According to Credit Action, personal debt in the UK grew by £1 million every five minutes during 2007. We now owe more than £1,400 billion in the UK, based on all forms of borrowing. This is £120 billion up on a year ago.

So on average, every household now owes £56,588, including on mortgages.

This is not necessarily a bad thing, because debt involves spending on items that generate employment for others, whether we are buying goods or services. Even spending on imports can help third world countries.

But rising personal indebtedness can have potential adverse consequences for individuals and families, so thinking about debt is important.

Managing debt
Nothing in life is free ... interest mounts up, especially if repayments are not made on time. Where borrowing is required it makes sense to look for the lowest cost option. Using in-store credit cards can be costly, but even if a significant discount is offered, there is no such thing as a free lunch and you will end up paying more in the long run.

Alternatives
Why not think about consolidating borrowings into secured loans, either with a bank or as part of your mortgage? This can represent a major saving in interest rates. Watch out though, as the loan is likely to be extended over a longer period, so you might be trading an immediate saving for greater overall cost.

Financial matters need to be seen "as a whole" rather than in isolation. Saving and borrowings are really two sides of the same coin; what matters is to understand how each is affected by the other and how to manage their relationship. Borrow too much early on, and the value of long term savings may be reduced.

Have your say
We would be interested to learn your experiences about managing debt in the current economic clmate. Why not add your comment below?

You should always seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact Robert Bruce Associates.