Seven steps to eradicating your overdraft

"Money doesn't talk, it swears," wrote Bob Dylan. He might have added that, on Planet Overdraft, it swears most vociferously. This is somewhere you don't want to go but if you are already a resident then getting control over your finances will provide a passport to a speedy, stress-free departure.

The state of our finances

Easier said than done. We've all seen the figures marking the increasing level of UK consumer indebtedness over the past year. Now the Bank of England has increased base rate to 5%; and if you survive the crucifying cost of Christmas it is likely you'll be faced with another hike in rates early in the new year.

When outgoings exceed income, debt is the only outcome. A survey earlier this year found that 1 in 5 people in the 18-29 year age bracket is permanently overdrawn and 1 in 3 uses their overdraft to finance other debt. But take heart youngsters, apparently the over 60s owe more money than any other age group.

Every year the banks hoover up at least £40 million in penalty charges incurred by breaching current account and overdraft rules. Then there's the additional interest they charge on unauthorised borrowing. But you don't have to be a victim; instead take these steps to minimise and eventually eradicate your overdraft.

Step one: Analyse your expenditure

Leaving aside the large monthly direct debits and standing orders, where can you make savings on the small stuff? Check bank statements to ensure your'e not still funding long forgotten causes eg associations, charities, societies or subscribing to facilities you have ceased to use, such as gym membership. Are there any dormant savings accounts that need closing down?

Step two: Itemise your weekly outgoings

Note down every purchase made. Set a daily maximum number and limited duration for phone calls made. Budget food and drink at a sensible level. For instance, do you need a smoothie every day as part of government-approved five portions of fruit and veg? A fresh apple or carrot would be a lot cheaper. Establish a weekly limit for such expenditure and pay with cash so that you can see the money disappearing. It's simple commonsense; if you haven't got the folding green then you can't spend it. Yes, but what about plastic?