Jeremy Gates looks at the nation's money issues and investigates how to get your finances sorted in preparation for Christmas

If it's any consolation to Chancellor George Osborne, the 'debt bomb' hanging over Britain's households is probably even more dangerous than the one facing the Government.

The latest borrowing figures from the Bank of England show that total individual debt across the country climbed to nearly £1.5 trillion in September: credit card debts zoomed by £200 million in September alone to £56.9 billion, while the amount of cash borrowed through cards and loans soared to £629 million.

Research compiled for the Consumer Credit Counselling Service suggests that 3.2 million people are already in financial difficulties, facing some form of debt action such as insolvency, or three months behind with a debt repayment, while three million more are at risk of getting into financial trouble.

Andrew Hagger, at Moneynet.co.uk, says: "Many people are enduring a pay freeze while struggling to cope with higher food, fuel and energy bills.

"Many people will be forced to make smaller repayments on credit card debts, while others might have to borrow more to keep their heads above water."

Some six in 10 households (59%) will cut back spending on Christmas in some way in the next few weeks, says comparison site uSwitch.com.

Instead of a shopping list, it says, consumers need a ‘chopping list’, with presents, alcohol, cards and plenty of food the first things to go.

The trick this year is to make the necessary spending cuts elsewhere to leave enough money for presents.

A MoneySupermarket.com survey found Northern Ireland residents are likely to spend the most on gifts – an average £525 per person – followed by north-west England at £501.

Shoppers in the east and south east expect to spend the least, some £393 each. Children will receive gifts worth an average of £134 each.

So, how do you save money at Christmas? Here’s some tips from the experts:

1 Draw up a budget to pay your essentials. National Debtline confirms a surge of enquiries in January, February and March each year.

Only when mortgage, rent, gas, electricity, water, council tax bills are covered, it says, do you know how much you have to spare on festive celebrations.

2 Try a frugal food shop to set aside some cash, says Moneynet.co.uk’s Andrew Hagger, "because the week before Christmas probably brings your biggest food shop of the year.

"Why not save some money towards the cost? Instead of your normal weekly food shop, try to buy as little as you can during one of the next two weeks – perhaps by using items already in your cupboards and freezer.

3 Beware the store card trap: Although you might be tempted to take one out in the Christmas rush by the promise of initial discounts, interest rates levied on store cards when the balance is not paid off in full at the end of the month will more than cancel out the attractions of the original offer.

4 Get the right credit card. Kevin Mountford, head of banking at MoneySupermarket.com, says: "A card offering 0% on purchases might be the cheapest option for cash-strapped shoppers as long as they pay off the balance in full before the promotional period ends.

"A card such as Tesco Clubcard Credit Card offers 0% interest for 15 months on purchases.

"For consumers able to pay off their balance in full each month, a cashback or rewards card could be a good option, as it gives them rewards every time they spend."

For example, the Amex Platinum Cashback Credit Card offers up to 2.5% cashback for the first three months up to a maximum of £100, followed by an ongoing cashback rate of 1.25%.

In addition, this card also offers a bonus cashback rate of 2.5% for the month of the 12-month anniversary of the card being opened, which could boost your spending power for Christmas 2012.

Moneyfacts.co.uk names its top five cashback cards as: Capital One World Mastercard (intro cashback 5%, standard up to 1.25%, rate 19.9%); American Express Platinum Cashback Amex; Santander 123 Cashback Credit; Bank of Ireland UK Moneyback MasterCard; and Leeds Building Society Platinum Credit Card.

5 Peg the costs of home heating: As energy bills soar, it’s a great time to check out rival suppliers, the December issue of Which? Money advises.

The magazine says: "If you use Which? Switch to find the cheapest tariff, it could slash your annual bills by anything up to £270 per year."

Hagger adds: "If your central heating is on a timer, set it to come on 10 minutes later and go off 10 minutes earlier than usual. This could save 30 hours energy usage in three months."

6 Be a sensible shopper, says Simon James, shopping expert at MoneySupermarket.com.

"Use the internet to research gifts and use a comparison site to compare prices and save money. The cost of items can be up to 54% cheaper online.

"With money so tight, there has never been a better time to find sale bargains and do all you can to make sure you get the best deal on every purchase."

7 Sale bargains used to be available directly after Christmas. Today, they are a near-permanent feature in many shops.

Watch for discounts and sales, by keeping your eyes open in the high street to make the most of any special offers or ‘bogof’ deals. These can be direct from the retailer or via online money-saving forums.

Shop online, as comparison sites find the best deals and may give an indication on availability. Many online retailers offer web-only deals and some offer free standard delivery.

Use vouchers if possible: there are thousands of downloadable vouchers and voucher codes, usually found online – www.vouchercodes.co.uk – or direct from retailers themselves. See deals listed at www.moneysupermarket. com/shopping.

8 Meet your spending targets by making more gifts this year: Homemade cakes and mince pies, for example, are invariably well received.

9 Have a complete ‘spring clean’ of your direct debits: A MoneySupermarket.com survey found the average amount paid through direct debits is £297, while a quarter of account holders pay more than £500 this way each month.

MoneySupermarket.com’s Kevin Mountford says: "With finances squeezed by the cost of living, check all your outgoings and make sure you are not paying for products or services which you no longer use. Gym memberships or annual subscriptions are so easily overlooked."

10 12. Keep the costs of petrol for your car down, says Hagger, by signing up to www.petrolprices.com. You then get regular emails telling you the cheapest garages in your area.

If you are hiring a car over Christmas and New Year, compare rates on cars collected in the centre and a few miles outside. In central London, savings can run into hundreds of pounds for those who get a train or taxi to collect a car from a cheaper location.

11 Don’t spend so much in Christmas 2011 that you are paying it off well into 2012. One survey claims that one in 10 families still faces an average debt of £1,078 from last Christmas.

12 Be sure to post all your Christmas cards by December 17, because then, says Nathalie Bonney in Moneywise magazine, you save a small fortune by ensuring all your cards can go second class.

INFORMATION: National Debtline England & Wales 0808 808 4000. Free advice agency www.mymoneysteps.org is open Monday-Friday 9am-9pm and on Saturday 9.30am- 1pm. It can plan individual budgets and devise plans to overcome debts.