I’ll keep this week’s tip short and to the point: Educate yourself about personal finance.

There are a lot of great books out there. The Simple Dollar reviews a personal finance book every Friday, so that is good place to start, if you are looking for suggestions.

One of our favorites is Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence, by Joe Dominguez and Vicki Robin.

There are also a lot of great personal finance blogs out there, including The Simple Dollar. You can find many others at this week’s Carnival of Personal Finance.

You can read all of the posts in this series in the category Personal Finance.

Most people have a set amount that they pay toward their debts every month. For many people, this is the minimum payment.

If you have decided that you want to get out from under your debt, this system will not get you there – at least, not any time soon.

You need a plan of attack.

First, gather all of your statements for your non-mortgage debts. This includes credit cards, car loans, and any other consumer debt you have.

Make a list of the total balance, minimum monthly payment and interest rate for each. A computer spreadsheet program works well for this.

Next, you need to decide your plan of attack.

What you are going to do is pay the minimum on all of the debts except one. For that one, you will use all of the extra money you can find in your budget to pay down that debt until it is paid off. (This is why the last two posts in this series were about how to save money.)

Once that debt is paid off, you will apply the money you had budgeted for that account to the next debt in your list. And so on, until you are debt free!

The most money-sensible way to approach this is to pay off the account with the largest interest first. This will save you more money in the long run.

But as I have said before, with any sensible money management plan it is important to know yourself!

Sometimes the best thing to do is to pay off the account with the lowest balance first, so you can experience your first victory sooner. That might be the boost you need to keep bringing your own lunch to work and going without your daily latte.

It is a good feeling when you get that loan or credit card statement with a $0 balance on it!

Figure out the strategy that is going to work best for you. After all, this is your personal financial plan and you are the one who has to live with it.

Wikipedia has a great entry on debt-snowballing (the method I just described) with some examples.

You can be debt free!

“And the borrower is servant to the lender.” (from Proverbs 22:7)

Visit the “Personal Finance” category to read all of the posts in this series.

As promised last week, here is a link to another grocery saving tip from All Things Hold Together (my other blog): Saving Money With Coupons

Let’s review where we are.

The first step was to assess your situation by writing down every expense for 30 days.

After a couple of weeks, I encouraged you to start evaluating non-essential recurrent purchases that you could cut back on, or cut out completely, and remember that every dollar counts.

Today, I want to talk about ways you can save money on your food budget.

With food prices rising, this is a growing concern among even those who are not trying to get out of debt.

This is a huge topic, so I want to start with the basics.

First, you need to have a food budget. Many people do not. I never did until last year.

You can start by looking at your 30 day record, if you have one, or your bank statement or checkbook, if you buy groceries using check or debit.

Once you get a feel for what you actually spend, you will be able to keep track of how much you save, stick to your new budget, and use the savings for other things like paying down debt, saving, or applying toward rising costs in another budget area.

There are a lot of ways to save money on groceries. When I started out, I saved $150/month by following three simple tips: plan your menu, shop sales, and stick to your list.

Shopping sales is as simple or complex as you want to make it.

I started out with buying the meat that was on sale that week and planning my meals around that. I also bought extra, so that I would have variety in the following weeks.

Cereals are another heavy hitter. They can cost over $4.00 a box at some stores! Stock up when they are on sale or eat whatever is on sale that week.

You can add as many or as few other items to the list of things that you will only buy on sale. The more you buy only when it is on sale, the more you save.

When sale shopping, it is helpful to know the regular price of the items. Sales are not always a good deal, especially when compared to other stores.

Trent, at The Simple Dollar, has a good tutorial on creating a price book for comparison shopping, if you decide to expand your sale shopping effort.

Menu planning is as simple as writing down what you are going to have for dinner each day of the week.

If you want to see what menu plans look like, the blog Organizing Junkie runs a weekly feature called Menu Plan Monday. It is a collection of links to hundreds of menu plans.

