The Average Family Owes Over $8,000 on Credit Cards Alone

With layoffs increasing and the stock market stumbling, now is not the time to be heavily debt.

Consumers rarely fall deep into debt all at once. Instead, their expenses outpace their income little by little until the balance becomes unmanageable. Once that happens, they have to make lifestyle changes to get out from under.

You don't have to be a tightwad to prevent debt overload.

Simple Strategies …

Identify situations in which you lack financial willpower. Take pre-emptive action based on these behavior patterns.

Catalogs:  Fill out order forms for what you want, then put them aside. One week later, allow yourself to send away for whatever you can actually remember, without looking at the forms. You will wind up buying only what is important, or more likely nothing. You won't even remember what you just couldn't live without just one week ago.

Also:  Try to find the items locally to avoid shipping-and-handling costs.

Supermarket impulse buys:  Put any items that are not on your shopping list in the shopping cart's child seat. Before checkout, choose just one item from the child seat. If you find a great bargain, take something off your list to accommodate the good deal.

Long-distance telephone service:  Cancel unrestricted services if you can't control your calls. Use pre-paid phone cards instead. Using a phone card is like using cash, so you tend to be more careful about your phone time. Warehouse discount clubs now sell cards for around four cents per minute. Beware – some sell for 50 cents a minute.

Pay Cash – even for big purchases. It may be inconvenient, but it forces you to prioritize. It's the single best way to eliminate impulsive buying. Cash customers spend 30 percent less on shopping sprees than those who pay with plastic.

If you need extra security, keep a $100 traveler's check in your wallet instead of a credit card. You're less likely to break the traveler's check for an impulse purchase.

Set Up a Monthly Spending Plan …

Log how much you spend each day for one month. Use one index card per day. Put the date at the top and make two columns – "What" and "How Much." Don't cheat or neglect to include "bargains." Include everything you spend.

Create a spending record. Analyze your daily logs, and group expenses into categories – groceries, clothing, entertainment, etc. Most people have about 20 categories. Total the amount in each.

Figure out your income each month – including salary, dividends, interest and other income.

Subtract monthly expenses from income. Most Americans live on about 110 percent of their monthly incomes. You're likely to face debt problems if your expenses exceed 80 percent of your monthly income.

Analyze the logs to identify problem areas. Create new targets so that expenses won't exceed income.

Draw up a new log for the second month with expense goals by category. Again, track all expenses. And again, see if you are spending too much … and identify places to cut back. Repeat this process until you reach your spending goals.

Budget for large expenses. Car brakes wear down over time. But instead of saving regularly for the inevitable brake job, most people seem surprised by the large bill. Everything has a limited life – washing machines and other appliances, the roof on your house, etc. Solution:  Set up a Freedom Account to better prepare for unexpected, irregular or intermittent expenses. Fill a binder with individual pages, and allot one category per page. How it works …

Review your checking account for the past 12 months-to find expenses that did not recur regularly. Most common …