The easiest and quickest way to get out of personal debt is to lower your expenses. Simple, but how many people do it?

Do up a budget, setting out all the money that will come in and all the money you normally spend. Now look at that expense column… what items can you get rid of without noticing? Some people are paying hundreds of dollars a year for gym memberships that they never use – get rid of it if you don’t use it!

Have you really gotten rid of every expense that you are comfortable getting rid of? Go back and cut it down again.

There’s no need to cut back too severely (unless your debts are really crippling). In fact, doing so may be counterproductive, much like going on a diet. You want to setup a budget for your expenses that you can stick with for at least 5 years. Don’t worry, you can change the numbers if you need to at a later date, but think – if your life went along the path it’s currently on, would you be ok spending the amount you set on the individual items for the next 5 years?

Part of the budget should provide for automatic, periodic savings. The period should be when your paycheck comes in or fortnightly if you run your own business. The savings will go directly to pay off your smallest debt. Set it up to be taken out the day after your pay goes in. Most banks have auto debit facilities and I highly recommend you take advantage of that. You should be saving at least 10% of your net income automatically.

Set up so you pay the minimum repayments on all your debts, except the smallest debt. Start with that. Is it a few thousand on a credit card? Pay that off first with the money you are saving.

Once that debt is paid off, take the whole amount you were paying on that debt (the minimum repayments and the savings) and set it to pay against the next smallest debt. By doing so, you’ll build up a snowball effect and easily pay off your debts a lot faster.

The beauty of this system is that a lot of it is automatic, so you don’t have to think about whether you’ll use the money to pay off the debt or buy a pair of shoes or go out to dinner. By the time you think of making the decision, it’s already gone to pay off the debt.