Think for a moment and imagine yourself exactly where you want to be financially. If you can, resist the impulse to imagine that you're a Power Ball winner and have more money than you can spend in 10 lifetimes. If you do happen to win the lottery one day that's fantastic, but for the time being keep your feet firmly planted on the ground.

This next part is important. Imagine for a moment that you have accomplished everything on your financial list. Answer this question:

Finally, think for another moment and answer this question. This question is important because it's the first mile marker you're going to see as you take yourself to a better financial life.

A small sign is exactly that—small. Don't be concerned that your sign seems too small. When you start to create one small change, other changes will follow. When there is a positive change in one area, other positive changes will occur somewhere else. So think small, no matter how unimportant it may seem and how far you may feel from your goals.

It really is a good idea to start with small signs. If a sign is too big, the chances are that you will feel overwhelmed. Doctors will tell you that if you want to lose weight and keep it off, the best thing is to lose just one to two pounds a week. Studies show that people who stay to that recommendation keep the weight off. Those who lost a large amount of weight too fast not only gained all their weight back but also put more on. The same thing is true when noticing small signs of change. Those who take small, baby steps to their goal tend to be successful whereas those who take on too much too fast may fail.

Money trouble feels lonely. You're convinced that everyone must be in better financial shape than you. The world seems to be dancing by without a care in the world, but not you. Friends and neighbors renovate their kitchens, take the kids to Disney World, and buy big-screen plasma televisions.

If you think you're adrift on a slab of ice all alone, think again. You are not as alone as you think. We may all have been fooled into believing that everyone is much better off financially than they actually are. According to the Federal Reserve Board, paying down debt accounts for 14.3% of take-home pay, the highest rate since 1986. Wait—there's more. The Mortgage Bankers Association of America states that in the last quarter of 2000, mortgage delinquencies rose to 4.5%—the highest delinquency rate since 1992.

Feeling a little less lonely? You should because many people are struggling just as much as you. Remember, the grass always looks greener on the other side. How many times have you found yourself thinking, “How can they afford that ski vacation every winter?” The truth is that they probably can't afford it any more than you can. Although they may not have the cash to pay for it, they do have something else—credit cards.

How did we ever survive before credit cards? They are so seductively easy. You don't need to worry about carrying cash. You can purchase items even if you only have a dollar left in your checking account. You can deal with that problem when the credit card statement arrives in the mail. The other great aspect of having a credit card is that you can take your time paying down your balance. The credit card company will be more than happy to let you make minimum payments as long as you also pay their 23 percent finance charge along with it.

If you're carrying a large balance on your credit cards you may want to consider consolidating with a lower interest credit card or home equity loan. There are credit card companies that will allow you to merge all of your debt onto one credit card, which is a sensible thing to do if you find yourself paying down credit cards with interest rates at over 14%. Ask yourself what makes more sense—paying a $7,000 balance at 13% interest or 21%? What's worse is if you've been making only the minimum monthly payment on your credit card debt. What typically happens is that you end up paying only the finance charge and never the actual balance. It's like rolling down the window of your car and throwing the money out.

Another way to go if you have a large credit card balance is to apply for a home equity loan. You do, however, have to be a homeowner. Not only will you save money in interest payments but also in federal income taxes, because the home equity interest is tax-deductible.

Here are a few suggestions to help keep your toes away from the credit card flames:

Your credit history begins the moment you obtain approval on your first application. Perhaps it was your first car loan or credit card, or maybe a school loan.

The best way to obtain and keep a good credit rating is to pay back the money you owe on time. When you make late payments or fail to pay something back, the credit card bureau labels you as a credit risk. The fact that you are a risk will rear its head each time you attempt to get a credit card, borrow money, purchase a car, or get a mortgage.

The disturbing thing is that a bad credit rating stays in your credit history for seven years. This can happen if you miss a payment or even if you are just late with a payment.

Your local credit bureau updates your credit report each month by contacting your creditors. Creditors not only include banks and credit cards, but also utilities, landlords, and even hospitals. The bureau collects data on whether or not you pay bills and loans on time, whether or not you miss payments, and your current credit rating with that creditor. The data collected is filed in your credit history and will rear its head each time you apply for something.

What you should be aware of is that credit bureaus do make mistakes. That's why it is a good idea to get a copy of your credit report. Once you get it, review it carefully. If you find a mistake, which is certainly possible, contact the creditor who filed the report to the credit bureau and ask them to have the information corrected.

You can do that by contacting:

It's often not easy to face, but before you can take steps to get out of debt you first must know how much you owe. Taking wild guesses at how much you owe isn't the best plan because some debts, such as credit cards, include late fees and interest charges. The best route is to lay all your debt down in front of you. Know what you owe. Only then can you make steps to dig out.

