Consumers face further household debt increases

Average household debt stood at £54,332 in December, according to figures released by The Money Charity. 

It represents a small increase from November's figures and shows that people are still facing substantial amounts of debt. Indeed, the typical UK adult now owes £28,599, which represents 115 per cent of average earnings. 

Total interest repayments on personal debts are now equivalent to £162 million per day, with the typical UK household parting with £2,239 in annual interest repayments.

This demonstrates the stark financial situation facing many people in the country. However, the future could be more positive as there are signs the economy is recovering, which will have a knock-on effect on job prospects. 

A positive picture

The number of jobless people in UK between September and November 2013 fell by 167,000 from the previous three months, while the number of people without a job over the 12 months during the year ending November 2013 dropped by 145 a day.

Over the three months to November, the number of people being made redundant also fell by 47,000 when compared with a year earlier. 

Michelle Highman, chief executive of The Money Charity, believes the latest job figures are very good news for the UK, as they show that the "recovery is moving in the right direction".

"Although it is fantastic to see people getting back into work, how long this good news will continue remains uncertain. Budgeting restraints on families and individual certainly aren't going to get any easier with nominal wage growth significantly below the rate of price inflation, resulting in the longest period of falling real wages since 1964," she added.

Because of this, Ms Highman is calling on consumers to bring their finances under control immediately, starting off by looking at how much money they have coming in and out every month. As long as expenditure does not exceed income, people should be fine.

The cost of debt

If people do not take debt management seriously, there's a very good chance they'll end up with mountains of arrears. For example, the Money Charity has revealed that 285 people are declared insolvent or bankrupt every day, while 79 properties are being repossessed every day.

With the average cost of bringing up a child to the age of 21 rising to £29.65 daily, families have their work cut out if they want to stay solvent and free of any money worries. Sticking their head in the sand is the last thing they should do, as this will only paper over the cracks and allow the situation to get worse.

However, by taking out a debt management plan, consumers can restructure their payments and reduce their overall monthly outgoings. In order to qualify, individuals need to be able to afford a £100 payment each month, have debts above £1,500 and owe money to more than one creditor. This informal solution will allow consumers to take control of their finances again. 

By James Francis