Unless you have ben lying down in dark room, you may not know that there is a worldwide credit crunch on.

Actually if you already know about the credit crunch then lying down in a dark room is probably the best idea anyway...

That's because the weekly supermarket run means you have to carry extra cash, heading to the petrol pump is alarmingly expensive and renegotiating your mortgage means you can expect a rise in your monthly payments.

And on top of this, Mervyn King, the Governor of the Bank of England, has sent out a stark warning: that we the British public should prepare to economise.

Economise is that word so few of us here in the UK seem to know about so we thought we would help you out:

Economise: 1. to practice economy; avoid waste or extravagance. 2. to manage economically; use sparingly or frugally.

The Bank of England (BoE) suggests that 2008 will be the toughest in the last 10 years, with economic growth slowing, inflation rising and share prices tumbling more easily than Cristiano Ronaldo in the penalty box...

It seems likely that the BoE will cut the interest rates and this may soften the blow but not fully as mortgages may actually still go up.

he main reason for the trouble lies in years of sloppy lending and runaway consumption, mostly in the United States, but in the UK and Europe the World Bank is not predicting anything like a recession. In a reversal of what happened a decade ago, this time the developing world will come to the rescue of the US, cushioning the impact on Britain in the process.

But, what does this mean for our everyday lives? How is the cost of motoring, mortgages and food going to be affected?

Housing: a crash or soft landing?

House prices are like Jeremy Clarkson; at some point people end up talking about a possible crash. But house prices are the hot topic and it's easy to see why. With huge year-on-year growth lots of you have started to assume that profits from property would cushion you into retirement. Unsurprisingly, this summer's events have shaken that notion.

So, as a homeowner, are you right to be nervous?

Last week's news suggested a yes as the Nationwide Building Society forecast that house price inflation will fall from nearly 10% to 0%. Others are even more pessimistic with Capital Economics saying your house price will be 3% lower in 2008 than it is now, and it will slump by the same amount in 2009.

Also, mortgage rates are up, and with nearly 110,000 mortgages coming to the end of a fixed-rate deal every month, new deals equal higher monthly repayments. For some of you, experts are suggesting that your only option may be a standard variable rate that could rise as high as 10%.

Not everyone is so gloomy though as Karen Ward, UK economist for HSBC investment bank, said:

'[House prices] are nine times average earnings. I think prices will struggle to rise further but I do not expect a crash.'

Fuel: £1 and going up

If you drive a car, it has not been a happy time as petrol prices have reached £1 per litre for the first time. With some of you low-income drivers spending a quarter of your income on travel, a Christmas squeeze may be inevitable.

Sheila Rainger, head of campaigns at the RAC foundation said:

'The vast majority of people do not have a choice. 'They are car-dependent and petrol is not a luxury. It is something they have to pay for. So if petrol prices go up they will have to cut back on other things first.'

But a few of you might be asking "how is the increase in petrol prices linked to the fact that crude oil also broke a barrier last week, reaching $100 per barrel?".And it's a good question!

Paul Horsnell, of Barclays Capital, explains that the £1 at the pump means drivers are already paying $333 per barrel at the petrol pump. It is not simply the price of oil driving what motorists pay but ever increasing taxation, he said. Instead it is straightforward economics.

The supply of oil is getting weaker while demand is rolling on. 'The age of cheap oil is over,' said Horsnell. So don't expect a 21st-century 'winter of discontent' but do expect the price of oil to keep on climbing. Oh dear...

Banks: profit and loss?

So far the world's biggest banks have copped about $50billion in bad loans and losses as a result of the sub-prime crisis in the US that saw too many mortgages handed out to people with poor credit histories.

Most City analysts, say that there is no reason for panic although the banks do certainly have cause for worry. But if you have put money into banks (as opposed to those of you who have shares or jobs in them) then you should be fine in the end; that is in part due to the Northern Rock debacle, which led the Chancellor, Alistair Darling, to put in place a series of better Treasury guarantees in the highly unlikely event that a British bank should find itself in trouble once again.

Food: the drought effect

Australia, a major producer of wheat, is suffering its worst drought in 1,000 years and here, corn, milk, meat and vegetables are in short supply and food prices are rising at their highest rate in over 10 years says the Office of National Statistics.

If you are a family, this could mean an extra £1,000 on your annual food bill. The cost of a pint of milk has soared to reach the record level of 33p, while a loaf of bread has hit £1.20 in large stores, while a basket of 25 basic goods has already risen by as much as 12% according to a survey by mysupermarket.co.uk.

Here again oil is a potent factor; its rising price is putting pressure on food through the costs of baking, packaging and transporting it to the supermarket. Inevitably some of this inflation of prices will be felt by us at the check-out.

But there is some good news!

The 'big four' supermarkets: Tescos, Sainsbury's, Morrisons and Asda are fighting hard for their share of the market, and they could absorb some of the higher costs, squeezing their own profits in order to keep us coming through their doors.

Credit crunch: a quiet Christmas?

It all started on the other side of the pond but the panic queues outside Northern Rock branches in September brought America's so-called 'sub-prime lending crisis' home to us ordinary Brits with a jolt.

The sub-prime crisis saw too many mortgages handed out to people with such poor credit history they could not get them at normal rates; this was a high-risk strategy that, in the end, went very pear shaped,

But, as Roger Bootle, head of London consultancy Capital Economics, said:

'It was not just sub-prime, but part of a more general problem of an over-extension of credit across the whole world economy.'

The crisis has now led banks to become much stricter about how much money they lend, at what rates, and to whom. So your mortgage rates go up and your money left over for the turkey, toys and tinsel goes down.

Few retailers expect the Christmas shopping tills to be anywhere near as active as they had hoped but this year they are more cautious. So cautious that the early Christmas sales have already started; retailers including Marks & Spencer, Woolworths and Toys 'R' Us have cut prices in an attempt to encourage our spending and cushion the impact of the credit-crunch.

Don't panic!

So, it seems that there very few of us can escape the credit crunch in one form or another. While, it's definitely not an easy time, in the words of the Hitchhiker's Guide to the Galaxy "Don't Panic!"

It just means having to economise and be a bit smarter with your cash. And we know you are all bright enough to do that!

If the credit crunch is causing you some concern, and you need some help, then you should contact the following:

The Consumer Credit Counselling Service (CCCS) is free and impartial and their helpline is open from 8am to 8pm, Monday to Friday, on 0800 138 1111.

Credit Action offers impartial and ethical advice about all things debt related.