Family debts up by 48% in one year

If you have the financial blues now the post Christmas credit card bill has finally hit the mat, you're not alone. In its Family Finances report, insurance company Aviva say the average family's debts have risen nearly 50% over the last year.

This means the average household now owes £7,944 in 'unsecured' debt; (that's debt you can't lose your home over), so we're talking anything owed on credit and store cards, loans and overdrafts, but not mortgages.


Our biggest debt comes from credit cards with a balance of £2,314 we can't shift so what can you do if you're struggling to make ends meet?

Manageable debt or in deep?

• First work out whether you've got 'manageable' debt; bills you can pay off if you get your head down and make some cut backs.

• Or if you're literally drowning in debt, not sure who to pay first and facing final demands and arrears letters, it's worth getting specialist advice and there's details further on about this.

Who to pay first

• Keeping the roof over your head should always be top priority. So pay your rent or mortgage first along with the council tax.

• If you can't meet these bills, talk to your landlord, lender or council to explain the situation and ask about reduced payments.

• Make a list of what you owe and check how much interest you're paying on each card or loan. Target the one with the highest interest rate first and use any cash you can to clear this first.

• Then work down the list clearing them in order.

Ways to cut back

• Detox your bank balance. Check you're not shelling out on old gym memberships or magazine subscriptions. Providing you're outside any 'minimum' contract terms, cancel these immediately.

• Write down everything you spend and look at ways to cut back. Ditching your monthly TV package may not be fun but can save around £70 a month; that's £840 a year.

• Don't pay for stuff twice. Mobile phone insurance costs around £80 a year but you may be covered on your household policy.

• Switch your gas and electric – you can save up to £530 a year through comparison sites like www.moneysavingexpert.com and www.uswitch.com.


Tackle credit card debts

• Use any cash savings to pay off your debt. It doesn't make financial sense to have cash in accounts earning 3-4% interest if you're paying around 18% interest on credit cards and up to 30% on store cards.

• No savings or a balance you can't pay off? Switch debts to cards offering 0% 'balance transfer' deals. You'll probably pay around 3% in fees but it buys you time to clear your debts. Right now you can get up to two years interest free with a Barclaycard Platinum card.

• Pay off as much as you can before any 0% deal ends and if necessary switch cards again to buy yourself more interest free time.

• Can't get accepted for a 0% card? Go for one with the lowest long term rate you can find and pay off as much as you can as fast as you can.

Need specialist debt advice?

There are lots of places you can go for free debt advice including:

• Citizens Advice has contact details for your nearest branch.
• National Debtline, 0808 808 4000
• Consumer Credit Counselling Service, 0800 138 1111

Whatever you do, don't pick up the phone and call one of those debt management companies you see advertised on daytime TV. They'll charge you another heap of money for help sorting out your debts which is all stuff people like Citizens Advice can do for you for free. Interest rates can sometimes be more than 1000%, that's one thousand %.

You can find more advice on AOL Money:
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