In general, a safe ratio level of debts is about 35 percent of your income, with 25 percent comprising your housing loan. Anything higher than that is a sign that you may need to reevaluate your finances.

The following are five guiding principles for dealing with debt:

1. View all your monthly payments as a single large payment.

Start by identifying all your financial obligations and calculate the amount that you will need to pay each month. Work out a budget to allocate part of your take home pay for monthly total debt repayments. Then, keep paying the same amount each month but reallocating as circumstances change and some debts get paid off.

2. If some loans are only subject to minimum payments, then always try and pay as much as possible on the smallest loan.

Pay off the loan with the lowest balance and proceed to the one with the next lowest balance and continue until all debts are paid up. Also known as the "debt snowball" method, it will effectively help you reduce the number of outstanding debts you may have, while giving you a feeling of success when you eliminate each debt one at a time.

3. If you can at all delay making payments on any loan, do so on the one with the lowest interest rate.

Instead of first focusing on the debt with the lowest balance, you may want to consider paying off the loan which incurs the highest interest rate. This will help save you more money in the long run because your debts will grow at a rapid rate if left unpaid too long, due to interest charges.

4. Compare loans to get the lowest interest rate.

If you were to get a loan, make sure you compare the different packages offered by various financial institutions. Get the one with the lowest interest rate that computes the balance on a daily basis and also comes with the option for early refinancing. This will help reduce the overall interest paid and shorten the loan tenure.

5. Don't ever agree to act as a guarantor for someone unless you have all the ready cash needed to repay that loan if he or she defaults.

It is essential that you think long and hard before you agree to act as a guarantor for someone. If the loan falls into arrears, you may be called upon to take over the payments from the person. Hence, you must have the funds available beforehand in preparation for something like that to happen. Only agree to act as guarantor for someone you know and can really trust.

Staying Out of Debt

When you are out of debt, it is difficult not to fall back into it. You will need to stay disciplined while developing good spending habits. The following are some things you can do:

- Don't buy what you don't need. If you are unsure, wait a few weeks and see if you still need it.

- Make your purchases with cash or via debit card. Only use your credit card if you are going to pay off the balance in full each month.

- Start a savings plan by putting money aside each month for something that you really want. Don't buy something that you cannot afford. As the saying goes, "Delayed gratification is the key to financial maturity".

Use a list when you go out shopping and stick with it.

- Carry out a regular income-expenditure review to ensure you are earning more than you are spending and always look for ways to maximize your income.