Don't spend what you don't have.
The average U.S. household spends $1.22 for every $1.00 it earns. That's a recipe for financial disaster.
Build up a cash cushion.
Ideally, you should have three months' expenses set aside for emergencies " like job loss, disability or divorce. For example, if your bills are $3,000 a month, you should have a $9,000 cash cushion. Start saving it now and consider that money untouchable.
Use cash more often.
Studies show people spend more, or overspend, when they whip out plastic versus paying for items with cold hard cash.
Get a financial planner.
Hiring financial help isn't just for the rich, and it doesn't have to be that expensive. Go to the Financial Planning Association (FPA) for a certified financial planner in your neighborhood. The FPA can be reached toll-free at (800) 647-6340 or on the Web at http://www.fpanet.org.
Put everything in writing.
Create a written list or a spreadsheet itemizing each creditor you owe. For some people, this step will be a big eye-opener. You may find out that you have way more debt than you thought. For others, putting all your obligations in black and white will be a relief ... you'll discover things aren't as bad as you'd imagined. Either way, having everything in writing gives you a realistic look at where you stand.
Bonus tip: To make sure you haven't forgotten any creditors, order your credit reports from http://www.myfico.com. You'll be able to get your credit score and credit reports instantly online from all three credit bureaus " Equifax, Experian and Trans Union.
Call up creditors and negotiate.
Many consumers don't realize that they can call up their creditors and ask for lower interest rates, or request that late charges or annual fees be waived. Often, credit card companies will lower your rate on the spot, simply because they don't want to lose your business. It's a competitive market " credit card companies send out nearly five billion offers to consumers each year " and most credit card issuers know that customers will switch cards if their interest rate is too high. So using your list of bills you created in the previous step, call up each creditor and start negotiating.
Cut spending and apply savings to debt.
Look for ways to slash your spending. For example, if you own a car, you can refinance your auto loan and save big bucks. Go to http://www.capitaloneauto.com, the nation's largest online lender, to save money on your monthly auto payments. Also check out http://www.lowermybills.com. It's a great resource for people who want to save money on 18 categories of bills " everything from life insurance to Internet service and telephone bills.
Pay at least three times the minimum due.
Credit card companies typically ask that you pay just 2 percent of the outstanding balance. But if you only make minimum payments, you'll never get out of debt. For example, if you carry a balance of $13,000 on your credit cards and pay 15 percent annual interest, making just the minimum payments will take you more than 25 years to pay off that debt " and that's assuming you never charge another dime! The solution: Always pay more than the minimum due. If you can swing it, pay at least three times the minimum required payment. Remember: "minimum" payments now really mean "maximum" payments in the long run!
Lynnette Khalfani is a personal finance expert, money coach, and the author of Investing Success: How To Conquer 30 Costly Mistakes & Multiply Your Wealth! and her latest book, Zero Debt: The Ultimate Guide to Financial Freedom. She can be reached via her Web site http://www.themoneycoach.net.