Make a grocery list using the sales fliers and your menu plan as a starting point and stick to the list when you are at the store.

If you can, try to do all of your weekly shopping in one trip.

Shopping once a week (or less) and sticking to a list will dramatically reduce your number of impulse buys, saving you money.

Have you ever gone in the store for “a few things” and ended up spending much more than you planned?

Imagine how much you will save when you eliminate those purchases.

There are many more ways to save money on food, but I wanted to start off with what I think are the easiest to implement – menu planning, shopping with a list, and buying on sale.

Since there are so many other topics I want to cover here, I will post additional grocery saving tips on my mommy blog in the coming weeks and include links in future Friday’s Focus on Financial Health posts.

If your finances are in trouble, it is because a simple equation is out of balance. You are spending more than you can afford. As a result, you are in debt, unable to save or, perhaps, unable to pay all of your bills on time.

To get back into balance, you need to spend less (or make more, but for now, let’s talk about spending less).

I missed last week, since we were under the weather around here, so by now, if you are playing along, you should be two weeks along with writing down everything you spend money on. (That was the tip from two weeks ago.)

If you look at your list, you should start to see some areas stand out as trouble spots.

Here are a couple indicators of potential trouble spots.

One indication is when an area of your budget looms much higher than the rest. This might be unavoidable (ie housing), but it might be indicative of a trouble spot that needs some reining in.

Another indication is a recurrent expense. There are very few mandatory expenses that show up frequently within a 30 record. Most times, these expenditures can be cut back.

I am sure there are more, but that is a good place to start.

You should still continue to log all money spent for a 30 day period, but it is good to start your analysis now. It is never too soon to start making changes.

Here are a couple of common examples.

1. You notice that Starbucks shows up 4 days a week. Do you really need to stop 4 days a week? While you might not be ready to cut it out completely, you can cut back.

2. You notice that you spend money on buying lunch every day. Could you start bringing lunch from home a few times a week, or even every day?

In this process of getting control over your finances, you must stop thinking, it is only a couple of dollars, and start thinking, every dollar counts.

It adds up.

And when it comes to your personal finances, it is a zero-sum game. Every dollar you do not spend is one more dollar you have to save, pay down debt, or invest.

Continue to look at your budget and think about areas where you can make some cuts to your frequent expenses.

Get creative.

Do you spend a lot on video rentals? Consider shopping around for a better deal. Or borrow movies from the local library.

If you need suggestions for a particular spending habit, do an internet search for suggestions, or ask me in the comments or by using the contact form.

Next week, I will take a closer look at a common budget buster, when I present some simple ways to cut your grocery budget by as much as hundreds of dollars per month.

Of course not. No one likes to think that they are really bad at something as important as their personal finances.

But now that you think of it, you do have a lot of debt. And your savings is a little small. And you don’t have much left at the end of your pay period.

Does this sound like you?

Then maybe you do need to take a look at how you handle your finances.

It’s nothing to be ashamed of. There are a lot of Americans in your shoes.

I was one of them, and I want to share what I learned with you.

I already posted a few things on personal finance and you can find them by clicking on the “personal finance” category.

Today, I want to start with step one.

If you have decided to make some changes to your personal financial situation, the first step is to assess the damage.

Write down everything you spend for 30 days. Do a shorter period, if you need to, but 30 days should cover all of your expenses and give you a more complete picture of where your money is going.

Write down everything that you spend. Every penny.

Even when you spend money on things that you know you shouldn’t – especially when you spend money on things you know you shouldn’t.

By the time we meet back here next Friday, you should start to see some of the areas that your spending habits could use some work.

I hope you will be back to join me.

As of five minutes ago, we are officially credit card debt free.  (I love online banking.)

Hallelujah!

And I don’t just mean that in the colloquial sense. The real change in our financial health came from our pursuit of right living, including the following of biblical financial principles.

I don’t like to get all churchy here, but I like to give the credit where credit is due.

