Where to begin?

The first step toward taking control of your financial situation is to assess how much money comes in and how much goes out. Write down all your expenses, even those that seem insignificant. The goal is to ensure you can make ends meet on the basics: housing, food, health care, transportation, insurance and education.

• List your income from all sources.
• List "fixed" expenses — those that are the same each month — such as mortgage or rent payments, car payments and insurance premiums.
• List all other loans such as boat, furniture and student loans.
• List all credit card debt and the interest rate of each card.
• List expenses that vary such as food, utilities, entertainment and clothing.

What does a budget plan contain?

Once you have a clear picture of your financial situation, you can create a written plan to start eliminating debt.

• Eliminate debt on consumable and depreciating items such as cars, furniture, dining out and vacations.
• Consider carpooling or using public transportation rather than owning a car.
• Clip coupons, purchase generic products at the supermarket and avoid impulse purchases.
• Above all, stop incurring new debt. Consider substituting a debit card for your credit cards.

What if budgeting problems still exist?

• Your public library has information about budgeting and money management techniques
• Good information sources include the Internet, the yellow pages, your community bank or local consumer protection office
• Many universities, military bases, credit unions and housing authorities operate nonprofit counseling programs.
• Most communities have low-cost budget counseling services that can help you analyze your income and expenses and develop budget plans.

Can I deal with creditors myself?

Yes. If you have trouble making ends meet, contact your creditors immediately. But be prepared to work out a schedule. If you are not comfortable doing that, seek a credit counselor.

• Before you call a creditor, understand how much you owe. If you dispute a debt, try to resolve the question with the creditor directly. If you still have questions about the debt, contact your state or local consumer protection office or state attorney general.
• Explain your situation to creditors and try to work out a modified payment plan that reduces your payments to a more manageable level. Most are willing to work with you and will appreciate your honesty and forthrightness.
• Don’t wait until your accounts have been turned over to a collection agency. At that point, the creditors have given up on you.

What are the powers of a collection agency?

The Fair Debt Collection Practices Law prohibits a debt collector from showing what you owe to anyone but your attorney. Under other federal laws, creditors cannot seize most government assistance funds and can only garnish a portion of wages to collect debts.

Next: Credit Counseling >>