OK, so you have blown it up to this point. You haven't created a spending plan and you have no emergency savings. What you do have are plenty of credit card bills. What are you going to do now? It's hopeless, right?

Not so fast. The first step in solving your financial problem is recognizing you have a problem. Then, you have to do something about it. Where do you start? Like the old saying goes: you start at the beginning.

That's right. The most important first step is just doing SOMETHING. Here are five things, easy things, you can do right now to start digging yourself out of that financial hole you dug for yourself.

1. Stop spending money. To be more precise, stop spending more money than you have. This might mean making some tough choices, like getting rid of that money pit of a car that you're still paying off, but you've gotten yourself in deep and it's going to hurt a little trying to claw your way out of the trouble you've gotten yourself into. Create a spending plan (I hate the word "budget". That's as bad as the word "diet"). Allocate money to food and shelter first. Then, the bills you need to survive, such as utilities. Shoot for living on ten percent less than you make, and eventually try to increase that to 20 or 30 percent.

2. Know what you owe. Go through your house and dig out all of those bills you have been avoiding. Get a copy of your credit report. This will give you an idea of what needs to be paid.

3. Prioritize your bills. Some people say pay off the smallest bills first and celebrate your little victories. I say pay off your bills with the highest interest first. Those interest payments can be killers. Get rid of them.

4. Be proactive. Don't wait for the bill collectors to call you. You call them. Tell them how much you can pay, or when you can pay. Don't wait for a bill to go to a collections agency. This will kill your credit score. If you don’t want to do this yourself, there are debt management companies that can do it for you.”

5. Pay cash...for everything. Stop paying for your stuff with credit cards. This goes for bill payments too. Yes, cash is less convenient, but when it's gone, it's gone. You can't go over your budget if you are paying for everything with cash. I use checks and debit cards, too. This helps me keep track of my spending. I check my online bank account each night and balance my checkbook. Yes, every night. How else are you going to know what you are spending? If you don't have that kind of discipline, stick to cash. Even better: use automatic BillPay for your monthly household bills. That comes right out of your bank account and you won't "forget" to pay your bills.

While you can start these steps today, you won't solve all of your financial woes overnight. It took you a long time to get into the bind you are in, and it will take time to get out. Just grit your teeth, put away the credit cards and be prepared to live a much more simple life for awhile. Eventually, the feeling of being debt-free will replace that sense of dread you feel when the phone rings or you go to the mail box.

FTC Disclosure: This post contains a paid link.


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