In today’s world of increasing prices, unemployment and overall unstable economy, one of the most lethal difficulties in the world of personal finance is debt.

However, when used wisely and with long-term goals in mind, you can beat the debt trap.

So, how can you avoid drowning in debt?

According to financial experts, having a plan, knowing what debts to clear first, as well as acting in making sure you don’t become one of the sad statistics, are very important to have.

For people who are finding it quite difficult in deciding what debts to repay first as they are confused of the too many repayment requests, it is recommended to pay off first those really bad debts, such as credit cards and high-interest personal loans taken out for non-taxable purposes such as holidays, goods and furniture.

Debts with the highest interest rates should be paid off first as you can’t be able to claim non-taxable debt, also known as private debt, as a tax deduction.

Also, in case if you have a personal loan with a high interest rate you are looking to pay off, make sure that you will not be incurring any penalties for doing this.

Experts say that it is the highest-interest debts that are usually the hardest to control. So, make sure to get rid of your debts from credit cards, store cards and mobile phone accounts as soon as possible if you can as these are the big ones that most people generally don’t control well.

As most people’s biggest debt is their home loan, it is best to next focus on reducing your mortgage as this can save you thousands of dollars once all the other personal debts are under control.

By shortening the length of your home loan, you will be making a big dent in interest costs. So make sure to find ways to shorten it. You can either do fortnightly repayments or if you don’t have any spare cash, make payments off the principal from time to time.

According to experts, you should only focus on paying off your mortgage, only when all of your higher-interest debt is cleared.

Also, you should not be afraid to seek help if you are having problems with your debt. Nowadays, there are a lot of banks that have help lines for people struggling, as well as there are also a lot of brokers that are offering advice too.

It is also highly recommended that when signing up for an interest-free deal for goods, make sure to always read the fine print and understand what you are doing.

Though interest-free and no repayment financing sounds great and may work for some people, these financing schemes do entail a catch, where many people have found themselves paying more money than what the goods are actually worth. This is because these schemes usually don’t point out what will happen if an item is not paid for during the interest-free period, wherein the interest changes to an extremely high rate and interest can be charged on the original amount owed regardless of what is paid. And once the interest free period expires on these deals, experts say, rates can be about 30 per cent a year, making them virtually impossible to pay off.

So, make sure to fully pay your debt by the end of the interest-free term. Make sure that you are aware of the term of the debt you have taken on as paying off on time requires discipline, and discipline only comes if you know these terms.

Also, another effective and popular debt reduction strategy is consolidating higher-interest debts such as credit cards and store cards within a loan where the interest rate is lower.

Also, make sure that you have a committed repayment plan as you can easily get into trouble with credit card debts when you don’t have one.

But take note, consolidation can be harmful if you consolidate debts into a cheaper loan but then go back to your old spending habits and rack up the credit card again.

So in consolidating, you should cancel the credit cards or just keep a maximum of two cards with a small limit on it as it can be difficult to keep track if you have many different debts.

Also, don’t be seduced by introductory offers as nothing comes without a cost.