Tips for Paying Off Debt, Finding Cash for Savings

Juy 11, 2006 — -- Thank you for your interest in the "World News Tonight" spending series. Here is a selection of your questions on savings and debt that Olivia Mellan, author of "Overcoming Overspending: A Winning Plan for Spenders and their Partner," has answered.

Question: The art of budgeting, which we used to call balancing a checkbook, is undervalued when calculating one's financial security. Do you have any tips or hints that might make handling daily finances easier on the brain or more efficient time-wise? -- Jeremy Winter in Austin, Texas

Answer:I recommend you keep a spending diary (a small notebook) on hand with you and record all your expenses in there. Even better, leave space to write small notes about how you feel about what you're spending -- it will help you make good, conscious choices. Then, perhaps once a week or nightly (whatever works for you), put the expenditures in categories. If you have Quicken on your computer, that can help you put things in categories and track what you're spending.

After two or three months of this, you're ready to make a realistic budget (or spending and savings plan). Judy Lawrence's budget books are useful tools if you want a written source of how to make a good budget. Good luck!

Question: I'm a newlywed, and my husband and I did not discuss, in full detail, the debt we were bringing into the marriage. Now, a mere seven months into the marriage, I feel we're spiraling out of control. We're spending but not saving outside of our respective 401ks. The "small balance" on the credit card became a not-so-small balance after the wedding, and I've since leased a new $36K car. How can we dig ourselves out of this hole, pay the bills and save all at the same time? -- Danielle, Basking Ridge, N.J.

Answer: Choosing to save on weddings and car leasings is a good idea, but it's too late for that. The only way to dig yourself out of this hole is to pare way back and choose a less- lavish lifestyle for a while. Bringing lunch to work, taking very simple vacations, you name it. If either or both of you tend to overspend (I'm a recovering overspender myself), Mary Hunt's books, and her publication, the Cheapskate Monthly, is a good source for becoming more frugal. She used to be $100,000 in debt, and in getting out of the hole, she changed her life. Good luck!