Post-Christmas Debt

If you have spent so much in cash and credit that your Christmas has left you well and truly in the red, you are not alone. Households recently smashed through the £1trillion-mark for debt for the first time, meaning that an average of £17,000 is owed by every man, woman and child on mortgages, personal loans, overdrafts and credit cards. For many people that represents a year's salary - imagine working for a whole year and paying every penny to credit card and mortgage lenders.

With borrowing growing at 15% a year, we can look forward to adding at least a further £2550 onto our annual debt next year. Experts say it could end with the bubble bursting, bringing financial ruin for families and the economy. Soaring borrowing on credit cards could even threaten Britain's financial stability according to the Bank of England, which says we are building up 'vulnerability for the long term'.

'This record level of consumer credit is a timely reminder to take stock and ensure that credit hasn't run away with you,' advises Malcolm Hurlston, chairman of Consumer Credit Counselling Service. 'There are a trillion reasons to stop and think. Remember it's not how much you owe, but how much you owe relative to your income that's important. No-one should be spending more than a fifth of their monthly take-home pay on meeting minimum repayments on unsecured credit. If they are, they need to cut back.' Unfortunately, this sound advice may be too late for many. The average household borrows 140% more than its combined income and around six million families are said to be struggling to make credit repayments. So how can get your own house in order and stem the tide of post-festive debt? Hurslton says that the simplest way of doing this is to stop paying for things by credit card until the existing balances have been substantially reduced. That way you will avoid becoming overindebted.

Cut up your cards

This may be easier said than done. Increasing numbers of borrowers trapped in a vicious circle of debt and are losing control. The number of people going bankrupt rose by nearly a third last year - more than 10,000 people, the equivalent of 111 people a day, became bankrupt in the last three months alone, the highest figure since 1993, when Britain was emerging from the recession, according to the Department of Trade and Industry.

Even those who are trying to repay their debts are failing to manage their finances effectively. Credit card giants make a fortune through customers who fail to switch to a better deal and pay over the odds in interest. Barclaycard made a record £722m from its credit card customers - £68 per cardholder - in the last year. Research by Capital One shows that five million people have transferred their balances to obtain a better rate, but only half of those have transferred again because of the inconvenience. As a result, Capital One is bucking the trend by offering a card that wont take advantage of lazy spenders by charging a flat rate for both balance transfers and purchases. They believe that people will decide that it makes more sense to stick with one low-rate card for the longer term rather than go for the headline-catching special offers.

The hangover we get from Christmas is mainly caused by a lack of planning. When you consider that it is the most memorable day of the year for many people, it is astonishing that so many fail to save for the extra costs. Research by Alliance & Leicester shows that some two thirds of Brits don't save any money for the festive period. And of the third who do, the average sum put by is £182.13 - an amount which is getting smaller each year, even though we spending more. People in their thirties - those most likely to have small children - have tucked the most away: nearly £250. But even this amount is down, falling from nearly £300 the previous year.

Shopaholics anonymous

It is not just seasoned shoppers who are contributing to the debt mountain. A new generation of shopaholics is emerging in Britain according to the National Consumer Council. Research among children revealed that 78% of 10- to 12-year-olds said they enjoyed shopping but this developed into a passion for no less than 94% of girls aged 10 to 19. Eight out of 10 also thought 'we all buy things we don't really need'. The findings coincided with 'Buy Nothing Day', a yearly protest against the Christmas spending frenzy by an alliance of anti-consumerists, churches, environmentalists and peace activists, backed by the NCC. When was the last time you bought nothing for a whole day? It might be easier than you think. Young people and finance will be increasingly under the spotlight from 2006 when students must start paying top-up fees. The National Union of Students expects average students to spend in excess of £30,000 on a typical three-year course.

Ignoring a hangover does not make it better and the same is true of your finances. But while a hangover will disappear given time, ignoring your debts wopn't make them any less. Instead of hiding from the bills, make a new year's resolution to tackle your debts head-on and ensure that the same thing does not happen again next year. If you find yourself struggling, don't be afraid to seek help. 'Ninety-five per cent of people will probably be OK but for those who are worried, it is best to seek help as soon as possible,' advises Malclolm Hurlston. 'Over half of our clients say they waited too long - over a year after they knew they had a problem - before seeking help.'

CCCS helplines are open 8am-8pm, Monday to Friday on 0800 138 1111 or at www.cccs.co.uk. There is no charge for any of its services.