Delete post-holiday debt

January is a month that's filled with the promise of a fresh start to a new year. Resolutions haven't been broken and calendars have yet to be filled, but if the same unpaid bills are piling up on the counter, you may need some help to free yourself from debt.

If you're drowning in red ink, don't head to the mall for a pick-me-up pair of leather pumps, even if they are on sale. "It's not time to pretend your debt is not real," says Laurie Campbell, executive director of Credit Canada, a nonprofit debt counselling organization. "Instead," Campbell advises, "look at this as an opportunity." It's your chance to take control of your finances and get the bill collectors off your back. Here's how:

Step 1: Look for warning signs
There are many signs that point out impending financial trouble, says Campbell. Some of them include:
• Only making minimum payments on your credit card
• Using your credit card for everyday expenses, or borrowing from one card to pay off another
• Feeling stressed about your finances
• Accumulating more debt than savings, month after month
Any of these signs can mean it's time to re-evaluate your finances, says Campbell.

Step 2: Collect your information
"Gather all of your bills from the last three months into one place," says Brad Desaulniers, president and CEO of the National Credit Counsellors of Canada. By physically grouping your bills, you can evaluate where your money is going, and assess how much you need to keep up with your financial obligations, Desaulniers explains. "You've got to do a situation analysis, figure out where you're at right now, and be ready to talk about that," he says.

Often, however, people are not aware of where their money is going, says Campbell. She suggests keeping a record of how every dollar is spent for one month -- count everything, from your morning coffee to your 3 p.m. snack. Then, when you set out to correct your financial ways, you'll have a clear picture of your spending habits.

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Step 3: Put pen to paper
Once everything relating to your finances has been corralled into one room of the house, a self-evaluation needs to be done, says Campbell. "Find a time when you've got space, the kids are relaxed and, if you are a couple, ensure that your partner is with you so they're able to give their input on what you're trying to accomplish," she says.

When investigating your finances, both Campbell and Desaulniers suggest listing all debt, monthly expenses and any other financial obligations. Then, record your net income and determine if your incoming earnings are able to keep up with your outgoing expenses.

Step 4: Make a spending plan
The term "budget" is as appealing to many consumers as the term "diet," says Campbell. "It's not a diet -- it's not about limiting yourself," she says. "It's about making choices that you are comfortable -- and you can live -- with."

Create a financial goal that you hope to achieve. This can be getting out of debt in two years, building a nest egg or starting an education plan for the kids.

Once you've established your goal, in order for your budget to be one that works, it needs to be two things -- realistic and specific. If your budget does not meet all your financial obligations, as well as allow for a little "wiggle room" in case of unforeseen circumstances, it likely won't work, says Desaulniers.

This is the time to look at what you're spending and decide what you can live without. Making these changes might not be as painful as you think, says Campbell. Something as simple as bringing a bagged lunch two or three times a week could end up saving you as much as $1,400 a year.

Step 5: Implement and update
Once your budget is in place, it's important to revisit it on a regular basis so it remains effective. "Modify your budget as you find your needs and habits change," says Desaulniers. Campbell adds that continually updating your budget will also ensure you're checking to see if you've stuck to your plan or not.

The bottom line to financial worries is that a little effort on a regular basis can go a long way, says Desaulniers. "Most people in this country are scared about money," he says. "But if you just take 15 to 20 minutes, twice a month to do your budgeting, it's amazing how empowering that is and how freeing that is. It's an incredible sensation, to actually be in control of your money."

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