1.  Pay as you go.

Credit cards can really grease the slide that leads to crippling debt.  So limiting their use can be important first step.   The trick to is to pay close attention to what you are really spending.

On trick is to always pay cash with actual hard currency (aka money).  The painful act of  lightening your wallet and handing over the green stuff to someone else will give you pause to think about if your really need to make the purchase.  Some would argue that paying with an ATM or debit card would be just as good.  However, studies show that they don’t involve the same feeling of pain.

2.  Always know what your “Really” paying.

When purchasing an item on credit (credit card, loans, etc.), it’s critical to understand what you are really paying.  For example, if you choose to charge a purchase using your credit card and plan to make minimum payments, run the numbers first.

Example.

• You charge a $500 purchase onto your credit card.
• Your credit card interest rate is 18%
• Your minimum payment is $15 a month

It will take you 47 months to get rid of your debt and you’ll pay $198.34 in interest, which will bring the total cost of that $500 purchase to $698.34 (which means that you are paying  39% of the purchase price in interest).

Here is a handy calculator provided by Bankrate.com to help you figure these calculations for yourself.