Are you sinking or swimming through a sea of debt?

Christmas, a time for spending: giving gifts, going out, hosting parties, followed immediately by the January sales, a time for spending: buying sofas, new kitchens, and lots and lots of clothes and this year we, as a nation, spent more during the January Sales than ever before. Could you afford it though or did you pay with credit? The average person in the UK currently borrows over £4500 via credit cards, motor and retail finance, overdrafts and unsecured personal loans and it is expected that as many as 30000 Britons will declare themselves insolvent in the first quarter of 2007. So what can you do now to sort out your personal finances and get back on track with your life?

• Understand your finances   It is very important to know exactly how much money you have coming in and going out each month so collect information on everything – your bills, your subscriptions, the amount you spend on snacks each day and find a way of calculating this against your income that you find easy to use and understandable (a spreadsheet, financial software or even a written down list). And as part of this exercise look at how much your debt is costing you, how much interest you pay on loans or credit cards.
• Review your list and see where and how you can make immediate cutbacks   Check that you are getting the best deal on your bills (www.uswitch.co.uk is a useful tool), not forgetting your insurance and mortgage, that you are not subscribing to things that are no longer of interest to you or that you do not fully utilise and limit the number of coffees and sandwiches you buy each week at the deli. If you smoke, consider stopping (the average smoker will save over £1800 in one year).
• Get motivated   What could you, would you be doing if you weren't in debt? Imagine how good your life would be, see yourself doing those activities and living that life you would have if you were debt free. Do this regularly, I would recommend spending at least 5 minutes a day visualising your life in this way, seeing yourself and really feeling how good it feels to be debt free.
• Set yourself a clear goal   Make it SMART, specific, measurable, attainable, relevant and timed, as discussed in the last edition, and...
• Make a well defined plan   As well as cutting down and cutting back, brainstorm and see how or in what ways you can increase you income. Consider asking for a rise at work, or looking for a new job or a second job, do you have any hobbies that you could earn money from? Or do you have things you could sell? When you know what will work best for you make a plan to put them into action.
• Constantly review your success and remind yourself of your goal   So when you see a new handbag or DVD collection that you just have to have remind yourself of how good it will feel to have the money instead and how that is going to enable you to have the brilliant life you are imagining.
• And bear in mind   If you choose to reduce your interest payable by taking out a consolidation loan as part of your plan, ensure that you cut off all other lines of credit as a recent survey conducted by uswitch showed that 64% of those who did not went on to spend an additional average of £2300 on unsecured credit.

Getting out of debt is possible and is worth it, just think now how good it will feel when instead of keeping your head just above water, you are standing on dry land. I wish you all the best.

Sarah Pineger