You're better debt-free than red, but the first step to getting back in black is to appreciate how you dug that hole in the first place, writes Helena Keers.

RED is not the new black. OK, many Australians prefer using credit cards to getting lay-bys but the rising cost of food, petrol and interest rates is fuelling debts and forcing Australians to run for cover. But how can you beat the rot without too much of a sacrifice?

Many of us are too scared to check our credit card balances, paying off the minimum each month and kidding ourselves that we're in control of our debts.

In order to grapple with debt and banish it, the first thing to do is understand why you're in debt in the first place.

DEAL WITH IT

A good starting place for debt busting is to monitor your spending. Write down every cent you spend in a pocket book for a few weeks and count the cost of those coffees. The longer you can keep up your personal audit the better. Once you've worked out where you're going wrong and where you're leaking cash, you can decide how to take action.

An Investment and Financial Services Association (IFSA) report released in conjunction with the Allen Consulting Group last year revealed the average Australian household owes about $160 for every $100 of income earned. We're a spendthrift society. This means you're not alone if you're in debt.

Facing up to what you spend money on can be a pretty scary revelation. Before reaching for the panic button, though, consider supplementing your income or cutting down on consumption. Below are some tips to help cut that spending.

CURB YOUR APPETITE

Work out your priorities and the essentials you rely on, such as food and travel costs, and get creative. If you must have a coffee each morning to get you started, try and make your own instead of forking out about $3 a day to buy one. The same goes for lunch. Making your own lunch can save about $10 a day which really adds up after a few weeks.

Cooking at home rather than living on takeaways should also help save those pennies. Be careful where you shop, though. Avoid those last-minute buys at pricey convenience stores and make the effort to get to a supermarket for food. Buying ham from the supermarket fridge instead of the deli will also slash those grocery bills. Be firm with yourself (and the kids) by using a shopping list. Say no to those impromptu treat purchases.

TRAVEL LIGHT

Apart from food, most of us count petrol as an essential. Fuel monitor MotorMouth says the average cost of unleaded fuel in July across Adelaide, Brisbane, Melbourne, Perth and Sydney was 159.10 cents a litre.

That means it cost about $80 to fill up a 50-litre tank in July. That's a lot of money if you fill your tank every week.

To cut back on petrol spending try and fill up on a Tuesday - typically the cheapest day of the week at the pump.

See the MotorMouth website (www.motormouth.com.au) to find out where your cheapest service station is. You should also try and take advantage of affiliated shop discounts. For instance if you spend more than $30 in one transaction at Coles, Bi-Lo or Liquorland you'll save four cents a litre on petrol when you show your docket.

Changing the way you drive could also help. If you can drive without extreme braking or acceleration, with an empty boot and no air-conditioning you could slash the amount of juice your car eats up, the NRMA says.

WATCH OUT FOR CREDIT CARDS

And finally try and pay those bills on time and online to keep good records. This is especially important if you have credit cards. The interest can be staggering, so if you pay on time you're not adding to your expenses without seeing any tangible returns. The average household has credit card debts worth three months' disposable income, Fitch Ratings says.

Take control of your credit cards by transferring your balance to a card with a no-interest period. Some cards offer customers 0per cent interest for nine months. But watch out for high cash advance rates, which can be more than 20 per cent in some instances.

InfoChoice has crunched some numbers and calculated that the best overall balance transfer card is the American Express Blue Sky Credit Card, which has no fees. (The card recently won our sister publication AFR Smart Investor Blue Ribbon Award for the best balance transfer card.) Still, if you made a payment of $150 a month on a $3000 debt at the interest rate of 6.99 per cent, it would take you one year and 11 months to repay your debt and cost you $199 in interest.

If you're going to transfer your balance to another card don't forget to chop up your old card. Many borrowers end up maxing out both cards which just makes that debt mountain higher.

Credit card offers are always changing and improving, so checking out ratings by InfoChoice (www.infochoice.com.au), Cannex (www.cannex.com.au) and RateCity (www.ratecity.com.au) is good practice.

But don't card hop. Each time you apply for a credit card it will appear on your credit history and lenders tend to interpret an active credit history as a risk.

DEBT CONSOLIDATION

Some financial advisers also recommend consolidating your debts so you get a lower overall interest rate and you're forced to make regular repayments.

Generally this means you're paying off the same debt just over a longer period though and that means your attractive headline low interest could actually rack up to be much more over the longer period.

You should look for help to find your best strategy because it's not always the same for everyone. Calling your lender can be helpful. If you let them know you're struggling they might have a few options for you to consider. Don't forget keeping up appearances shouldn't be more important than keeping up your bank balance.