Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

Get a grip on your finances

Dear Dollar Diva,
I am a 29-year-old college graduate who now realizes that student loans and credit card debt do not mix. My wife and I are systematically paying off credit cards with small balances and using the money we save for payments on bigger credit cards. This leaves little if any money to pay my $48,000 in student loans.

I had bad credit when I was in school in 1991, and I have tried to do my best to keep my credit in good standing since then. But I feel I am losing my grip on my finances. Would the risk of a negative credit report caused by using a nonprofit credit counseling service outweigh the risk of trying to pay things off myself and maybe be late with a payment here or there?

Using a credit counselor is better than having entries of missed and late payments on your credit report. However, it's sort of like a choice between a kick in the head and a left to the jaw.

Matt Reading, certified financial planner and chief investment officer at Austin Asset Management Company in Texas, says you can probably hold off the negative entries on your credit report -- at least in the short term -- if you contact your creditor as soon as you have a problem meeting your obligation. Creditors care more about getting your payment than about putting negative entries on your credit report. And your real focus needs to be on getting back on track.

The Dollar Diva offers some suggestions to get you started:

Credit Cards

• Stop using them immediately. This is not negotiable.

• Pay the credit cards with the highest interest rates off first, regardless of the balance. It's the killer interest rates that make the debt burden stretch into eternity. (OK -- if you need the psychological lift that closure brings, the Diva gives you permission to pay off one or two small ones, even if the interest rates are a bit lower than the big ones.)

• Go on a quest to get the interest rates lowered and the annual fees lowered or removed. Call your credit card companies and see if you can negotiate a better deal. If they don't want to play, consider finding new companies. Shop around for credit cards with lower interest rates and annual fees than the ones you now have. Beware of short term low interest rates that will go up in six months or so -- that's not what we're looking for. Our sister Web site, Bankrate.com, will help you find credit card companies and current rates. Call your creditors, and ask them to match what you've found. Talk to the supervisor. If they won't match the lower rates available to you, transfer your balances. Cut up the credit cards, and officially close the accounts of the cards that have been transferred.

Student Loans

If you've missed any payments, have you contacted the lenders to explain why? Have you tried getting your payments reduced or deferred? If you haven't, do so as quickly as possible. Different options are available for different student loans -- ask them to explain all of the options available to you. The government will work with you to get these loans paid off, but you actively have to go after the help.

Increase Income

Here are some suggestions. If you think about it hard enough, you'll figure out ways that will work for you:

• Ask for a raise

• Find a second job

• Teach a class at night

• Tutor kids in a subject you know

• Take in a boarder

Lower expenses

Remember, this is not forever. You deserve your share of the goodies the world has to offer when you can afford them. You just can't afford them right now.

• Lay out your monthly bills. Do you really need those cell phones or that cable TV? Could you drive a cheaper car or pay less for maintenance and insurance?

• Do not buy another garment, piece of jewelry, accessory or electronic toy until you have paid for the ones you already have.

• Do no recreational shopping until all credit cards are paid off.

• List the things you do to amuse/entertain/feed/care for yourself. Come up with a less expensive alternative for each item. For example:

• Jog or walk vs. health club membership

• Mr. Coffee vs. café au lait

• Emery board and bottle of nail polish vs. a nail salon

• Banana and apple vs. a smoothie

• A color and cut every five weeks vs. once a month

• Day trips to explore your neighborhood/city/state vs. recreational shopping

• Picnic in the park vs. expensive restaurant

• Concerts in the park vs. the Philharmonic downtown

• Snorkle vs. dive

• A book vs. cable TV

Start an Emergency Cash Fund

Emergencies happen, and when there's no cash to pay for them, the hole gets deeper and deeper. You need to open a bank or money market account for emergencies. Make the minimum deposit allowed and with the money you're saving from the above efforts, make regular, monthly deposits for emergencies.

There's a saying, "too soon old, too late smart." You're very lucky you got so smart so soon. Make financial freedom your top priority, and your debt situation can be brought under control in a couple of years. After that it's all down hill.

DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.