The first steps towards a debt-free existence

Get impartial, independent advice from leading debt charity, the CCCS. on how to take your first steps to get out of debt.

Falling in to debt is all too easy to do, if you experience a sudden change in circumstances, such as losing your job or being off on long-term sick leave. For many though it happens more gradually.

Debt can have a habit of creeping up on you and taking you unawares, particularly if you have more than one creditor and rely on making minimum payments on credit cards to get by.

It is important to recognise when you may be about to slip from a manageable situation into unmanageable debt, because the longer you leave a debt problem, the worse it will get.

10 top debt questions to ask yourself

The first step towards a debt-free existence is to ask yourself the following 10 questions:

Do you dread opening your post or bills?
Have you missed or been late with credit card payments or other bills?
Do you avoid looking at your balance when you withdraw cash from an ATM?
Do you know your bank balance to the nearest £10?
Are repayments of credit cards and other debts taking an increasing amount of your money?
Can you only afford to make minimum payments on your credit cards?
Are you using credit cards to buy items everyday items such as food and other essentials (this does not apply if you pay off your cards in full every month of course)?
Are you at the limit of your overdraft and credit cards?
Do you spend money you know you can't afford when you feel down?
Do you regularly have to borrow off family and friends?

It is not how much you owe that is important, but rather, how much you owe relative to your income. So, a good rule of thumb is to add up all your monthly payments to unsecured creditors, including personal loans and credit cards, but not your mortgage. It this comes to more than 20 percent of your take-home pay, you are over-extended and need to cut back.

Help cutting back

To help cut back, prepare a budget, detailing all monthly expenses for the coming year. The FSA website Moneymadeclear has a useful budgeting tool which ensures you won't leave anything out, or you can adopt the lovemoney.com goal: Draw up a budget.

Keeping a money diary for a week, being honest about what you spend, is also often very revealing about where your money goes - the morning coffee at the station on the way to work, the sandwiches at lunchtime, and so on.

If you can, make an effort to pay off the most expensive borrowings first which is likely to be your credit cards. Consider opting for a 0% balance transfer card if you can get one but don't then also use the card for everyday spending.

If you think you might need help but aren't ready to talk to someone yet, why not use the lovemoney.com Q&A tool to get advice? Advisers from our charity, the CCCS, are on hand to answer debt questions and give individual guidance.

If you think your situation is serious, talk to your welfare officer at work if you have one. Alternatively, contact us directly at the CCCS for advice. Our helplines are open 8am to 8pm Monday to Friday on 0800 138 1111 or visit our online debt counselling service, Debt Remedy anytime day or night.

Compare credit cards at lovemoney.com