2nd Term Debt Blues

Getting to halfway through the year and how many of you out there are getting frightened to open letters from the bank? Quite a few I would guess. Well, here's what to do to make it easy on yourself.

Firstly sit down, have a cup of tea and calm yourself down. If you panic about your debts you won't be able to deal with them effectively. As one who has been threatened with court action and experienced numerous threatening telephone conversations from debt collection agencies (licensed bandits in my opinion) I know how it feels. Log everything

Now you are calm it's time to analyse your income and expenditure. That way you can see how much you are slipping under each week; more importantly you can identify the areas you can save cash. So, get a file or book, draw a line and write down where every penny you spend goes. Do it for a whole month to get a detailed picture, then see where the wonga disappears.

When you start your record, write to your bank manager and any other debtors likely to send in the big boys to remove your cd collection in the near future telling them you are analysing your finances and will contact them to outline your future plans in due course - say about 6 weeks when you have properly assessed your finances and can give a realistic plan for a repayment schedule. This will buy you a bit of time and stand you in good stead should the situation turn nasty later and you end up in court. Now you know where it's all going...

Ok, so now fast forward one month. You should now have a record of where your cash goes. Now to make some decisions: necessary as you are going to be in the red by an average of about £4000 per year at the current rate. Yep, that's about £80 a week. Or £11 a day. Scary, innit?

Next thing to do is work out your income for the next six months or year. Or whatever period you choose. This will almost certainly be less than your expenditure figure.

Now, this is really obvious I know, but subtract one from the other and you've got the amount you've got to make up. If you are lucky your loan will cover the amount and you can get back to enjoying life. If not then read on… In another exercise in stating the obvious there are two ways to do this. Either cut your expenditure or raise your income. Both of which are covered in more detail by another article in this issue. Deal with it

Once you have worked out where you are, go and talk to your bank manager and any other debtors. Tell them what your situation is and explain how and when you are going to pay back the cash you owe them. They'll be more helpful if you have gone through the processes earlier in this piece. Don't forget that they are there to sell their products and you might get a better rate elsewhere, especially if you choose to go down the path of loan consolidation.

We also recommend the excellent set of resources on sUK for further advice. If you still need further help or can't sort out your income and expenditure, go to your local Citizens Advice Bureau, who will have free debt counsellors to help you out. They're quite friendly people really, honest. And when you've done all that a celebratory cup of tea using the week old tea bag is in order. Good luck!