MILLIONS face going into 2024 worrying about debt.
Half of workers will go into the red to pay for Christmas, reports work benefits provider Perkbox.
Our step by step guide to tackling debt can help you get on top of money problems in 2024Getty
One in every three expects to be suffering a debt hangover by next month, a separate study suggests.
Kim Jenkins, boss of finance app Moneyhub, says: “It’s been a tough 12 months with rising rents and mortgages, and inflation pushing up prices at the shops.”
But racking up too much debt can spell serious trouble.
We explain how to get on top of your money in 2024 . . .
STEP BY STEP: Two thirds of all households across the UK have some form of debt, says Karen Barker, head of policy at Abrdn Financial Fairness Trust – whether that’s overdrafts, credit cards, personal loans, car finance, buy-now-pay-later or store cards.
Used carefully, debt can help you improve your credit score, netting you lower credit card and loan rates.
But borrow too much and it can start to go the other way.
Before it gets to that, there are simple steps you can take to start paying it off.
STEP ONE: See how much you owe who, by checking statements and bills or contacting your provider.
If you’re behind on regular bills, Citizens Advice has a list of “priority debts” such as the rent or mortgage, energy bills, council tax and court fines to clear first.
Fail to repay these and you risk losing your home, having your energy supply cut off or even going to prison.
STEP TWO: You need to know how much you have coming in and going out each month.
Recording your income and what you spend on essentials helps you see where you could cut back.
The Government’s MoneyHelper website has a free budget planner with tips on how to manage your cash.
MoneySavingExpert has a simple budget spreadsheet you can download for free.
Sara Williams, at advice site Debtcamel.co.uk, says it’s crucial to plan your spending for the year.
She says: “Make a list for 2024 of everything from the date of your MOT, to your dad’s 60th birthday and your mortgage fixed rate ending.
“This will make it easier to put money aside at the start of the year.”
STEP THREE: Talk to your provider or bank if you are having trouble keeping up with payments.
Jonathan Chesterman, from free debt advice charity StepChange, says most banks, energy firms and other providers will help you negotiate a repayment plan.
He adds: “You may also be able to get a grant to help you pay off some or all of a utility bill.”
Financial support site Lightning Reach lists other grants you may be eligible for, from charities, local authorities and other organisations.
Some creditors — the companies you owe money to — offer a temporary “payment holiday” to give you some breathing space during which to get back on track.
Remember that interest builds up during the “holiday”, meaning you will pay more overall.
Jonathan says: “For this reason you shouldn’t take a holiday unless you feel it’s absolutely necessary.”
If you need help deciding the best approach, the Citizens Advice, National Debtline and StepChange offer free and confidential advice.
STEP FOUR: Paying back debt can feel overwhelming without a plan in place. But there are several tried and tested techniques that have worked well for other people.
The “avalanche method” means paying back the most expensive debt first.
Most overdrafts charge around 40 per cent interest, while a credit card might charge 28 per cent and a personal loan 15 per cent.
Paying off the debt with the highest annual percentage rate (APR) first will save you repaying more than you need to.
The “debt snowball” method means paying off your smallest debts first and the largest last.
Seeing the list of debts get shorter quickly can be motivating. But you could pay back more interest with this approach.
“Stealth saving” apps such as Chip, Plum or Moneybox can help.
Sara says: “These quietly take small amounts of money from your account so you save £30, £40 or more each month that you’d otherwise have frittered away.”
Some online banks round up spending on your card to the pound and put the extra pennies into a savings account, which can go towards repaying debt.
‘Talking about £53k debt was turning point’
KATIE JOHNSON hit “rock bottom” after maxing out 11 credit cards and racking up £53,000 in debt.
Mum-of-three Katie, 45, says: “I barely slept and hid it from my friends and family for years.”
Katie Johnson says seeking help with her mounting debt was the best move she madeKatie Johnson
Then she finally sought help.
She and husband Mark, of Ashby-de-la-Zouch, Leics, reached out to StepChange to set up a free debt-management plan and began manageable repayments.
Katie says: “Budgeting was key.
“Only then could we cut costs and cut out what we didn’t need.”
They cut spending on holidays and Christmas and bought everything second-hand.
It took them 11 years to clear the debt.
They have also begun attending their local church and are involved with charity Christians Against Poverty.
Katie, now a debt coach with the group said: “Talking about my debt was the turning point.”