by Simon Wright

Created on: December 23, 2009

With credit facilities having become ever more readily available from the 1980s onwards, the number of people with debt has soared and not surprisingly some of these people have then found it extremely difficult to extricate themselves from that debt. This can be a serious problem as debt can damage your credit rating, which in turn may affect your ability to get a house, and make it much more difficult to build for a better future. Eliminating your debt should therefore be one of the key strands of your financial planning strategy.

Evaluate your position:

When people get into money difficulties, there is often a temptation to hide away from the full extent of the debt. Bank statements either get shoved into drawers unopened or thrown straight in the bin. However, it’s vital to know how much debt you have and how it’s split over various credit facilities such as overdrafts, credit cards, and loans.

It’s worth setting up a spreadsheet to detail your accounts and then create a separate row for each individual debt that you possess. You should also detail what interest rate you are paying. An example might look like this:

Sam’s debt:                                          Interest rate:

Student loan: $10,000                           5%

Overdraft: $1,000                                   12%

Main credit card: $5,000                       15%

2nd credit card: $500                            11%

Car Loan: $3500                                    7%

Total: $20,000

Prioritise your debt payments:

As a general rule it’s

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