Make a New Year's resolution to balance your checkbook each time you receive a paycheck to ensure that you are not spending more than the amount you make.
Keep track of your bills. Designate a filing cabinet or secured box for bills and financial statements. Make separate files for bank statements, tax documents, credit card bills, medical receipts, mortgage statements and other records.
Create a monthly budget. Your budget is your spending plan. To create a budget plan, determine your monthly income and recurring expenses like rent or mortgage payments, utility bills, food, transportation costs, tuition, savings, entertainment and personal grooming. Then identify other recurring and periodic expenses like clothing, household appliances and maintenance, gifts, credit card purchases and vacations.
Prioritize your expenses and spending. After writing down your expenses, prioritize each expense based on your needs versus your wants. Set spending limits and determine estimated costs for each expense. If additional funds are left over after all monthly expenses are paid, split the rest of your income between debt reduction and savings. Pay down high-interest credit-card bills and loans, which will save you money over time. Use extra funds to also increase your savings — it's good insurance for unplanned emergency expenses.
Develop a diversified savings plan. Savings should not be limited to retirement planning. It's important to save for a down payment to purchase a home or vehicle and other items like uncovered medical expenses. Make regular deposits in an interest-bearing savings or money market account to cover these costs.
Recognize the early warning signs of debt trouble. You may be approaching a debt crisis if you are experiencing these signs: You're behind on the basics, like January's mortgage or rent and utilities; you're using credit to buy items you should be able to buy with cash, like groceries; you're skipping some debt payments to make others; you're receiving overdue notices or telephone calls from bill collectors.
Don't suffer in silence. Take action and get help. Seek helpful credit counseling. As soon as you know you're going to have problems contact your creditors and explain your situation and what you're doing to meet your debt obligations. Depending on the creditors' policies and your situation, credit and payment history, you may be able to negotiate your next payment or a lower interest rate.
Source: The National Foundation for Credit Counseling