We're such a lot of big spenders

SOMETIMES, the oldest advice is the best. There has probably never been any sounder financial advice than that given by Charles Dickens' Mr Micawber to his young friend David Copperfield.

"Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness," Mr Micawber told his young friend.

"Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and - and in short you are for ever floored."

In other words, if you spend more than you have, you are going to find yourself in trouble.

Simple, really. So why do so many of us find it so hard to follow Mr Micawber's advice?

That's simple too. We live in an age of instant gratification. We are bombarded from all sides with images of the latest must-have item, whether it's clothes, cosmetics, cars, mobile phones, DVD players or the latest model of hi-tech washer/dryer.

At the same time, credit card companies and hire purchase outfits are queuing up to let us spend money we don't have yet.

Result? "Year on year we are seeing more individuals with higher amounts of personal consumer debt seeking help," admits Lou Smithson of York Citizens' Advice Bureau.

Last year, the CAB's specialist money advice team advised people in the York area on how to cope with £3.5m of debt.

And it gets worse. It's now not only your credit rating that could take a hammering if you're not careful about the finances. With interest rates starting to go up, your home could be at risk too.

The latest figures reveal that the number of people in York who have had their homes repossessed has almost doubled in the past year. Between January and March of this year, courts imposed 27 home repossession orders against people on the city. That compared to 16 for the same period last year, and is part of a national trend.

There are few things that are worse than having your home repossessed.

So what should you do if you are sinking into financial trouble? We sought advice from Richard Mowbray of the Mortgage Advice Service in Skeldergate on meeting your mortgage commitments and from the CAB's Lou Smithson on tackling your debts.

But we also look at the advantages of practising a bit of good old-fashioned Yorkshire thrift.

The thrifty approach

It all seems simple to Tadcaster pensioner Ida Mary Goodrick. "We did not get into debt," the 90-year-old says. "If we could not afford something, we did not have it."

Mrs Goodrick remembers growing up in a Tadcaster brewery house with her younger brother, her parents and her grandmother - all five of them living on her father's £3 a week steam wagon worker's salary.

There was no telephone, no radio, certainly no Playstation in the children's bedroom. If they wanted to play, they went out, Mrs Goodrick recalls. But despite the hardship, she remembers them as happy times.

"We cut our coat according to our cloth," she says. "But we must have had all the essentials or we would not have lived so long."

Those lessons from her childhood have stood her in good stead, she says. "I've been a widow 60 years, and I've never owed a penny."

People who run up huge credit card debts ought to have more sense, Mrs Goodrick says. She has a simple solution: don't use a credit card at all, and only buy things you have the money to pay for.

Pound stretching

One woman who has had to be an expert at making the pound in her pocket stretch as far as possible is 'super' foster mum Rachel Baker. As well as her own four children (now all grown up) Rachel, 59, from Claxton near York, has fostered 40 children over the past two decades.

So what are her top tips for managing your money when things get tight?

Don't buy convenience foods, she says: they are expensive, and not good for you. Instead, she has always cooked healthy family meals using inexpensive ingredients; stews, soups, hotpots, fish pies and shepherds pies. She also bakes her own bread. "It is very easy: especially if you have a bread-making machine."

Don't give in to pester power. Learn to just say no: and make sure that from a very young age, your children learn that if they really want something, they will have to save up to buy it themselves.

Don't buy anything on hire purchase - it will cost you more in the long run. Instead, save up until you can afford something outright.

Fix things instead of throwing them out.

Find ways of having fun with the family without spending a fortune. Going for a good walk or a bike ride doesn't cost money. And if you want a family meal out, why not have a picnic instead of going to a restaurant?

:: Dealing with debt

The first step to tackling your debt problem is to recognise that you have one, says Lou Smithson of the York CAB

But how do you recognise the signs that you are in trouble financially?

"Are you able to pay all of your bills, including credit commitments, from your household income, without using other credit facilities to boost your income?" asks Lou. "If the answer is no then you may potentially be in financial difficulties."

If you do find yourself in financial trouble, here is Lou's advice:

Don't bury your head in the sand hoping it will go away, sort it out now before the situation gets worse.

Complete a realistic budget sheet detailing all of your household income and expenditure.

If you do not know how much you spend on outgoings, then keep all receipts for a month and look at ways of reducing your spending.

Ensure all priority bills are paid including rent/mortgage, council tax, gas, electric, water, secured loans etc.

If you do not have enough money left over to pay for your credit debts after paying all essential bills then seek specialist debt advice.

If you are struggling but your credit rating has not yet been affected, consider transferring your debts to a 0 per cent interest rate credit card. Then, before the interest free period runs out, shop around and transfer to another card with 0 per cent interest.

Destroy your credit cards and try to pay more than the minimum payment each month.

Don't be tempted into consolidation loans unless the terms are more favourable then you are currently paying.

Get help - preferably from a free advice agency such as a Citizens Advice Bureau (in York, the number is 0870 1264850), Consumer Credit Counselling Service and Payplan, as some others may charge you a fee.

:: Saving your home

A combination of high house prices, rising interests rates and increasing levels of debt seem to be responsible for the growing number of home repossessions. So what should you do if you are starting to have trouble meeting your monthly mortgage payments?

Don't just bury your head in the sand, says Richard Mowbray of the Mortgage Advice Centre. Face up to the fact you have a problem. Then do something about it.

First, prioritise. If it comes to making a choice between paying off your credit card bill or paying your mortgage, pay the mortgage. What could be worse than losing your home?

If you are really struggling, go to see your mortgage lender as soon as possible. If your problems with repayments are caused by rising interest rates, they will be sympathetic: and whatever the problem, they will not want to repossess your home if they can avoid it. That is bad publicity for them and it is also expensive.

If you are having trouble meeting your payments, there are a number of options your mortgage lender could consider. These include:

If you have already built up an arrears, they could simply add the amount by which your payments have fallen behind on top of your mortgage. This would effectively wipe the slate clean and allow you to start afresh

If you have a repayments mortgage, they could allow you to pay 'interest only' for a while until your finances improve

If you have built up a big arrears but your finances have now improved they could, instead of re-possessing your home, allow you to pay extra each month until the arrears is paid off.

If the term of your mortgage is not too long, they could extend it, so reducing the amount you pay each month.

At the very worst, Richard says, if you go to your lender and you can't find any way of meeting your mortgage commitment, the lender will at least give you time to sell the house yourself, rather than going to court for a repossession order. That will make a big difference. If you sell your own home, you won't go on the register of people who have had their homes re-possessed and you will in future, once your finances improve, be able to take out a mortgage again.

If your home is repossessed you won't - at least not for a long time.

Updated: 09:41 Thursday, May 05, 2005