It advises people to tackle their bad finance habits in order to stay afloat during these tricky financial times.

One of the worst habits is that of living beyond your means. This fatal flaw is going to see huge numbers of UK adults sinking under unmanageable debt in coming months. People who regularly spend more than their income each month are obviously mounting up debts that they can never tackle. Many of these people will end up using credit cards to pay for basic living costs and then taking out personal loans to clear the credit cards. This is a ticking timebomb, according to MyVesta, the debt solutions provider, and they should know.

Another poor habit is allowing yourself too many credit sources. If you hold a handful of cards each with a limit of thousands there’s always the temptation to splurge. Add to this a number of catalogue accounts or store cards and suddenly all kinds of avenues are open for spending on days when your income is all gone. Moneyfacts strongly recommends paying off the cards or accounts with the highest amount of interest and limiting yourself to only a few once the balances are cleared.

Not being aware of your current financial situation is a big step in the wrong direction. Whilst few people know their exact bank balance, it is always wise to have a handle on your rough debt balance. If you haven’t tallied up all the money you owe in overdrafts, hire purchase, credit cards and loans then you’re burying your head in the sand. By being aware of what you owe you remain in control and can decide which bills need clearing most urgently.

Above all, be aware of missing payments. Many creditors see this as a green light to either slap you with a charge or raise the interest rate on your borrowings. Or both! Whilst borrowing may still be fashionable, there’s no point in spending money unnecessarily. Especially during the credit crunch!

A recent study reveals that more than fifty percent of adults admitted to not reading the small print when buying financial products, mobile phones or electrical goods.  This is disturbing as often the lack of understanding of the fine print in your contract can lead to major problems or, in extreme cases, financial ruin.  Once a repayment contract on a credit deal – such as a mortgage or personal loan – has been breached, penalties and charges can snowball, putting the consumer at risk of losing their home.

One of the most important contracts where fine print must be completely understood is the credit card agreement.  All credit card companies are in the business to make a profit off their customers and with the Office of Fair Trading cracking down on unfair charges, credit card companies must then find other ways of making a profit.  Some of these ways include cash withdrawal fees, foreign usage charges; higher interest rates if the cardholder defaults as well as shorter interest-free periods.  It is important that consumers first read over the fine print of the credit card agreements before activating an account.  Often credit card holders fail to read over their agreements properly and overlook items such as handling fees for balance transfers or the high interest rates that are charged on cash withdrawals, and in some cases credit card providers are allowed to reprice a contract should the cardholder default on payments, which means they can then start charging a higher interest rate.

Almost 25 per cent of consumers use shopping to relive stress, according to new research from Retail Trust, with the younger generation – 18 to 24-year-olds – favouring retail therapy as a viable solution to stress.

The report states that men are more likely to carry debt than women.  Almost 33% of men owe as much as 20% of their current income in debts such as secured loans and hire purchase car agreements. Older men, over 40 carry the most debt including mortgages.

Considering retail and service industry workers as a demographic group revealed a startling trend.  Employees in the retail and service sectors have the highest debts, with eight per cent owing more than 71 per cent their annual income. Most of this is in the form of tenant loans and other unsecured borrowing.

Nigel Rothband, chief executive at Retail Trust, highlights these workers as most in need of financial advice and guidance.

“It is estimated that an astonishing one in five people in Britain work in the retail industry and the survey results reinforce the fact that there are a large number of people in need of help and advice,” he told Retail Bulletin.

The government is instigating initiatives to regain control over debt and educate the publish.  However, understanding debt is the first step to creating a viable a solution.

Credit Action reports that personal debt was £1,318 billion at the end of March, 2007, with the annual growth rate recording an increase of 10.5 per cent.

• Consider a pay-as-you go mobile.  If you find that you are not using up all the free texts and minutes on your mobile contract, then you are wasting money and should consider a pay-as-you go mobile.  With a contract you can pay as much as £50 a month to your mobile phone company which adds up to £600 a year.  With a pay-as-you go mobile you may pay as little as £30 a month and only pay for the odd call when you need it.  You can save over £100 simply by switching.
• Cut your home phone bills by switching providers.  Although BT may seem like the only company providing the service, there are in fact several cheaper alternatives from cable companies that include a telephone in the package with broadband internet access.  It is worth checking out other services and finding out just how much you can save.
• Save on petrol by using public transportation.  As the price of petrol has gone up it will easily put a hole in your pocket if you are simply using your car to get to and from work when you could just as easily use the bus or train.  Not only is public transportation often quicker, but it can also become cheaper, especially if you end up stalled in traffic for long periods of time with your engine running.
• Consolidate debts: if you are holding a number of different debts – a personal loan, an overdraft, a handful of catalogue accounts and a store card – you will certainly save many by taking out a consolidation loan. A cheap loan can attract an interest rate of as little as 5.7%; compare that to the 30% APR charged by a typical store card and you will see how you can pay off debts quicker and cheaper by putting them all into one place.

