Stop Borrowing. Stop the bleeding. Regardless of your current debt, you must (I mean, must) stop sinking further in debt. You will not be able to change anything until you stop spending borrowed money. Period. It is THE most important thing to do first.
Trim Your Budget. Simplify the budget analysis by being honest with yourself. Chances are that there are only one or two categories where you tend to break the budget. Think about it. You know what they are… Maybe you go out to eat too much. Maybe you buy too many clothes. Maybe you spend too much on gadgetry. The point is, instead of over-analyzing your budget, simply STOP spending too much on the categories you know to be your weakness. It takes will power.
Save. Even though there is relatively little interest paid on cash savings these days, this is no excuse not to save. As you begin to save a few dollars here and there, your motivation will grow as your cash stash grows. Instead of creating more debt, you will be creating more cash! Don’t spend every extra dollar on paying off your debts. Instead use some of it to build up a savings of cash.
Expect the Unexpected. A common area where people tend to go into debt is in the category of emergency expenses. This is where having a savings of cash will provide insurance against falling back into debt. Expect things to happen, such as the unplanned car expense or home appliance repair or replacement. Unexpected expenses ALWAYS happen. Save for them.
Plan for Future Expenses. Rather than letting known future expenses catch up with you, which often send people back into debt, plan instead for them. Use simple math. If you know that you will likely need a replacement vehicle in 2 years, and you are planning to purchase a used-car for $7,000, then $7,000/24 months equals nearly $300 per month that you need to save ahead of time. Budget for it. Money to purchase things that you will need to replace or purchase in the future WILL NOT fall into your lap. You must save for it, or go into debt when you need it.
I believe that one of the biggest problems today with those that are in debt is the lack of understanding that you cannot simply spend all of your paycheck or income each month (or week – whatever). There will always be significant expenses that will unexpectedly slam into you throughout life. You must plan for this by facing the reality that you need to set aside a portion of your take-home income for the future. This notion goes against the programming of ‘the system’, which deluges you with advertising and pressures to buy-buy-buy, however it is a false notion, one that will make you a slave.