How to manage your debt

If you, like many, are struggling to keep your head above water financially, Christmas can be a time of worry as well as joy. Don't despair If your finances are anything but organised and the debts are building up - with discipline it is possible to take control of your money once again.

Worried woman with bills
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Own up

The first step to solving your debt problems is to admit that they exist. According to, more than a third of people in debt hide it from their partners. Save yourself from the guilt and embarrassment by owning up and clearing the way to resolving your debt issues.

Facts and figures
If you have credit cards, bank loans, a mortgage and bills to pay keeping track of them all can be a trial. Before you can even begin to draw up a spending budget, sit down and work out exactly how much you owe to whom, what money is incoming and any other regular expenses.

Get organised
Once you know how much money is coming in and going out it's time to work out just how much you can afford to pay while still covering the essentials of day-to-day living. To get a realistic view of your disposable income, check out This is Money's household budget calculator, to see where you may be able to cut back.

Though it's important to tackle all of your debts, those that carry more serious missed-payment penalties should take priority, such as your mortgage or council tax.

Make the call
Don't avoid phone calls from your creditors - it will only make things worse in the long run. Utility companies and lenders are adept at helping struggling customers and will listen if you are having difficulty making repayments. You may be surprised at how helpful some of them can be.

Disciplined spending
If you're an impulsive shopper, overspending is all too easy. Being disciplined is the only way to get out of debt, so make some simple changes to your daily spending. Firstly, leave the credit cards at home - instead, take a set amount of cash out of the bank at the beginning of the week and use that, and only that, as spending money. And do cut up those store cards.

With Christmas just around the corner, be realistic about what you can afford to spend. Don't go blithely borrowing for the festive period. Instead agree on gift expenditure - buy presents only for the children, or set a cash limit for Christmas shopping.

If your debts are spiralling out of control, it may be time to consider debt management. Organisations such as PayPlan, the Citizens Advice Bureau can offer advice and the charity National Debtline can help you to reduce your level of debt by negotiating with lenders to work out a manageable repayment plan - and they'll do it for free.

More serious action
If none of the above are viable options, an Individual Voluntary Agreement (IVA) or bankruptcy may be the last resort. An IVA is suitable only for those in full-time work who owe more than £10,000 to three or more creditors. This acts as a legal contract between debtor and creditors, and allows you to make reduced payments. Generally the debt is settled after five years.

In serious cases, bankruptcy becomes the only option. In this instance a proportion of your income is taken to repay creditors and a trustee takes control of your estate. But be warned - filing for bankruptcy is not the easy option, nor a quick fix. You will lose control over many of your assets and obtaining credit in the future can be difficult.

Above all, if you are worried about debt, don't bury your head in the sand - get advice and take control.