Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

Climbing out of debt: A two-year plan

Dear Dollar Diva,

Every month I cringe, quiver and loathe the credit card bills that come in. I've decided against taking out a second mortgage to pay off the debts. My wife deals in foreclosures, so I know what can happen when you start tapping into your home equity. I've also decided against breaking into my 401(k) plan because the taxes and penalties would eat up too much of the proceeds. What do I do?

Sergio

Dear Sergio,

First, thank God your wife's work in foreclosures has encouraged you to keep your paws off the equity in your home. It's not a good idea to finance credit card debt with a second mortgage. Then, stop cringing and quivering, and start taking charge of the situation.

How did you get where you are?

How did your financial life get so fouled up? Have you been frittering away your money on lottery tickets, recreational shopping, a time share or other nonessentials? If you want something but don't have the cash, do you save up for it or do you charge it?

Maybe you forgot to save money when the good times were rolling, and had nothing to fall back on when times got lean. You made some bad choices in the past; that trend needs to be reversed.

Setting goals

You can't change the present or the past, but you can set some goals for the future. Let's set a two-year deadline to get out of debt. Here's how to get started:

• Get mad as hell at the sleazy, predatory tactics employed by credit card companies. Protest by cutting up your plastic cards, and using cash for all future purchases. No exceptions; not Christmas, Kwanzaa, birthdays, vacations or anything. Use the money you save on interest to pay down the debt.
• Know what you're dealing with. Make a schedule of all your debts, recording the balance due, interest rate, and minimum payment on each. The Diva's "How to create a credit card payment schedule" will help you construct a payment schedule to meet your goals.
• Make a schedule of how much is coming in, and how much is going out. Detail your expense categories so you know exactly where your money is going. The Diva's  "How to create a budget" has a sample schedule of monthly expenses to get you started.
• Make a schedule of what you own and what you owe. The difference is what you're worth. Review this number every month.
• Hold a family brainstorming session. The family is navigating in stormy seas and everyone has to pull together to turn the ship around.
• Bring more money into the household. Find a better-paying job. Moonlight. Sell stuff you don't need. Take in a boarder. Get rid of that second car. Cancel subscriptions for publications you don't read.
• Spend less. Shop with a list; swear off impulse purchases; cook and freeze a month's worth of meals at a time; read Bankrate's "Money Makeovers" for other money-saving ideas.
• Examine every bill. Challenge your real estate tax bill; ask your credit card company to reduce the interest rate; shop around for cheaper car insurance.
• Go on a weight reduction program. You'll save money on food, and get a mental boost from your exercise program.
• Make increasing your net worth an avocation. Keep a log of money-saving ideas as you accumulate them.

If your situation is so dire that you simply cannot dig yourself out without help, read the Diva's "How can I work with my creditors to get the bills paid off" for information on Consumer Credit Counseling Services and links to stories on filing for bankruptcy.

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.