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According to CNN Money, the average American family holds over $10,000 dollars in credit card debt alone. The average interest rate on cards is in the mid teens with some cards exceeding 20 percent. Overcoming debt problems seems impossible for some but the truth is it’s quite simple. It just takes time, discipline and patience.

Track Your Spending

1. Make a list of everything you spend in a month. At the end of the month, review your list. You will likely find several items that easily can be cut from your spending.
2. Create a list of bills and other expenses. Gather all of your bills and place them in a pile. List who you owe money to, the total amount and the amount due each month. With credit card and loan agreements list, also the interest rate.
3. Pay down your highest interest debts first. These cost you far more money in the long run and usually carry heavy penalties for late payments. The sooner you can pay these off the better.
4. Avoid paying just the minimum. With credit cards, the minimum payment just covers the interest. Pay more than the minimum each month if you can afford it. You’ll start clearing the balance faster.
5. Put any left over cash in a savings account. Even small amounts start to add up. As the money accumulates you’ll have an emergency fund or extra cash to put toward debt.
6. Ask for help. If your income isn’t sufficient to cover your monthly outgoings then consider credit counseling. A good credit counseling service can negotiate with your creditors and try to freeze interest and late fees. They can also help you with creating a reasonable budget.

Whether you’re seeking out an organised debt management plan or you’re trying to resolve your debt problems alone, one of the most important things to do is to prioritise your debts. If you have debts from multiple creditors, deciding which ones are the highest priority can be difficult.

Here are the highest priority debts you should look to clear as soon as possible.

Mortgage or Rent Arrears

The simple fact of the matter is that if you fail to pay your rent or mortgage, you could lose your home. With mortgage arrears, you could even face legal action and the lender you take possession of your home. With mortgage arrears, your landlord could evict you, leaving you without a home and still owing the money. As soon as you find yourself in any difficulty meaning you cannot afford your mortgage or rent, you should contact your lender or landlord as soon as possible and explain the situation fully. Treat this as a high priority payment.

Tax, National Insurance and VAT

Failing to pay tax could lead to bankruptcy and potentially even criminal proceedings against you. This is certainly a high priority debt.

Council Tax

Again, this is a debt that should be considered high priority, as failure to pay could result in legal action against you. Hire Purchase Agreements on Essential Items. While hire purchase payments against non-essential items should be considered low priority, essential items that require a monthly payment should be high priority. Examples include a car that you use for getting to work. Any item where losing it will inhibit your ability to go to work or to live is an essential item.

Gas and Electricity

Gas and electricity companies have the right to cut the supply to your home if you fail to pay and as such this is again a high priority bill. Of course you should pay your water bill as well – though water cannot be cut off and as such should be treated as a lower priority debt.

Consumer champions Which? have carried out a new survey which found that just 1% of people in the UK are able to identify the main types of train tickets available to them. Additionally, 61% of respondents didn’t know that Advance tickets were non-refundable, and 48% didn’t know they had to be used on a specific train. When asked about Anytime return tickets, 75% were not aware that outbound journeys could be made within 5 days of purchase, and that return trips could be made within a month.

Consumers also displayed a poor understanding of off-peak tickets, with 51% not realising they are only valid outside peak times, and 17% unaware they don’t have to be used on a specific train. Richard Lloyd, executive director of Which? said “people could be wasting money buying more expensive tickets than they need to because it is so unclear what certain tickets allow them to do,” adding that “train operators have to recognise this is a problem and take urgent action to fix it. If they won’t, the government must step in to sort this out.”

There may be some hope for bewildered and cash-strapped consumers – transport secretary Phillip Hammond recently described the railways as a “rich man’s toy” and Liberal Democrat transport minister Norman Baker has said the railways should be “available for all.” Unless the government does legislate to simplify tickets and put the brakes on above-inflation price hikes, however, ordinary passengers will be left at a disadvantage, with a scarcity of alternatives for those who require affordable transport.

The final problem with credit card purchases is directly related to a more emotional dimension of these purchases — debt. Americans are accumulating record amounts of debt at breakneck speed, perhaps because of the overabundance of great credit card offers. Credit card companies love to target college students, because they know that college students are notoriously poor and unrealistic. If these companies can “help” college students to spend money that they don’t yet have, they can be assured of monthly payments, and better yet, they can freely raise APR rates when those payments don’t come in on time.

These companies can also train young people to live by a debt mentality, so that even if they can get out of debt at certain phases of life, they will inevitably fall back into debt when the lure of certain items becomes too much for them. If you train people to buy more than they can afford — or to live by “soft,” unrealistic numbers instead of limited resources — you can keep them in a continual position of dependency.

Ideally, before you make a credit card purchase, consider the emotional and economical costs of the purchase. Ask yourself how you will feel after you purchase the item, after you bring it home and begin to grapple with its real cost. This simple question can prevent purchases that may cause regret over the long haul.

New data published by the Council of Mortgage Lenders (CML) indicates that the number of home repossessions has fallen by 1%, from 9,100 in the first quarter of the year to 9,000 in the second quarter. However, some people in the industry have warned of an “arrears timebomb”, with disaster set to strike when rates rise in 2012.

Compared with the second quarter of 2010, the latest repossession figure represents a 7% fall. At this stage in 2010, there had been 19,500 repossessions, compared with 18,100 so far this year. The number of mortgages in arrears of 1.5% to 2.5% has increased, however.

Paul Smee, director general at CML, said that the stabilisation of mortgage repayment problems could be attributed to “stable employment and low interest rates.” He added that he felt there was no need to revise current forecasts in light of the current uncertainty in the global financial markets.

The Citizens Advice Bureau has reported that it has dealt with over 100,000 cases where people are in mortgage or secured loan arrears, and says that it has prevented 5,000 people from losing their homes in the past year. Gillian Guy, chief executive at the CAB, said: “With the cost of living going up daily and incomes lagging badly behind, mortgage lenders and the government must focus on helping people stay in their homes. Repossession is a terrifying prospect and should always be the last resort.”

If you do fall behind with your mortgage payments, you should always treat them as the top priority before paying back any other debts. Otherwise, you risk losing your home. Always contact your lender if you are expecting to miss a payment, rather than waiting for them to start threatening you with legal action. They may be willing to reduce your monthly payments in some circumstances.

Additionally, you should ensure you are receiving any benefits or tax credits to which you are entitled. The Government also operates a Mortgage Rescue scheme, through which you be able to sell your home but continue living there and paying rent. You can get more information on this from your local council.

If you are struggling to repay unsecured loans, credit cards or overdrafts, we can provide confidential debt advice.