Are you mired in debt or want to avoid the overspending trap entirely? By following some simple steps, you can get your finances back on track.
  1. Make a budget (and stick to it): It's difficult to spend within reason or plan savings without knowing how your monthly spending compares with your take-home as well as what it is allotted to. That's why you should rank order your expenses -- including debt payments, emergency fund contributions, and other savings -- and trim the fat if necessary. And most importantly, once you develop your budget, make sure to stick to it, or else you'll have simply wasted your time.
  2. Build an emergency fund: With a robust financial safety net, you'll be less at the mercy of the economy and able to withstand a prolonged period of joblessness, should the need arise. Your goal should be to gradually save about a year's worth of after-tax income through monthly contributions to an emergency account.
  3. Try the island approach: The Island Approach is a credit card strategy that involves using different cards for different types of transactions, as if they are a chain of distinct yet interrelated islands. For example, you could transfer your existing debt to a 0% credit card to reduce your monthly payments as well as get out of debt sooner and subsidize your ongoing spending with a rewards card or two that offer high earning rates in your biggest expense categories. This will enable you to get the best possible collection of terms as well as gain a better perspective on your spending and payment habits, since finance charges on your everyday spending cards will signal a need to cut back.
  4. Use the snowball method to strategically pay off amounts owed: To become debt free at the least possible cost, you should attribute the majority of your monthly debt payment to the balance with the highest interest rate while making the minimum payment required on the rest. Once your most expensive debt is paid off, repeat the process as necessary with the remaining balances.
  5. Evaluate your job situation:  In some cases, all the budgeting and planning in the world won't be enough to solve your debt problems. You may therefore need to evaluate whether there are higher-paying opportunities out there for people with your background or if you'll need to acquire some new skills to make yourself more marketable. This might require making a bit of an investment in yourself, but as long as you get a worthwhile return it's money well spent.

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