At some point in our lives, most of us have borrowed too much. If you're in over your head, don't despair. But make no mistake: You must learn to live on what you earn.

First, stop making excuses about why you're in debt. Don't blame the credit card companies or your parents. Put that energy into reducing your debt.

Debt can be extremely stressful, so tell someone you're in financial trouble. If you can't talk to a family member or friend, contact an organization that deals with debt reduction.

Then get a handle on how big your problem is. You can start with a free debt analysis, or you can sit down with pen and paper. When you have no idea how much you owe, simply establishing a number is a critical first step.

Don't avoid the B-word

The best way to start reducing debt is to set up a budget. It's not a punishment; it's a way of knowing exactly where your money goes. You'll need to add up your income and subtract your expenses, then set up a plan. 

Don't lie to yourself. Be honest about your spending habits and you'll end up with a more realistic budget.

• Budget more than the minimum on credit card payments. Paying the minimum is better than nothing, but you wind up paying a lot more in interest as you chip away at the balances.

• Start an emergency fund -- a savings account that should grow to at least three months of expenses. Even $10 a week can help if it means you don't have to visit a payday lender two months from now. Without an emergency fund, unexpected costs or loss of income can drive you deeper into debt.

What's your plan?

Use your budget to help you plan your debt-reduction strategy. List all of your debts, from the highest interest rate to the lowest. Aggressively pay down the highest-rate balances while making on-time minimum payments on the others. Your budget will dictate how much you can devote to paying down your balances each month.

In addition, consider these tips:

• If you have the money in savings, pay off what you can. The amount of savings income you get is usually dwarfed by interest rates you pay on your debts.

• Use any extra cash -- bonuses, extra paychecks, lottery winnings -- to pay down debts.

• Volunteer to work overtime, or get a second job.

If you can't earn more money, you'll need to spend less. Try these tips:

• Eat at home when possible. Avoid buying lattes and fast food. 

• Go cash-only. After the bills are paid, allot yourself a certain amount of cash for gas, groceries, etc. When the cash is gone, the fun is done. 

• Forgo premium cable-TV channels and high-speed Internet service. Your public library typically not only offers free Wi-Fi but computer access as well.

Face up to your credit cards

Once you're out of debt, how can you stay that way? Of course, stick to your budget. In addition, figure out how to deal with credit cards, which likely got you into this mess in the first place.

• Stop charging right now. 

• Cut up all but one of your cards, the one with the lowest interest rate. Use that card only for emergencies. 

• If you continue to use your credit cards, pay in full every month and avoid interest charges altogether.

• Pull your credit reports once a year and check them for errors. (Free Credit Report)

• Call your creditors and ask for lower rates.

• Don't use retail-store credit cards for the discounts. Chances are that card carries a high interest rate that you'll have to deal with if you don't pay off your balance each month.

When the collectors are knocking

If you've gotten in so deep that debt collectors are at the door, know your rights:

• Debt collectors may not harass, oppress or abuse you or any third party they contact. (See "What Can a Det Collector Do and Not Do?")

• They may not falsely imply that they are government representatives or that you have committed a crime.

• They may not tell you that you will be arrested if you do not pay your debts.

Whatever you do, don't give up. You didn't get into debt overnight, and you won't get out that quickly. Getting out of debt takes time and patience, but it pays big dividends down the road.

photo by: paalia

Sometimes the only way to stop a snowballing problem is to go back to the top of the hill and find out what started it.

If you're up to your eyeballs in credit card debt, take a step back and recount your money missteps. Knowing your weaknesses could help prevent you from falling back into the bad-credit pit and show you a way out.

Bad Habit #1: Misusing balance transfers

Transferring balances on high-interest cards to lower-rate cards can be an effective technique, but it's easy to make it a good idea gone wrong. Transfer a balance onto a card with a low introductory rate and you can potentially save money on interest if you refrain from charging on it and focus on paying off the balance before that introductory rate expires. But most people continue to charge on the new card and wind up with more debt once the teaser rate expires. In fact, new purchases may have an altogether different interest rate. Read the fine print very carefully, and attempt the balance-transfer maneuver only if you can control your spending on the new -- and old -- card. 

Try this: If you can't refrain from charging, balance transfers won't get you out of debt. If you're really in the hole, consider getting a part-time job and dedicating your earnings to your debt load. If that's not possible, go back to your budget and cut back on unnecessary expenses such as restaurant outings and cell phone extras. Put the money you save toward paying off your balances. Pay for any new purchases with cash or a debit card.

Bad Habit #2: Not checking credit reports because you can't change them anyway.

If you have credit cards, pull your credit report at least once a year and check it for errors. Purging your record of inaccuracies can be crucial for getting better interest rates, landing the job you desire and stopping an identity thief from ruining your credit rating. The scores on your credit report also determine how high your interest rates will be on future loans. Dispute anything you think should not be there. The Fair Credit Reporting Act allows for the correction or deletion of inaccurate, outdated or unverifiable information, provided that a reinvestigation into the disputed data sides in your favor.

Try this: You can request one free copy from each of the big three credit reporting bureaus every year. If you do find a mistake, send a correction letter to each of the credit bureaus that show the error. All three allow you to dispute errors online.

Bad Habit #3: Thinking of 'budget' as a dirty word

Everyone can benefit from deciding on certain amounts for spending -- and sticking to the amount. It also makes sense to budget for known future expenses, such as quarterly insurance premiums, college textbooks and rent. Not saving up in advance means you'll have to charge expenses or cut into funds set aside for necessities. 

Try this: To find out what's draining your finances, keep track of where your money goes for a month. Use this free budget spreadsheet to categorize your expenses. This will reveal whether you're spending too much on expenses you could trim, such as restaurant outings and gas. Cut back as necessary without cutting out expenses important to you.

Plan for future costs by figuring out the total amount you'll owe and divide by the number of months you have until that day. If you have money due next month, divide by the number of weeks you have and save that amount every week. 

Bad Habit #4: Using retail store credit cards to make use of discounts

Chances are, that card carries a high interest rate you'll be forced to deal with if you don't pay off your balance each month.

Try this: If you must charge your purchase, use your general-purpose credit card. If you can't pay off the balance, at least you'll pay a lower interest rate. Limit the total number of credit cards you have to just two, if you can: one you can pay off each month and one with a low interest rate for those large purchases you'll pay back over time.

Bad Habit #5: Making the minimum payment only

Paying the minimum is better than paying nothing, but it doesn't do much to pay off most balances and forces you to keep paying interest. By paying interest on interest, you lose any savings you may have recieved from buying something on sale.

Try this: If you can afford to pay more or in full, go ahead and pay as much of the balance as you can. You never know when you're going to have a tough month. Pay in full every month and you can avoid interest charges altogether.

Or, if paying more than the minimum proves difficult, consider enrolling in a Debt Consolidation Program.  These programs can lower your minimum payments, reduce your interest and put you on a level payment plan that will have you debt free in 3-5 years or less!