There are three important points to remember when you are trying to settle your money problems. You need to:

If you have found yourself with unmanageable debt, it is critical to your recovery to know how you got there in the first place. Not everyone lands in debt the same way. While overspending can cause debt, it can also be caused by job loss, illness, or a failed business. And another thing—not all debt is bad. In fact, there is good debt and bad debt.

Bad debt refers to such items as car loans, credit cards, or borrowing money to take vacations. These are things you consume, pay high interest rates on, and will never see again. On the other hand, borrowing money to purchase land or real estate is considered good debt because you can expect a return for your investment. Taking a loan to pay for a college education is also considered good debt.

Use the following worksheet to list all your debts. The worksheet is divided by categories: auto, credit cards, home, miscellaneous, and taxes. The items listed with an asterisk reflect items considered to be bad debt. At the end of this worksheet you will be able to compare your good versus bad debt. Total your debt by category, and then tabulate your grand total.

In this worksheet, we didn't include such routine expenses as current utility bills, food, and entertainment because living expenses are not part of your debt. However, your monthly costs do influence how much money you will have to pay down your debt.

Setting a plan for getting debt under control includes knowing how much of your monthly income or take home pay is needed to pay it down.

Financial experts recommend that you keep bad debt below the 20% level. The higher this percentage, the greater the potential for your debt to grow and get out of control. You could be spreading yourself too thin and finding it harder and harder to keep up with monthly payments.

By now, you may be wondering how in the world did you get in such financial straits. As bad as you may feel, you took an important step by facing the debt and calculating how that amount impacts your salary. Now it's time to start digging.

It might surprise you to learn just how many people live paycheck to paycheck with little or nothing in a savings account. More alarming is how few people are saving for their retirement. Studies indicate that fewer than 20% of “Baby Boomers” are saving enough for their retirement. That means that a whopping 80% are going to be in a world of trouble come retirement.

You don't have to be on that wagon. Starting today you can do something different and begin to get your financial house in order. Sure, it may involve cutting back on your lifestyle, but think of the peace of mind you will have knowing that you are saving your money.

Before we ask you to reach for a pencil again, here are a few savings ideas that may help you:

It's time to write down your financial goals. You may be asking, why should I write them down? I want to save money—period. Remember in the beginning of this chapter when we talked about fuzzy versus clear thinking? Saying that you want to save money is another example of fuzzy thinking. You can't get an active plan in gear with your head full of murky thoughts. Knowing what you want in clear terms sets the stage for success. Writing goals down on paper makes them more real, and things look different on paper. You need to be able to recognize the signs or mile markers that you are moving in the right direction.

Now ask yourself this question:

If you answered with a 9 or 10, that's impressive. But stick around because there is always more to learn. Remember that life has a way of throwing you a curve ball just when you think you have it all together. There are always unexpected babies, job changes, divorce, home renovations, and other events that can affect your financial balance. It's always wise to keep your financial muscles well-toned. If your score was as high as a 9 or 10 then ask yourself this question:

Many of us wouldn't give ourselves a high score when it comes to saving money. In fact, many would score themselves lower than they actually should. What score did you give yourself? A two? Three? Five?

Ask yourself this question:

If you are thinking that there simply couldn't be anything in a score that low, you're wrong. If you didn't give yourself a flat zero it is because in some small ways you are doing a few positive things to save your money. It may feel small or inconsequential but change is built on tiny, baby steps. A step in the right direction is powerful because it takes you closer to your goals.

As we have laid it out here, finances aren't a big mystery. Debt is bad; savings are good. Planning for the future is even better. IRAs and saving for kids' college funds, however, can seem like a pipe dream if you can't get a handle on your spending and debt. It's important, then, to take a look at your emotional budget.

An emotional budget, and in turn balancing it, involves examining your feelings about money. For instance, if you look at a closet full of clothes and think you have “nothing” to wear and then, despite your debt, go out to buy new clothes, there is some emotional component to your spending. If you are tempted to buy a car, a set of golf clubs, or an expensive vacation and put it on credit because you feel like you “have” to have it, this is also an emotional button.

The key to an emotionally balanced budget is to “see it through.” Before you go shopping, before you shop on e-Bay, purchase a vacation, or go out for that ultra-expensive dinner, see it through to the next step—the bill arriving. Ask yourself “Is this a want or a need?” If it is a want, examine where those feelings are coming from. If it is a need, ask yourself if this newly purchased item will solve your debt problems and make you feel better in the long run.

A true sense of balance will come when you have made strides in reducing your debt, saved for the future, and stopped living from paycheck to paycheck, and purchase to purchase.