New Year - New Budget

According to the latest Bank of England 'Lending to Individuals' figures, people in the UK are £207.5 billion in debt, owing money on credit cards, personal loans and overdrafts. If you have unsecured debts and you don't have a personal budget for the year ahead, the start of the New Year is an excellent time to begin one.

A budget is simply a record of every expense you have for the month ahead. An even better budget takes account of forthcoming expenses - like birthdays, or your car tax renewal date - so that you can plan for these expenses accordingly.

Ideally you can review your budget regularly throughout the month to make sure your finances are on track. You could even make this year the year you put more money into savings for the future.

Any money you can save elsewhere can go towards debt repayments. The start of the year is an excellent time to assess whether every financial commitment you have is giving you value for money. Consider changing your fuel tariff, ending subscriptions or memberships you no longer use, or whether a debt consolidation loan could lower your monthly payments.

A spokesperson for debt management company Gregory Pennington commented: "Many people are attracted to debt consolidation loans for the significantly lower monthly payments they could be making by spreading the loan over a longer period.

"However, that will work out more expensive if you end up paying interest for longer. Only apply for a loan with monthly repayments that you know you could afford for the full length of the loan. If you began missing payments, it would damage your credit rating and you could be charged."

Lucy Bower