It is a familiar tale — meals out, a once-a-year holiday to a far-flung destination, home improvements, all bunged on the credit cards and, soon, you are in masses of debt.

Lynley Gilchrist-Lunn, 33, and her husband Jonathan Lunn, 40, have run up £35,000 of such “lifestyle” debt, caused by living beyond their means. They have set a target to be debt-free in a year, and their efforts have already begun. “We used to buy expensive food but have cut back, so there’s lots of stew,” says Lynley.

The couple have stopped spending on credit cards, which they had been using to fund expensive holidays to Lynley’s native New Zealand and to the Middle East, as well as for renovations on their three-bedroom terraced property in Bedford, bought three years ago. “It was a shell,” says Lynley, a legal PA in central London. “You name it, we have renovated it.” But the couple hope their efforts will be rewarded when they resell later this year. They estimate it is now worth £200,000.

Their mortgage, for £152,000 on a 6.29 per cent variable rate deal from Mortgage Express with no redemption penalties, costs £833 a month.

Lynley has three credit cards and two store cards. She has £2,242 on a Halifax card, £5,335 on Amex and £3,844 on an HSBC card, all with APRs of 15.9 per cent. Her store cards, with House of Fraser and Monsoon, have about £20 on each. Lynley is transferring as much debt as she can to a Marks & Spencer &More card, with a life-of-balance rate of 3.9 per cent on transfers.

Jonathan, a self-employed project manager, has two credit cards and two personal loans. He owes £3,500 on an HSBC card with a 15.9 per cent rate, while a Bank of Scotland 0 per cent card has a balance of £4,900. He has personal loan debt, spread between Capital One and HSBC, of £1,300.

Between them, they also owe £12,500 on a personal loan at a rate of 5.9 per cent from Alliance & Leicester, that they used for a car and for their wedding, and £500 from HSBC at a rate of 7.8 per cent, was for debt consolidation.

Lynley and Jonathan own a two-bedroom buy-to-let property in Bedford, bought for £105,000 last August. Their mortgage repayments are £389 on a three-year fix of 4.89 per cent from Capital Home Loans, with rental income of £520 a month.

Savings are scant. Lynley has £800 in an HSBC cash mini-Isa and £1,000 in a Standard Life stocks-and-shares Isa, with half invested in UK Smaller Companies and the other half in an Income Fund.

Lynley, who earns £32,500, has an employer contributory pension that matches her contributions of 3 per cent. She pays in £63 a month and her pot is worth £10,000. Jonathan earns roughly £40,000 a year but has no pension.

Aside from debt repayments of £1,400 a month, the couple’s biggest outgoing is transport. Lynley spends £3,600 a year on her train and Tube season ticket into London, while Jonathan spends about £120 a week on petrol. The couple plan to move to Berkhamsted to make his drive easier, but this will not reduce Lynley’s commuting bill.

Lynley and Jonathan: what the experts say

DEBT 1 Philippa Gee, investments director, Torquil Clark

“Lynley and Jonathan face an incredible challenge. They should not rely on property equity to bail them out.

“They need to agree a weekly budget and stick to it by withdrawing the sum in cash at the beginning of each week. They might also try to cut down on household bills by searching out cheaper providers. It is also a good idea to sift through old direct debits or standing orders that could be cancelled.

“I think they should remortgage now to reduce monthly outgoings, as they do not know how long it will take to sell. Most mortgages are portable, so they could move it to the new property.

“Lynley is right to transfer to the Marks & Spencer &More card, but must not spend a penny on it. Jonathan should go down the same route. This one change could create another £1,500 towards debt repayment in the next 12 months and the change of mortgage could provide an additional £2,000 to £3,000.”

DEBT 2 Christ Tapp, associate director, Credit Action

“For Lynley and Jonathan, paying off the debt over four to five years should be manageable. They should not be overambitious and end up frustrated.

“To get a clearer idea of where they can save more and how they can best arrange their debts they should visit www.cccs.co.uk and use the “Debt Remedy”.

“They need to pay off the debt with the highest interest first. They should avoid tempting debt-consolidation offers, or securing the debts against their house, as this will cost more in the long run. The best solution is careful budgeting and patience.

“They need to consider risk exposure. Moving to Berkhamsted, where average house prices are £397,809, would mean taking on an enormous mortgage, leaving them vulnerable to any negative change in circumstances.

“Emergency money should also be a priority as, at the moment, they have nothing to fall back on.”

INVESTMENTS & PENSIONS

Mark Dampier, head of research, Hargreaves Lansdown

“The couple’s total debt is some £274,000 — almost four times their level of income.

“My first thought was to suggest they sell everything, including investments and buy-to-let property, but if they think they can clear the debt, they should try to keep their investments. The Standard Life stock has been doing well, and an extra bonus of shares is due in about four months. In addition, Standard Life’s UK Smaller Companies Fund and Income Fund are among the best rated funds around.

“Lynley’s pension will generate around £6,000 a year in today’s terms from age 65, assuming a 7 per cent return, in addition to state pension of about £7,000 a year. The problem is that this assumes full entitlement and as Jonathan is self-employed he is unlikely to pay full contributions. Assuming a full entitlement, £13,000 a year before tax will not be sufficient for them in retirement, even supplemented by rental income from property.

“Jonathan should not rely on property for retirement. He can save some, or all, of his higher-rate tax by paying into a pension. He can invest into property funds within a self-invested pension plan (Sipp), or personal pension. If he keeps the buy-to-let he should diversify with equities. The Invesco Perpetual UK Pension Fund, run by Neil Woodford, is worth looking at.

“They also need a cash buffer of at least £20,000. I would suggest cash Isas. National Savings have the best rate at 5.8 per cent.

“They should also consider protection issues. How are the debt repayments to be met if either dies or suffers a long-term illness, given they are struggling to pay now?”

MORTGAGES

David Hollingworth mortgage specialist

“Their current rate is very expensive. Even cutting the mortgage rate by 1 per cent could slash monthly payments by more than £100.

“When they come to remortgage, they must set aside enough cash for initial costs, which can run into thousands with arrangement fees, valuation fees and legal costs.

“There are no-penalty deals on the market that do not charge an arrangement fee and cover valuation and legal fees and if Lynley and Jonathan are still struggling for cash when they sell, I would recommend one of these.

“If their plans to sell are delayed, they should consider switching deals. They should also try to make inroads into the capital balance as soon as possible, and moving house will be a good opportunity to review their needs. The sale will also provide an opportunity to pay off some of their debts.

“Their buy-to-let rate is competitive, but they need to increase their savings pot in case of rental-void periods.”

Lynley and Jonathan’s response

“I was pleased to get confirmation that my choice of investment funds was good,” says Lynley.

“I can see the sense in having a ‘buffer’ but you can’t just save £20,000 overnight. We will be able to achieve it only by plugging away and letting things take their course. I can’t think of anything that might happen that would require us to need sudden access to this amount, so having that much cash sitting around is not very cost-effective.

“The comment about stretching out our repayment plans is good advice. I think we could easily slash the debt down to the bare bones this year, although not having a life for a year does get tedious.

“I will think about things we can do for fun that will not cost much. There really isn’t too much we can do about the mortgage at the moment and the flat generates enough cash so that there is a reserve to fix anything should it go wrong.

“Overall, I am confident that we will have broken the back of the debt by the end of this year.”

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