Question: What are some things people can do to start the new year on the right financial footing?

Answer: The first and foremost thing is to develop an individual or family spending plan so that you are clear on where your money is going on a weekly and monthly basis. It’s the most simple, basic thing, but it’s more often than not the one that we fail to do. We often just try to get from one paycheck to the next without the benefit of a personal financial road map. Everything else springs from that. If you have a plan, you know what you can afford and what you cannot afford to do with your money. That’s the foundation of being financially sound, no matter what your income level. 

Another important thing to do is to develop a savings safety net, equal to, at minimum, three times the amount of the total of your monthly living expenses and debt obligations. Having adequate reserves is essential to seeing you through hard times.

Q: How can the Christmas shopping season affect family finances?

A: The holidays are hectic, and if you’re a procrastinator, the last-minute buckshot approach to Christmas shopping can absolutely derail your finances. It happens to the best of us, and it circles back again to knowing what your spending plan is. The fact is we see many people who are, a year later, still paying for Christmas past.

Worst than that, it does a disservice to our kids when we fail to keep our budgets in line with realistic expectations. There’s tremendous pressure to fulfill your children’s every wish, with the latest Wii games or iPad Airs, but if you cannot afford to do that, you can wind up getting in over your head, causing stress that definitely affects the entire family. We live what we learn, good or bad, and history repeats itself until we do things differently.

Q: If you are already in debt, what steps can you take to climb your way out?

A: It starts with being aware of everything you owe. Make a list of your debt all in one place. We have a tendency to compartmentalize our thinking. So we think in terms of making the car payment, then the following week the personal loan is due, pay the credit card on Tuesday and so on. We focus on those events singularly instead of seeing the bigger picture. 

Once you have a better handle on your financial landscape, it’s generally a good idea to start going after the highest-interest bearing debt first, as these are eating up a lot of every payment you make. Once again, it comes back to having a solid budget, because then you know what you have to apply to debt and you can set realistic goals to reduce it.

Q: What type of programs are there to help people reduce their debt?

A: There are great online tools out there now that weren’t available a few years ago. There are various websites like mint.com that enable you to track your spending and set goals for paying down debt. If you are at, or over, your limit on credit cards, barely managing to make minimum payments, if money problems wake you up in the middle of the night or there’s friction at home over finances, it would be a good time to seek credit counseling because it could be that you are headed for trouble. Accredited agencies like CCCS are available to help you for low to no fee.