With the recent interest rate cut, there's no better time to whip your finances into shape with money expert David Koch’s six-step plan.

Don’t accept debt as a way of life – take control and secure your financial future now!

Instead of cutting out carbs, I want you to cut out credit. Your budget is your training program – stick to it and you’ll be on your way to a whole new you.

1. Face reality

Many people ignore their debt problems until it’s too late. The sooner you act, the better off you will be.

Here’s a quick quiz. Are you:

• Putting day-to-day living expenses such as petrol and groceries on credit card because you have no money?
• Spending more than you earn each month and regularly dipping into savings?
• Only able to afford the minimum payment on the monthly credit card bill?
• Not prepared for unexpected expenses that crop up, such as house and car repairs?
• Receiving legal notices in the mail?
• Taking menacing phone calls from people chasing payment?
• Enduring relationship instability such as a marriage or relationship breakdown?

• Adopting bad lifestyle habits such as increased drinking, smoking and gambling?

Be honest. These are all tell-tale signs of financial distress. The worst thing you can do is ignore your debt problems until it’s too late, hoping things will work out for the best and your creditors won’t notice.

2. Ask for help

If you’re in trouble, talk about it. Credit card companies and financial institutions will be much more lenient if they know you’re trying to tackle the problem.

Talk to them about a payment program to help you manage your debt. Ask if you can reduce or postpone some of your repayments, or pay less interest while you get yourself on track.

3. Control your spending

For the next month write down everything you spend and then examine what you’ve done. You’ll be amazed, and maybe a little horrified, at where your money has gone, but I bet you’ll think twice about spending it in future.

Start living within your means so you don’t go further into debt. From now on use cash for everyday expenses such as groceries, clothes and entertainment so you only spend what you have. Resist the urge to impulse buy and save up for bigger purchases.

If you’re going to struggle with the temptation of credit, get rid of it. Replace your credit card with a debit card. It allows you to purchase things online or over the phone like a regular credit card but uses your own money instead – so you can’t go further into debt.

4. Stick to a budget

Balance your family budget and develop a debt reduction plan. The fastest way to pay off what you owe is to make extra repayments. Look at your budget and work out the maximum you can afford to pay off your debts every month.

Every pay period set aside money to cover your basic expenses such as food, transport, utilities, and rent or mortgage payments. Also contribute to an emergency account to cover any unexpected bills. Use all the cash left over to pay down debts like your credit card bill.

If you’re not making much of a dent in your overall debt you have to increase your income. Get a second or third job in the evenings or on the weekend until your debts have been cleared. Make sure all the extra money you earn goes towards paying them off.

5. Don’t fall in to the minimum trap

The monthly credit card bill looks horrific, but then you take comfort in the much smaller minimum balance owed. Big mistake. It will take years to eliminate your debts if you only make minimum repayments. Your credit card provider will charge you interest on the rest of your bill, adding to your overall debt.

6. Pay off your most expensive debt first

It’s common sense, but pay off the debt with the highest interest rate first. Credit cards are charging up to 20 per cent interest, so focus on that debt to start with, then look at personal loans, which will be costing at least 10 per cent interest.

Don’t even think about saving or investing until you’ve paid off your bad debts. There’s no point playing the share market or investing in a managed fund when you’re being charged 20 per cent interest on your credit card debt.

Your home loan is probably your cheapest debt, at around 7 per cent. Borrowing to buy a home or invest in quality shares or property is generally considered to be good debt, and not as much of a concern.

If you have debt, you should have no savings. It should all go in to the credit cards or loans instead. Think about it logically. Why have savings earning 5 per cent (at best) while you’re paying up to 20 per cent interest on debts?