I know it will sound incredible. How does this work? But, it does. It stops the debt cycle once and for all.

1. Save for emergencies and retirement.

Retirement comes upon all of us way too quickly. We can never afford not to save for retirement. Were we saving too much? That might need to be scaled back, but in a total perspective of our spending habits. I have done a couple of calculations on retirement calculators. According to what legislators say, if there is NO Social Security, which is looming over us all, I must have $800K in the bank to keep my present life style. Currently my lifestyle costs me $25K a year. I'm not even thinking about inflation. To have enough in savings to use my savings, use the interest to live on, I must have that $800K. Scary no? So can I afford to stop preparing for retirement? A resounding NO. I must find smarter ways to save, but not stop my saving.

2. Take care of necessities first. Pay manageable consistent amounts on debts, what you can afford.

I pay the same amount on my debts every month, unless I get a windfall. Yes, that's right I spend the same amount. I started out with 43 separate accounts. I now have 25 accounts. I've paid off 18 and I did that without doubling up in the traditional manner. In fact, I paid less than the minimum payment to my creditors. Of course, to do this I had to give up the idea of a credit rating. But, credit is NOT a necessity of life. That is, unsecured credit. Still, my credit will end up smelling like a rose, and I won't use that rating. My method takes a long time. It will take five more years, but when I'm done, I'll have savings, retirement, insurance, and no debts. My life will be not full of deprivation, and I probably won't get into debt again.

So what is the answer. First, find out what you spend by tracking your expenses for a couple months. Make a spending plan. (Not a budget). Tracking all the things you realistically need to spend on each month to keep your sanity and charity toward the human race. The first need we all have are Food, Shelter, and Clothing. Do we all wonder why we spend so much money on clothing? Well, it's a natural survival instinct. A little blown out of hand by the advertisements thrown at us every day, but it is natural. So the first thing I write down is my Food expenses, ($310) a month, $10 a day. That includes groceries and going out to eat. Just me. I've been tracking for months and when I go under that I go into deprivation. Shelter. I'm lucky. I live in Silicon Valley and I spend only 1K a month for my rent. Clothing. I'm lucky that I work at a semi-relaxed place. But, if you look in our parking lot it is full of Jaguars, Mercedes, Volvos, brand new Saturns, etc. You get the picture. So, my clothes can be casual, but must be good quality. At home, I wear other things. At work, I wear decent clothing. So my clothing budget is $75 a month for clothes, $15 a month for shoes. You get the picture? There many more categories, include them all: Pets, Health care, Utilities, entertainment (you heard me, entertainment). Then after you have completed this, what is left goes to debt retirement.

1. Food
2. Shelter, rent, and basic utilities
3. Clothing (upkeep)
4. Transportation
5. Telephone
6. Federal Government, student loans, IRS
7. Other bills (gift giving (charities, your church), paying your bills such as cable, etc.).
8. Creditors, good faith with a letter

In my case that meant $5 a month on each bill, a total of $215 a month. Impossible you say. Well, I did that. I paid $5 a month on each bill without fail. And the key to this is that when I paid off the lowest debt. I took that $5 I had been paying on the 1st debt and paid it on the second debt which paid that debt off faster.

When I get a windfall, I apply the 1/3, 1/3, 1/3 rule. I put 1/3 to the past (old debts), 1/3 to the present (present needs), and 1/3 to the future. I divide that amount equally between retirement, and a contingency fund.

3. Take advantage of your taxes

That money I apply the 1/3,1/3, 1/3 rule. The 1/3 I pay to my debt, I divide equally among all my debts and all of them get a little bonus that month. This is a great opportunity to pay a little extra on my debts, get a treat, and to add a little to savings for the future.

4. Cut up your credit cards and don't go card surfing for a better rate.

My answer here is forget the card surfing, cut up your credit cards, and send them back. If you really think you need a credit card, get a secured credit card backed by money in the bank. Then, your money is collecting interest, and you have that credit card for car rental, hotels, etc. But I have managed to rent cars, hotels, and many other things without a credit card for the last 4 years. I don't even have a checking account. I use strictly cash and have a savings account that I have my paycheck deposited into. I remove enough money for living expenses each month and every so often transfer the balance except for $50 into money market funds. I never bounce a check, and I always know my balance.

5. Never borrow money without a real security backing it up.

Boy that's rich, borrow money. Your parents or your brothers deserve value for their money just like anyone else. Why should they, the people you love, lose interest while they lend you money, while you send the money to the creditors, who they don't know from Adam. More debt never solves debt, no matter how one looks at this. Gifts are another story. If your relatives want to give you a gift, then that's great. Say thank you and divide that money 1/3 to the past, 1/3 to the present, and 1/3 to the future.

6. Make plans for the future.

Instead of concentrating on the past which is dead and gone, concentrate on the future. Think about the things you want for yourself, and write them down. Do you want to go on a vacation? Would you like a new car? Would you like to give more to your church? Whatever your priorities, come up with a plan, and then start saving for your goal, no matter how small. Even, if it's $1 a week, that's one more dollar you have saved than you have before. Those little $1 will build to tens of dollars, then hundreds before you know it. One person I know puts a car payment in the savings account every month, so they can purchase a new car. I, personally want to have paid vacations each year, so my goal is $200 a month, which includes money toward my contingency fund. Have fun thinking about the future.

7.Reward yourself and buy yourself the some of the fun things of life.

Reward yourself, yes. Include that in your spending plan. That's right, include mad money. Money to buy the crazy things in life. I put $30 a month into mine, and every couple months, I do something fun just for me.

Always make sure you have allotted enough money for the basics, before your creditors. Whatever amount you send to your creditors. Be consistent!! Send it on the same day every month, and always include a letter announcing your intentions to keep sending payments each month and ask for interest waiver. When you pay the lowest amount off, add that amount to the payment for the next bill, and before you know it, you will have paid most of your creditors off, and will be down to just a few bills.

With my plan, I'll still be saving and building after my debts are paid, I won't have to relearn how to handle money. I'll have ten years of handling money in a responsible way. I also won't be desperate to go on a spending spree, or applying for a charge account the minute things are straightenedout.

Thanks for listening.