Getting out of debt when the credit crunch bites

|PIC1|With the credit crunch dominating the news and talks of a recession, there's a question that will soon be the main thing on people's minds: 'How are we going to manage financially?'

Rob Parsons, author of The Money Secret and Executive Chairman of Care for the Family has a message for those who are struggling with debt or worried about how they can manage their finances. Although there are no easy answers, there are things we can do that will help us find a way out of the spiral of financial gloom.

Here are 10 Top Tips from The Money Secret to get you on the road to regaining financial control:

1) Know the worst! Open all bank statements and bills. List all your debts, large and small.

2) Keep a record of what you spend and where you spend it. Knowing how you spend your money will help you control your spending. You could carry a notebook with you and for, say, three months, record all items of expenditure ... however small!

3) List your monthly/weekly income and expenditure. Consider whether you can make any realistic cutbacks that will increase the money you have available to pay what you owe to creditors?

4) Some debts are more important than others. The debts which take priority include: mortgage, rent, electricity, gas, income tax, fines, maintenance and TV license. Debts that are not such a priority (known as non-priority debts) are credit cards, store cards, money owed to catalogues. Work out which are your priority and non priority debts.

5) Consider what offer of payment you can make to each of your creditors. For priority debts, try to offer the current charge plus something towards the arrears. For non-priority debts, offer whatever you can, even if it's £1.00 per month, until your circumstances improve.

6) Write to your creditors explaining your financial difficulties. Send them a copy of your income and expenditure form. Ask if they will agree to accept your offer of payment and freeze the interest.

7) Credit and store cards. After you've paid the priority debts, if you have enough money spare, begin to hit those credit and store cards! Start by paying the minimum amounts on all your cards, except for the one with the highest interest rate. Put all you have into paying that card off, then once the debt on this card has been dealt with completely, move on to paying off the card with the next highest interest rate. Soon the house of cards will come crashing down.

8) Rediscover cash - especially if you find it hard to keep track of your spending when using credit or debit cards. At the beginning of the week, withdraw your budgeted amount of cash for the week and resolve just to use that!

9) Don't be tempted to transfer all your debts into 'one easy monthly payment' secured on your house. If you do this and fail to keep up with payments, you risk losing your home.

10) Don't despair! With help you can get through problems with debt. Consider making an appointment to see a free debt advisor. They will not judge you. Be very careful of debt advice agencies that want to charge you - they can sometimes make things worse.

On the web:
To find out more visit www.careforthefamily.org.uk or www.themoneysecret.info for further advice.