As life changes, people must continually re-adjust their expectations and how they operate. Initially, credit agencies are willing to give people large credit limits due to expectations of high income potential over their lifetime. Over time, our income potential expectations must be adjusted based on changes in employment, debt, and interest rate charges on accumulated debt. Once people know exactly how many pounds they have coming in versus going out each month, they can gain control of their budgets.

Predatory Lending

The goal of some predatory financial institutions is to "Keep people in debt perpetually." These companies accomplish this goal by continually offering people higher credit limits while increasing their interest rates. After awhile, when income fails to keep up with debt, these debtors may need to cut back on expenses so they can better prioritise repaying their debt.

Develop a Budget Plan

Once people have answered the following questions, they can develop a budget plan: How many pounds do I make each month? How many pounds to I spend on necessities each month? How many pounds do I spend on debt repayments each month? Do I have extra money each month?

People must categorize their expenses - necessary versus discretionary. Necessary expenses include the following:

• Food
• Clothing
• Housing
• Other basic necessities.

Non-essential discretionary expenses include the following:

• Entertainment
• Extra clothes
• Fancy dining
• Recreation.

Whether people make more money than they spend each month or vice versa determines whether they need to reduce expenses drastically or merely adjust their debt repayment schedule. If people need to reduce spending on discretionary expenses, there are many bargain Web sites or brick-and-mortar shops where they can find deals. Due to the economic downturn, more businesses are catering to the bargain shopper.

Prioritise Debt Repayments

Debtors must determine which debt is highest on their list of priorities - home, vehicle, major appliances, or other - and consider which of these has the highest interest rates. You should always strive to repay off debts with highest interest first as these are the most expensive - but don't forget to meet the minimum monthly payments on the others or you could land up in more trouble. By calculating these hard figures, they can find out if they need to consider alternative means of borrowing.

Some financial institutions might be willing to offer a 'consolidation loan' where they pay off your multiple debts and offer you one single repayment. Be cautious though - some charge over the odds for interest and you may be better off asking at your own highstreet bank or better yet at a credit union. The UK government has many Web sites with free, confidential advice on debt, like http://www.nationaldebtline.co.uk/ and http://www.direct.gov.uk