Your Four-Step Financial Action Plan

Are you struggling to make ends meet every month? Tackle your `Big Four' and stop that money draining away!

This week, a friend told me that she was struggling financially. In a nutshell, her monthly expenses are slightly more than her income. And as a result she's slowly sinking into more debt.

As she talked, I realised she was doing what I used to do. She was making all sorts of little cutbacks, without tackling the factors that could make a really big financial difference.

For example, it sounded like she was practically living on bread and water - but she still hadn't investigated whether she could get a better deal on her mortgage. This, she said, was because she thought it would take ages and she hadn't had time to get it sorted.

Now, my friend isn't stupid - but mid-credit crunch, she is beginning to panic. And panic doesn't help clear thinking.

Your Big Four

If you're struggling financially, take a few minutes to pinpoint exactly where all that money is actually going. What are the expenses that suck the cash out of your bank account quicker than any others?

In this article, I'm tackling a `Big Four' that will, I think, be familiar to many Fool readers: Your mortgage, credit card/s, personal loan/s, and gas and electricity. Get these sorted and you really will be heading in the right direction.

If you can't face the whole lot at once (and I don't blame you!), set yourself smaller goals. Maybe you get to grips with a task a day?

Mortgage

Your mortgage payments are likely to be your single biggest monthly expense - so it's worth getting them right.

If you've come to the end of your original fixed rate, discount or tracker deal, you're now likely to be on your lender's Standard Variable Rate (SVR).

If you are, try to find a better deal immediately. The SVR is often horribly expensive, and you could save yourself literally hundreds of pounds a month by switching.

Read Is Your Mortgage Going To Get Cheaper? - by my Foolish colleague Donna Werbner - for more mortgage tips.

Credit card repayments

For years I was foolish (rather than Foolish) and had debt on a credit card that charged 15.9% interest. I shudder to think of the money I wasted every month in interest payments.

If you can't pay your credit card balance off in full, try to get your hands on one of these cards:

A 0% balance transfer credit card: With one of these - like the Virgin Money card - you'll pay no interest on the amount you transfer to it for as long as the deal lasts.

Alternatively, consider a lifetime balance transfer card. With this sort of card, you'll pay a very low rate of interest for as long as it takes you to clear the balance.

The bad news is you may not be accepted for either of these if your credit rating is poor.

If that's the case, and you're stuck with the credit card you've got, don't spend any more on it (cut it up if necessary!). Instead, try and clear the balance as quickly as possible.

Snowballing is one of the best ways to get out of debt. In a nutshell, target the debt with the highest level of interest, then the one with the next highest, and so on.

Personal loan repayments

If you currently have a personal loan, there are several things you can do to batter away at the balance:

Find a cheaper one: Visit The Fool's Loans Centre to see if you could get a better deal. In Loans Rates Rocket, my Foolish colleague Christina Jordan highlights some of the best deals still around.

Overpay: The sooner you pay off that loan, the less you'll have to fork out in interest charges. Snowballing applies to all sorts of loans, not just credit cards.

Just be aware of any penalty charges your lender might slap on for overpayment, or early repayment of the total amount.

Ditch the PPI! In Avoid This Appalling Loan Rip-Off, my Foolish colleague Cliff D'Arcy explains exactly why Payment Protection Insurance (PPI) sold with loans is such bad value for money.

If you already have a loan with over-priced PPI, it's definitely worth contacting your lender and seeing if you can get it cancelled.

Some lenders will allow you to cancel it while keeping the original loan. They may not make it easy for you though, so you'll need to be persistent.

Gas and electricity

Gas and electricity bills have been front-page news in the past few months, as prices shoot up and more people face `fuel poverty' (when you have to spend at least 10% of your disposable income on heating and lighting).

You have two main choices when it comes to cutting costs in this area:

Capped: A capped tariff is one that locks you in at a certain rate for a set period of time. It means that you won't be affected by price rises during that time - but it also doesn't leave you free to chase the best new deals. And it's possible that energy prices will drop in the next few months now that the oil price has fallen.

Flexible: The other option is to stay on your toes - chase the best deals and switch whenever you find one that's more competitive.

Either way, if you haven't checked tariffs for several months, you could be paying far more than you need to every month.

Visit The Fool's Gas and Electricity Comparison Centre to see if it's still worth switching.

Once you've got the big expenses sorted, you may find you've got the spare cash for that occasional treat after all!

More: Seven Tips To Seriously Reduce Your Debts | The Credit Crisis Survival Guide