Where Does It Go? – UK Money Blog £

Introduction

Initially, the credit crunch and, subsequently, recession has had a significant effect on the spending habits of myself and other British consumers. Falling house prices, rising unemployment and reduced lending from financial institutions has, inevitably, caused many consumers to rein in spending and to improve their personal balance sheets, particularly with regard to debt management. Indeed, the majority of consumers are looking to reduce their debts, on credit cards, loans, etc., rather than taking out more credit.

Eliminating Credit Card Debt

A consolidation loan, where multiple debts on credit cards, personal loans, etc. are replaced by a single, affordable loan with a longer repayment period, is not a method of eliminating debt, per se. Yes, it is a method of restructuring debt, which can reduce your cost of living in the short-term, but you may end up paying back more money in the long-term. Eliminating credit card debt, completely, essentially boils down to spending less than you earn, and setting aside enough money to pay off more than the minimum repayment on your card(s) each month.

The first step in doing so should be to stop spending on your card(s) altogether, to prevent the situation becoming worse, rather than better. Some tactics to avoid spending is to put the card into a cube of ice, to help combat impulse buying (without a hairdryer!)

The second should be to prepare a monthly budget, so that you can see exactly how much disposable income you have left after essential outgoings, such as mortgage, rent, utility bills, food, etc. are taken into account. Once you know how much you have left, it is worth setting aside a little for “luxury” items, if you can afford to, and the remainder can be used to service your credit card debt. Whatever your level of credit card debt, you can reduce the amount of interest that you pay by switching your balances(s) to 0% interest deals on a regular basis, if your credit rating is sufficiently high.

Thankfully, three times more people have access to the Internet, nowadays, than during the recession of the early Nineties, and many consumers are using comparison sites to shop around for cheaper deals on car insurance, gas, electricity, etc., as well as shopping and selling their unwanted belongings online. Other cost cutting measures include walking, or cycling, instead of using a car, or public transport, and a reduction in takeaways and eating out. Mobile phone operators have also worked hard to simplify mobile phones and tariff options in recent times, making it easier for consumers to find value for money.