Destroy Your Debts In Five Steps!

Put this five-step money diet into action and knock your finances into shape!

I started 2009 feeling a.) fat and b.) skint - a pretty depressing combination. I decided to take the bull by the horns and and tackle both at once. and it seems I wasn't the only one.

According to recent research from AA Personal Loans, over a third of us are cutting back on the calories this January, whilst 53% of us have decided to slim down on spending.

At least you can kill two birds with one stone when it comes to planning your health and money makeovers. Lots of diet and `getting in shape' strategies can also be applied to your finances.

So, if your bank balance is looking a bit sorry for itself, fight your debts the way you'd fight those extra lbs. Here's a five-step action plan to get you started:

1. Detox!

First of all, lighten your debt load by lowering the interest rates you're charged and cutting unnecessary payments wherever possible. Your to-do list should include:

• Ditching Payment Protection Insurance (PPI) - or at the very least finding the best value cover on offer. This article, by my colleague Cliff D'Arcy, explains why most PPI is a total rip-off.

• Cutting your credit card interest payments. If your credit record allows, switch to a credit card which offers 0% on balance transfers. The Virgin Money card is currently the market leader, offering 0% for 16 months.

• Losing the high interest loans. If you are accepted for the Virgin card, you can also use it to make a 0% interest money transfer into your bank account. This could help you pay off debts charging a high rate of interest, like an unauthorised overdraft or a personal loan.

2. Slim down your spending

Cut back on spending just like you'd cut back on calories. How many of us eat when we're not really hungry? (I know I do).

So - when you're about to flash the cash, always ask yourself: Do I really need this? Can I get it/a similar thing cheaper elsewhere?

12 Ways We Can All Fight The Recession has lots of tips on how to cut your everyday living costs.

And for a host of moneysaving deals on homeware, fashion, books, films, eating out and travel, have a look at this article by my colleague Rachel Robson.

3. Don't crash diet!

Crash dieting just isn't a good idea. You eat nothing but lettuce for a week, achieve your `target weight', then feel so relieved that you eat 14 doughnuts and put all the weight back on again.

The same applies to your finances. The key to beating your debts is to devise a sustainable, long-term strategy that works for you. Here are some pointers:

• A cunning plan: Use this Statement Of Affairs calculator to work out exactly how much financial trouble you're in. Then draw up a budget and devise a realistic plan to tackle your situation. Snowballing your debts is a great place to start.

• Regular weigh-ins: Keep a spending diary, and note down every penny you shell out. This will help keep you motivated, and will also pinpoint any money `leaks'. And be honest with yourself. The scales don't lie and sadly, nor does your credit card bill!

• Reward yourself: If you never treat yourself, the chances are you'll end up spending big when you do give in to temptation. So, find occasional and affordable ways to reward yourself as your debt shrinks. It could be something as simple as a day out or a nice meal from M&S.

4. Build financial muscle

Just as exercise burns calories, upping your income will help you climb out of the debt mire that bit quicker.

You don't have to make a complete career change (and, let's face it, now might not be the best time to try that!). There are plenty of ways you can earn a bit on the side while still keeping your existing job.

If you're in need of inspiration, have a look at Ten Easy Ways To Make Money. Or perhaps you'd prefer to Sell Your Youth To Survive The Recession?

5. Get help

Like a good slimming club, the Dealing with Debt discussion board is somewhere you can get non-judgmental help, advice and support.

It will also show you that you're not alone - in fact, there are millions of people in exactly the same boat!

More: Five Ways To Cut The Cost Of Debt | A New Way To Repair Your Credit Rating