The best way to avoid financial catastrophe is to eliminate debt and spend within your means. Debt elimination may mean downsizing or getting rid of some things. Take a hard look around you.

Then take this quick financial self-assessment:

• Do you have one or more expensive cars with high payments each month?
• Are you living in a house that is really more expensive than you can afford?
• Are you eating out frequently?
• Do you have expensive cell phone plans for everyone in the family?
• Is your cable TV plan loaded up with premium movie channels?
• Do you carry credit cards that you use indiscriminately?

The first question to ask is: Are any of these things a matter of life and death?

Certainly we all need to eat and we all need basic shelter and transportation, but almost all of us fall into the trap of rationalizing the purchase of items that far exceed the requirement of satisfying the basic need.

The second question to ask is: How can I get out from under these excessive or unnecessary expenses and right size my financial obligations?

The answer in some cases may be surprisingly simple.

• Cancel the cable.
• Stop eating out.
• Eliminate or cut back on your cell phone plans.
• Cut up your credit cards.

The answer in other cases may require more work. Like most people you have probably taken on debt and other financial obligations that are not easy to get out of.  You may have to work harder to eliminate some of these other things from your life.

Put your house up for sale and move into a less expensive one. In the current economy this may be more difficult than you would like it to be, but it is often doable. If you owe more than the house is worth then you may need to visit with your bank about accepting a short sale offer. Make sure that your agreement is one that doesn’t put you on the hook for any deficit in the future. Many banks are willing to accept short sale prices (an amount less than what is owed) and call it good. Others may accept the price but want you to be obligated to the difference. This is not a good outcome for you. Be careful to ask about this.  Either way, you will want to get out from under the burden of financial debt associated with our extravagant and excessive house payment.  Some creditors will also allow you to restructure your loan and make interest only payments or otherwise reduce your monthly outgo, at least for a time while you are trying to sell the house.

Put your cars up for sale. Again, you may find that you owe more than they are worth. It may mean another trip to the bank to explain your situation and ask them to work with you. They may restructure your loan or allow you to turn the car back in.  The key is to get rid of these enormous financial burdens and then replace them with something sensible. Maybe a smaller, reliable, used car that gets good gas mileage and doesn’t come with a huge payment. If you can pay cash for a used car that would be the best possible thing.

Just get out there and do it. Gaining control of your financial future starts with making ONE good financial decision – no matter how small. You will be surprised at how much better you feel just by calling the cable company and cancelling the cable. It may not mean that much to your bottom line but it is the start of a new financial path that will lead to financial peace of mind and an ability to live within your means into the future.