Some debt advisors state that the total amount of debt accrued per month in credit cards, loans, mail order catalogs etc., should not exceed any more than 36% of our gross monthly incomes.  This is the maximum target level a mortgage lender will allow while assessing a potential borrower.

What is the best next step to take?

The secret to using debt to your advantage is to make sure that you buy assets which will increase in value.  For example, a mortgage will allow you to live in a nice home with the hope of making a profit from it in the future.  A student loan will allow you to study for a good job which will bring you many financial rewards.

Instead of using credit for profitable purchases like the above, most people use their cards to purchase everyday items which decrease in value the moment that they are bought, for example, food or clothes.  If you do have to revert to your credit card for these goods, you should pay your total balance in full to avoid interest charges.

A credit card should never be used to finance a holiday as a holiday does not appreciate in value.  Add to this a card with a high interest rate and you are dabbling with bad debt.  An ideal debt to income ratio should not rise above 20% of an annual income when calculating personal loans, credit cards, utility bills etc.  Figures that rise above this mark are likely to turn creditors away, even if payments are maintained.

When you call, a trained counselor will carefully assess your financial problem and then make recommendations on what can be done. You don’t have to take their advice, but it’s always good just to hear the advice of an expert regardless. Some debt advice companies can also help you out with your budget too, so make sure you ask for their advice. If they don’t provide a service that is suitable for your debt, many companies might also suggest where else you could go for those debt solutions. All you have to do is ask.

If you’re worried about being ‘judged’, don’t. You won’t be. Debt advice companies are there to help you, not scare you (and if they do you’ve probably called a bad one!). Millions of people are in debt across the world so remember that you’re not the only one is debt and there is nothing to be ashamed about for asking for debt help!

The first thing you need to do to get debt free is set a realistic household budget. List all things you have to spend money on i.e Gas – Electric, mortgage, then list all the things you want to spend money on. The goal is to separate between ‘Need’ and ‘Want’ for example you ‘need’ to eat or you ‘want’ that new cd.

The idea is to look at you outgoings and see where you can make cut backs, set yourself a shopping budget for food. Some examples of how to save money on groceries, household bills.

1. Ask your supermarket what time they mark down there products, and purchase these when they are cheaper. Most things can be frozen to restore the sell by date.

2. Grow your own vegetables and fruit alot cheaper than buying.

3. Use price comparisions sites to check you are not paying to much for your gas – electric or mortgage.

4. Check with your enegry supplier to see if you have an economy setting, do you washing etc in the evening as it is cheaper.

5. Take a shower instead of a bath, its cheaper.

6. Do you really need the heating on ? Can you just put on another layer of clothing.

7. Hang clothes to dry on a rainy day indoors over the bath or use a clothes airer, its cheaper than the tumble dryer or radiators.

8. Use natural products for cleaning its cheaper and better for your health !! I.e Vinegar for cleaning windows.

Overall just think about ways to do things on the cheap, research and you will be saving money and getting out of debt.

Remember pennies make pounds and pounds make rich men !!!

Saving money is a very similar principle to setting a budget. Firstly you need to look at how frequently you are paid. If you are paid monthly then you set yourself a monthly savings target, if weekly then a weekly savings target should be set. Generally you should aim to save at least 10% of what you bring home in your pay-packet after tax, national insurance etc. So if, for example you earn £1,200, then you should aim to put £120 of that into a savings account. However, if your on a really tight budget save as much as you can afford to, even 1% is better than nothing.

It is very important to keep your savings in a separate account to your normal everyday spending account, otherwise you risk unwittingly spending your savings. It is also extremely important that you make your savings work for you – you want to get as much benefit from your savings as possible, so a high interest account such as an ISA is advisable. Once you have put your savings into your chosen account forget about them, they are not extra money for you to use on frivolous things, they are there as a back up plan, to stop you getting into debt if a cash-crisis emerges such as the temporary loss of income or your roof collapses.

Dedicating the time to sorting out your finances and planning a savings-budget is one of the most important investments that you can make. Making a small commitment to save just 10% of your pay, an amount which many of us would not miss, could really make the difference between being financially secure and getting into debt.