Member Article

North East Finance Expert Issues Presciption For Avoiding A New Year Debt Hangover

A North East finance expert has drawn up a ten-point action plan to help people across the region with money worries avoid a painful New Year ‘debt hangover’.

Chris Ferguson, North East chair of insolvency and restructuring trade body R3, is urging anyone with concerns about their financial situation to take proactive steps towards recognising, reviewing and addressing their expected 2024 money issues before they cause them potentially avoidable pain.

According to the official annual figures from the Insolvency Service, North East England has remained at the top of the national table for the rate of personal insolvency every year for well over a decade.

The latest official figures also revealed that there were 8,247 personal insolvency cases registered across England and Wales in November 2023 alone.

And with the cost-of-living crisis, high utility bills and enduring inflationary and economic challenges continuing to put huge pressure on the UK’s personal finances, the number of individual insolvencies in the North East is expected to remain high level right through 2024.

Chris Ferguson, who is a director and head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, says: “Our region has consistently had the highest rate of personal insolvency of anywhere in England and Wales for well over a decade, and the first few months of any new year are often the time when overspending catches up with people.

“The cost of Christmas can heavily weigh on people’s personal finances for many months afterwards and R3 members sadly know of too many people who are still struggling to pay the bills they’ve accumulated during the festive season when the next one comes around.

“With the cost-of-living crisis still lingering on, we are almost certain to see many more significant personal finance issues arising in the region next year, but there are a number of steps that anyone facing money worries can take now and in the new year to try and retake control of their finances.”

R3’s top ten tips for managing a debt hangover are:

1. Act today. Putting off the problem is far worse than dealing with it.
2. Ask for help. Initial professional advice is often free, whether it’s a consultation with a licensed insolvency practitioner, the National Debtline, Citizens Advice, or the Government’s Money Advice Service.
3. Start by working out how much you owe right now with everything combined. Work out your income and expenditure too, and be as precise as possible.
4. Prioritise the payment of your debts. Identify your essential financial commitments and cut down on luxuries. Identify outstanding debts with the highest interest charges and prioritise paying these. Maintain minimum monthly credit card payments to retain your credit rating.
5. Communicate with your creditors. This is often overlooked but can be hugely beneficial, as most creditors will be sympathetic of your position and appreciate the proactive approach you have taken. It also gives creditors an opportunity to help, and avoids any unnecessary silence that could see any goodwill with creditors evaporate further down the line.
6. Learn about your options. Bankruptcy, Debt Relief Orders (DROs) and Individual Voluntary Arrangements (IVAs) are forms of individual insolvency procedures which are appropriate to various levels of debt, and are highly regulated and administered by professionally qualified specialists. However, identifying and using the correct procedure is key, as people often pursue the wrong solution for their individual situation.
7. Be transparent. Give full details about your financial situation to both creditors and the person from whom you’re receiving advice.
8. Take a breath before you choose. Don’t allow yourself to be pressurised and make sure you are talking to a regulated professional such as a licensed insolvency practitioner, rather than an unregulated provider, who may seek upfront costs, worsening the position you’re already in.
9. Don’t use your credit card or take ‘payday’ loans to plug the gaps in your day-to-day finances – this is a sure sign of financial trouble, and only likely to make your financial situation worse, rather than better.
10. Spend sensibly. Retailers are desperate for your cash or credit card, especially during what are usually their quietest months at the start of the year, while ‘buy now, pay later’ offers are also now commonplace. Try to resist the temptations they’re offering if you know you can’t afford them.

Chris Ferguson concludes: “The most important thing for anyone with money worries is to not ignore the problem in the hope it will somehow disappear.

“Seeking early qualified advice from a regulated source is crucial if you want to give yourself the best possible chance of getting your financial situation back on an even keel.”

This was posted in Bdaily's Members' News section by Julian Christopher .