If you are starting to feel overwhelmed by your debt it is easy to let your bills pile up unopened, but ignoring your debt will not make the problem go away.  If you understand just how much you owe on your credit cards then you will find it easier to control your finances.  You will want to start by making a list of exactly how much you owe for each card, and what the interest rate is on each credit card account.  Once you have listed all your credit cards, you will then want to list your cards in order of highest rate to the lowest.

Once you have organised a list of what you owe on your credit cards, then you will want to start off by making additional payment on the cards with the highest interest rates.  These are the cards that will cost you the most in the long run, so you will want to pay off these high interest rate cards first.

One thing that you can do to help reduce your debt is by ringing your credit card company and asking them if they can give you a better rate than what you currently have on the account.  It never hurts to ask.  Often if you mention that you have been getting offers in the mail for cards with lower rates, the credit card company will probably authorise a lower rate, as they would rather lower your rate than lose you as a customer.  If, however, they do not lower your rate, then you may want to consider using a different card.  If you are approved for a credit card with a 0% introductory rate on balance transfers, then you will want to take advantage of it and switch cards as this will help you reduce your debt quickly.

If your outstanding balance is significant (over £5000) you may find it easier to arrange a secured or unsecured personal loan.  Even if you need a bad debt loan (because of missed payments or past CCJs) you will probably find the interest rate charged on a loan is lower than that on your card(s). Making regular standing order payments to clear a loan not only sees you clear your debt quicker it can also improve your credit rating. When making payments to clear a credit card it is often tempting to make only the minimum payment or to put more purchases on it, keeping you effectively in debt to your card company forever.

You will often see in big retail stores an advertisement for their store credit card, offering you a discount on your purchases when you apply and are approved for their card.  However good this may seem, it is often a way to lure customers who would have otherwise been better off without it.  On average, store cards charge a higher interest rate when compared to a standard credit card.  Often these rates can get as high as 27%, if the cardholder is not careful.  Many times a store will advertise a variable interest rate on the card, and slowly increase the interest rate.  Companies are required to notify cardholders of any increase in the interest rates, and many companies do so discreetly through what may appear to be an advertisement in your monthly statement.  Many people who own store cards are not aware of what their current interest rate is, and it would probably surprise them if they checked, as they would probably be charged a higher rate than what the initially started off with.  It is wise to be wary of any offers made by store cards, and if you intend applying for one be sure to read over the terms and conditions before signing anything.

If you do own a store card, there can be some benefits attached to it if you pay off your full balance every month.  Often a store will offer you benefits such as discounts to exclusive card holders, there are also some stores that will restrict the first few hours of a holiday season sale to card holders only.  However, you must remember that these benefits are only beneficial if you pay the full balance on the store card every month, otherwise you are simply using an unsecured loan with a sky-high interest rate.

The combined of transactions made on charge, credit, debit and store cards is expected to grow to £639 billion in 2010, according to Credit Action.  Currently, more than 41 per cent of UK adults who need help dealing with their debt problems owe money on store cards, while credit card debt is a major factor in 91 per cent of cases.

The unregulated interest rates on store cards have a devastating effect on household finances. Store card debt is relevant in January as consumers are hit with the results of Christmas shopping.  Research from Alliance & Leicester Personal Loans reveals that 23 per cent of people used store cards for Christmas spending.  The problem arises because they are not using the cards for convenience, but to spend money they do not currently have.

John Porter, senior counsellor with the Debt Counsellors, said:

“Store cards can be tempting because of free gift incentives or offers of discounts. It is fine to take advantage of these but the balance must be paid off immediately, otherwise excessive interest fees will be incurred.

“In fact, the best advice is to avoid store cards altogether, because store card debt can mount up very quickly due to the high interest rates and it is best to keep temptation at bay.”

Porter adds: “Anyone worried about their store card debt, or any other kind of personal debt problems, should get professional debt counselling. The Debt Counsellors provide free, confidential debt advice.”