Personal Debt has exploded in recent years. In May 1997, our total debt including mortgages hit £500 billion. 6 ½ years later, at the end of 2003, it had rocketed, almost doubling to £942 billion. Of that figure, £169 billion is unsecured credit (credit and store cards, personal loans, overdrafts and so on) which has swelled to a worrying £7,800 per household.

Our total debt has increased every single month, without fail, since April 1993. Our credit card debt alone has ballooned from £10 billion in April 1993 to £52 billion at the end of 2003!

According to the Financial services Authority, one pound in every ten we spend is borrowed money!

There are two main reasons why being in debt is bad for your financial health:

The first is that most debt, with the possible exception of mortgages, is expensive to service.

What’s more, although it’s possible to shop around for attractive rates on credit cards, personal loans and overdrafts, most people still buy their financial products on the high street. Unfortunately, the big banks still price their products based on the maximum they think borrowers will pay, which means we often don’t pick up the best deals.

For example, many of the Uk’s most widely held credit cards charge annual interest rates upwards of 18% - around four times the base rate. Most high street banks charge similar rates for authorized overdrafts and 30%+ if you exceed your overdraft limit.

Thanks to interest alone, a debt charging 18% APR will double every four years!

The second reason is that by living beyond your means, you are effectively borrowing from your future self – when in fact you should be SAVING for your future self.