In this article we are going to help you take the first step to solving your debt problems. The first step is that you need to know what you are up against. How much debt are you actually in? How much do you spend each month? And what is your income?

This is going to take you some time, very few of us are organised enough to put our hands to every single bank statement and bill, so you need to set some time aside to do this next task.

Task 1 - Your Current Debts

You need to search your home for the latest bank statements, credit card bills and any other letters from people that you owe money to.

Next, make a list of each of your debts and the amount of money that you owe, also make a note of any interest rates that you are being charged, this is so that you can see at a glance which debts are the most expensive.

You have now taken the hardest and first step towards clearing your debts. Now that you can see your full debts in black-and-white this may be a little scary, but there are definitely solutions available for your debt problems.

Task 2 - Your Finances

Now that you understand the extent of your debts, it's now time to work out your actual monthly finances. This task is also going to take some time as well, but this is the most important step to begin clearing your debts.

Income

First of all you need to make a note of every single source of income that you have, so this is your salary, benefits, interest on savings, rental income etc. Refer to your bank statements to remind you of the various sources of your income.

Expenditure

This is the hard bit, you need to itemise everything that you spend your money on. It will be useful to check your bank statements to see what you have spent, make sure you include all your direct debits, standing orders, bills, mortgage / rent, council tax, utilities etc. You will also need to write down the everyday spending such as coffee, sandwiches, magazines, clothes, etc. If you regularly withdraw money out of the cash machine and don't know where it goes this should be an eye opening experience.

Task 3 Moment of Truth

Now you can view at a glance your entire financial situation and compare what's coming in and what's going out. Don't panic! It is now time to find some extra cash and cut back on your spending.

This is where you really need to be ruthless, first of all see where you can cut back on your spending; do you really need the morning coffee every day on the way to work? £2 per day adds up to over £500 a year on coffee!

Do you have a gym membership that you never use? Can television and Internet packages be cut back? Check that you have good deals for your gas and electricity suppliers, as well as your insurances, it's easy nowadays to shop around on the Internet and compare prices.

You need to keep finding areas to cut back your spending until you have some spare cash each month, once you have done that you may also need to look at ways of generating extra income, for instance working overtime or renting a room in your house, selling unwanted possessions, and also check to see if you are eligible for any benefits.

You are now well on your way to clearing your debts, the next step is to work out which debts to pay first which we will cover in a separate article.