City Survivors: Beat your Christmas debt hangover
As we come down from the highs of the festive season, it's not just our heads that may be suffering; our bank balance may also have taken a hit - which is particularly difficult for those already struggling with debts to deal with.
More than a third of young people have debts of almost £3,000, according to a survey carried out last year by the Money Advice Trust (MAT), and this excludes the MAT estimated average student loan balance of £25,505.
Young people are borrowing using credit cards, overdrafts and loans from family and friends. Of the 2,000 18-to 24-year-olds who answered the MAT's survey, 32% said their debts were a "heavy burden", while just over half said they regularly worry about money.
Worryingly, of those in debt, 37% said they do not have a plan to repay what they owe.
National Debtline, the free debt advice charity that the MAT runs, is rightly concerned that if this situation continues, there is a risk that young debts will become old debts, and that the financial prospects of young adults will be negatively affected as a result.
Its top 10 money tips for the under-25s, which Moneywise has expanded on, are as follows:
1. Draw up a budget
Calculate your essential monthly outgoings; such as food, bills, rent or mortgage repayments, and then work out how much is left for the rest of the month. Don't spend over this amount.
2. Spend less where you can
Take a look at your outgoings. Is there anything you can cut back on? For example, do you need to buy lunch or a coffee out every day? Why not take a packed lunch instead? And whether you're shopping or going to a restaurant, check for discounts using VoucherCodes.co.uk.
3. Earn more money
Is there anything you can do to make a bit of cash in addition to your job? Can you sell unwanted clothes or goods on Facebook or eBay? Or DVDs, CDs, and electricals on sites such as musicMagpie.co.uk? Do you have any skills you can market on TaskRabbit.co.uk, such as DIY or cleaning skills?
4. Take care with contracts
Use a mobile phone comparison site, such as BillMonitor.com, to check if you're overpaying and if you are, switch to a cheaper deal. The same goes for checking you're not overpaying on your broadband and digital TV services.
Are there any subscription services you could ditch too? An Amazon Prime or Netflix subscription, or a gym membership you've only used once? Just beware any early exit penalties.
5. Choose your bank wisely
Make your bank work hard for your money. You can earn in-credit interest of up to 5%, while some banks are paying switching bonuses of up to £100 at the time of writing.
6. Save if you can
Put savings into a top-paying cash Isa or, if you can put the money away for five years or more, a stocks and shares Isa fund so your investment can grow tax free. For investment ideas visit our First 50 Funds page.
7. Plan, plan, plan
Plan your spending so you donít get caught out just before payday.
8. If you borrow, borrow wisely
Use 0% interest credit cards and ensure you clear them in full before the 0% ends. Balance transfer cards will also help you to consolidate debts at 0% interest.
9. Watch your student loan
If youíre a student, ensure you use any student loans wisely and try not to fritter it all away on cheap pints down the student union.
10. Take free debt advice
If you're really struggling, you can get free debt advice from National Debtline on 0808 808 4000 or Nationaldebtline.org. Other free services include Citizens Advice (Citizensadvice.org.uk or 03454 040 506) and StepChange Debt Charity (Stepchange.org or 0800 138 1111).
You can view our pick of the best current accounts, best savings and best credit cards, updated every week on our best buy page.