How to get out of debt

If you're worried about your debts racking up, find out how you can clean the slate with Moneywise TV.

When you are in debt, getting to the bottom of it can seem impossible. But pulling the wool over your eyes will not stop your debt from spiralling out of control.

The first thing is to own up. However much you owe, it's important to acknowledge the debt and that you need help.

It's best to seek some advice before making a plan. There are lots of debt management agencies out there, but the best places to visit first are the Citizens Advice Bureau or the National Debtline because they are free to use. They can help you consolidate your debts, or organise a debt management plan, where your debt is split into manageable chunks to pay off over a period of time. Alternatively, if your debts are too big, they can also offer advice on filing for bankruptcy or individual voluntary arrangements, which is a formal agreement between you and your creditors.

Sit down and work out exactly how much you owe, and to whom. Figure out how many debts are in your name and if they are secured against your home, or unsecured. Once you have done this, it's a good idea to total up your assets and see what you own.

Next, draw up a budget sheet. Not only is it useful to keep an eye on how much you're spending, and where you can cut out unnecessary expenditure, it also aids you in organising your debts. Factor in necessary outgoings such as rent, bills and food, then make a realistic plan of how much you can afford to pay towards your debt each month.

Making more money could be an option. If you have a large enough house, you could consider renting out a room. Check to see you're receiving all the available benefits and tax credits, and consider selling any non-essential items.

There are steps you can take to prevent yourself falling into debt again. If you have a large overdraft, consider switching current accounts to one with a good overdraft facility. In addition, if you have a large balance on your credit card, use Moneywise's best-buy table to find a credit card with a large 0% balance transfer facility.

To avoid spending temptation cut up existing credit cards and store cards, as these will prevent you from falling into further debt. These cards charge a very high rate of interest, and by paying cash it makes the transaction more real.

It's important to be disciplined with the debt. Keep to a strict weekly budget, writing down everything you spend, which will highlight where you might be going wrong. Once you've decided on a plan on action to tackle your debt, make sure you stick to it – and you'll be out of debt before long.