debts please feel free to drop me a message in my guestbook. I know how it helps to have support while you are trying to sort yourself out.

Many thanks for reading.

Shazza x 

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