I’ve written about budgeting and debt before but the festive period is a time when many people feel over stretched and struggle to balance their finances with their families expectations. The best advice is to only spend what you can afford but should you slip into the red here are my top tips for dealing with debt.

Create a budget

The first thing to do is document every single penny you spend and create a realistic budget. Use your bank statements from the last few months to find your average spend on things like food, transport, clothing, utilities etc. I use Martin Lewis’s budgeting spreadsheet which has clear categories you can assign your spending to. You can also add your incomings and let the spreadsheet tell you if you will be in positive or negative figures at the end of the month. This spreadsheet makes it easy to play around with numbers and decide how much you can afford to spend on each element. For example you could decided to reduce your spending on unnecessary treats like trips to the cinema in order to increase the amount you pay back each month on your loan or credit card. Once I’m happy with my budget I import the figures into an app called Goodbudget, the tech equivalent of the envelope system. This app is free to use and you can set your own budget categories and enter each transaction into the appropriate one. This makes it really easy to see exactly how much you have left to spend in each category and stops me overspending on things like food and nights out.

Pay off the card with the highest APR first

If you have several credit cards or loans try to pay off the one with the highest APR first. The higher the APR the more the credit will be costing you. If possible move your debts to a 0% deal. This will save you money that you can use to put towards the debt itself.

Talk to your creditors

If you can’t afford to meet repayments it’s worth contacting your creditors to make them aware of your situation. You may be able to negotiate a deal or agree on a new repayment plan.

Earn extra income

To pay off debt as quickly as possible consider how you could earn some extra income . Perhaps you have time for a part time job or maybe you have some items you don’t need and could sell. If I haven’t used something in over a year and it doesn’t hold any sentimental value I look it up on eBay to see what it’s worth before deciding if I would like to list it. Generally I list items twice and if they still haven’t sold I put them in a bag to take to the charity shop. I have had situations where something hasn’t sold for 99p the first time round and has gone for over £5 on it’s second listing. Every pound counts when it comes to paying off debt.

Get some help

If you’re still struggling, have debts of 5k or more and live in Scotland you can take the Scotland Trust Deed Debt Test which will indicate if you are eligible for a Trust Deed. This is a government backed contract between you and your lenders which allows you to write off a significant portion of your debts and only pay back what you can afford. This is one of three solutions, the other two being a Debt Arrangement Scheme and a Sequestration.

Most of us have been touched by debt at some point in our lives and with credit readily available it’s easy to let our finances get out of hand. Unexpected expenses like problems with your car can lead to bank charges or credit card bills. Now I’m living on my own for the first time I’m determined not to slip into the red and build an emergency fund for those one off payments. Budgeting has become a priority and I have spent time trying to reduce my outgoings and tidy up my finances.

Having created a spreadsheet with my earnings and outgoings I know what I have to spend in each category every month. To make sure I stick to it I’ve decided to use The Envelope System. As people tend to spend less when using cash the idea is that you put the allocated amount into envelopes with the name of what they are to be spent on written on them.

Every penny spent in each category has to come out of the specific envelope and any change should go back in. When the money runs out of each envelope you can’t spend anymore until the new month begins.

Any money left over can be put into savings or if you haven’t budgeted in any treats it can be used to go out for dinner or to see a film.

If you live in Scotland and are struggling with debt Debt Therapy Scotland can help. It may be possible to organise a Trust Deed. This is a voluntary agreement between a debtor and their creditors (the people they owe money to) to repay part, or all of what they owe and may help you write off debt you can’t afford. Government backed it transfers the debtors rights to the things that they own to a trustee who will sell them to pay creditors part of what is owed to them and will normally include a contribution from income for a set period, usually 48 months.

This solution is for people with debts of £5,000 or more. If you owe less than this it’s a good idea to see if you can move debt to a cheaper credit card or loan. It’s important to pay off high priority debts such as rent or mortgage payments, utilities, council tax etc first before moving on to paying off the highest interest credit cards or store cards.