by Ophelia Keith

Created on: January 20, 2009   Last Updated: January 22, 2009

In these tough economic times getting control of your personal finances may seem like an impossible task, but it's more important than ever to get your financial house in order. Following a few simple steps may mean the difference between surviving a recession with your life intact or seeing everything you've worked for slip away.

Credit Cards.

Stop using credit cards. Don't shut them down, just stop using them. Your FICO score is improved by maintaining higher limit cards with low balances, particularly if you've had the card a long time. Next, contact your credit card companies and try to negotiate a lower rate. This works more often than you think, especially in a tricky economy. Start paying as much as you can comfortably afford, without impacting your ability to save, beginning with the card that has the highest rate. Once that is paid off you can take all of the money you were paying towards that card and add it onto the payments to the card with the next highest rate and so on. As you put some distance between your credit limits and the amount of credit you use, your credit rating will begin to rise, which translates to lower interest rates. If your credit card issuers wouldn't work with you before, they might be more flexible once you demonstrate your ability to handle credit responsibly.

Budget

It may sound obvious, but you have to get an accurate picture of how much money you bring and how much you send out and the only way to do that is by creating a budget. There are plenty of free budget planning software programs on the Internet. Make sure your expenses include everything from how much you spend on Christmas/birthday presents and dining out to how much goes towards toiletries. Once it's all laid out, you'll be surprised at where your money goes.

Savings

Save. It seems simple but in an era where Americans save virtually nothing and have used the equity in their houses like ATM's for nearly a decade, getting money in the bank and leaving it there is something of a lost art. Set up a savings account that pays reasonable interest and is not attached to your checking, preferably one that requires you to make withdrawals in person (view only online accounts, no debit card). If your company offers direct deposit, have part of your check deposited directly into savings every pay period. You'll have a better idea at how much to put aside every pay day once your budget is complete, but a general rule of thumb is to have six to eight months worth of living expenses

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