That said, here is some secular money advice that anyone can follow.

Once I linked to a post called, To Make Good Financial Decisions, Think Like Mr. Spock but Act Like Captain Kirk.

If you missed it, the gist is, to make good financial decisions, you need to know the numbers (logical, Spock) and know yourself (emotional, Kirk).

As I said in my last Friday’s Finance Tip, once we made the choice to stop using our credit card, it was hard to get ahead and save money.

One way we accomplished this was by using the IRS to help us save, when we were too undisciplined to do it ourselves.

I know that most financial advice says to adjust your withholding so that you are keeping as much of your money as you can, and save or invest it. The government does not pay you interest for holding your money all year. (The Spock: knowing the numbers)

But, I submit, if you are not saving because you are not disciplined with your money, or keep dipping into your savings account, adjusting your withholding so the IRS is taking more money each pay period can be a good way to start that savings. (The Kirk: knowing yourself)

Just make sure you do not go out and blow the money when you get your tax refund.

When we were lousy at saving, had all but maxed out our credit card spending, and needed that large sum once a year for big purchases or paying off debts, this came in handy.

This year, my husband was able to finally adjust his withholding because we keep to our budget, do not use credit, and have a savings. We put the difference in his pay into our savings account.

Even though it is not the best way to use your money (because it does not earn interest), allowing the IRS to keep more of your paycheck is one way to force yourself to start that emergency fund, or save for a big purchase that you would otherwise put on your credit card, when you lack the discipline to save.

Well, I decided that since I’m not qualified to teach elementary school, but I do that anyway, I might as well go for it.

It’s not like I am going to give stocks tips or investment advice. I am just going to share some helpful pointers that we have discovered along our journey to financial health.

This first week, my advice is simple.

Get out your January credit card bill(s).

You should be able to find the total finance charges for last year. Take a good, long look at that number.

Think about all of the things you could do with that money, if you had it right now.

Now, realize that you paid your credit card company that money in interest. You basically gave that money away for the ability to buy something that you could not afford.

Okay, don’t beat yourself up about it.

Resolve now to stop trowing your money away. Resolve now to put away those cards and never use them again.

Bob and I did this two or three years ago when we realized how much we spent on credit card interest. We have not used our card since.

At first it was hard, since we were only using it for car repairs. We had to save money in order to not need the card, but we were still paying on that card. We did not feel like we had the extra money to save for repairs.

It was very difficult to get into good habits and wean ourselves off of our credit dependency, but we stuck to our guns and are better for it.

You will be too.

The Simple Dollar – Financial talk for the rest of us

My Two Dollars – A place to discuss money…for the rest of us

Do you see a common theme here? Both of these blogs discuss money in common, everyday language.

There are lots and lots of personal finance blogs out there, but these are the two that I have in my reader. That does not mean they are the best of the best, but I enjoy them.

The Simple Dollar is my favorite because Trent focuses on frugal living a lot, which I think is crucial to financial health.

You might also want to check out the Carnival of Personal Finance, for a selection of personal finance blog posts, such as this one from the current carnival, “To Make Good Financial Decisions, Think Like Mr. Spock but Act Like Captain Kirk.”

A nod to my sci-fi geek readers.

May 2008 bring you better financial health (or may you bring yourself better financial health in 2008)!

Q. Need Extra Holiday Cash?

A. Skip Your Loan Payment!

Ugh! What horrible advice.

Not for them, of course. They get to collect interest on your higher balance for up to two extra months and charge a $10 fee for each loan payment you skip.

Look, if you need extra holiday cash, pick up a part-time job. Lots of places hire temporary holiday help. As an extra plus, you usually get an employee discount, too, which will help lower your shopping costs.

Better yet, plan your holiday spending in advance and save for it. Open a Christmas account and put away a little bit all year.

Better still, de-emphasize the materialistic culture this Christmas and make some home-made gifts. They cost a lot less and mean a lot more.