So you had a great Christmas with lots of nice presents, delicious food and plenty of partying with family and friends – but has it all left you with a Christmas debt hangover?
We all love to have a good time over the festive period and are often too busy enjoying ourselves to be worried about the cost, but in the cold light of a new year we can often find we had too much of a good time for our wallets and purses.
An extra £500
Getting an exact figure on how much is spent is difficult, but research by myvouchercodes.co.uk suggests that each adult in the UK spends an extra £500 over Christmas, which in some households could add up to more than £2,000.
A survey revealed that 8 out of 10 people admitted going over the budget they had set themselves, making up the difference with credit cards, overdrafts and other credit.
Still paying for it
Which all means we will still be paying for it long after the baubles have come off the Christmas tree. Experts say most will still be paying it off by the end of April.
But it’s important to remember this is only the extra debt run up over Christmas. In October last year the Bank Of England was warning that consumer credit was rising by £900 million a month, including a boom in credit card spending of £400 million a month.
Total credit card debt now stands at £72 billion and insolvency experts have claimed that money is so tight that 1 in 5 British adults would struggle to pay an unexpected bill of just £20 without help.
So what tips do the experts have for getting your finances back on an even keel?
Kate Hughes, Money Editor of The Independent, says the first thing is to assess the position you are in. Total up all the debt and then devise a budget for paying it off at an affordable rate.
She said: “Over ambitious plans to repay at the cost of all else, including – in extreme cases – your physical and mental health, often fail spectacularly.
“They could leave you in a worse position than you started in if you have to borrow yet more money by the end of the month because you’ve thrown more than you could afford to at a debt in the first few optimistic days of that month.”
The next step is prioritising the debts you have because the consequences of paying some bills are far more significant than others.
Debt charity StepChange advises focusing on mortgage or rent arrears, council tax, child maintenance, magistrates court fines, tax and national insurance, CCJs, TV license, hire purchase/log book/payday loans, gas and electricity and telephone debts.
Manage your debts
Kate suggests listing every debt you have and the cost of each, including things like interest rates, arrangement fees and on-going charges, before starting work on paying them off or re-arranging them to a cheaper alternative.
One of the most common forms of doing this is to switch the outstanding balance on your credit card to an interest free or low fee alternative.
Credit specialists Totally Money say in the last four years more than 2.6 million balance transfers worth more than £6 billion were made in January alone.
However, there are fewer deals around this year than previously. Totally Money boss Alastair Douglas said: “At the start of 2017 there were 10 major credit card providers offering 0 per cent interest terms of 40 months or more, now the market has slumped and there are just two lenders with deals over 30 months (MBNA and Post Office).
“It seems that providers are falling out of love with ultra-long zero per cent cards and if the trend continues over the next 12 months, some consumers will become increasingly anxious if there’s no longer a healthy stream of 0% offers to help them plug the hole in their finances.”
If you’re facing a debt mountain which doesn’t seem to shrink no matter what you do Kate says you shouldn’t be afraid to get help.
She said: “Time and time again debt advisers say people don’t seek help early enough. They battle away in isolation, risking the health and wellbeing of themselves and their household, when there are solutions for even the most complex and indebted circumstances.
“There are options for every situation. These range from personalised advice on the above steps to debt consolidation, agreeing an individual voluntary arrangement with your creditors to pay off a reduced sum over a fixed length of time, or even writing off your debts altogether.”
Plan for the future
If you do manage to solve your immediate problem, the next step should be planning for your future to make sure you remain in control.
Said Kate: “Check your current credit score with one of the many free-to-use services now available and, crucially, keep checking it. Do the same with your budget.
With your debts under control or even cleared, build an emergency fund first of all that would cover your monthly costs for at least three months. That way, the risk of falling back into debt in 2019 and beyond shrinks dramatically.”