A few years ago, our family lived by being dependent on receiving a weekly paycheck. Both the husband and I maintain great jobs, but we were hardly able to pay the bills. Borrowing from Peter to pay Paul – we would push one bill to lapse its due date to pay another we ‘forgot’ about. We were never able to get ahead. It took me painstaking long years to realize that the debt ridden life was all our own making, due to poor financial habits and choices, and that I was no longer going to stand for it.

Today, things have gotten better, although we are still not in the black yet. We have an emergency fund, paid off several smaller debts and work diligently to pay off the big accounts (like the student and debt consolidation loans), and hope to pay off the Lending Club loan by the beginning of next year. We are on track to be debt free in two years and half years, with a good future in the forecast. We have also increased our contributions for retirement, learned to plan for weekend staycations, and live with a frugal mind. Our finances are much better off today than they were three years ago. It amazes me how far we have progressed and how indulgent becoming debt free feels.

If you are in a state of financial despair, like my family once was, you can climb out of it to become a your own success story. Stop living paycheck to paycheck. Take control of your financial life. I would like to share my thoughts about what has worked for our family, what I know works by having lived through this experience.

To begin, many financial advisers and blogs, typically recommend to start by tracking your spending on a daily basis. It is definitely worthy advice, but not always practical as keeping track of daily spending can be difficult. I advise you to track your expenses, but if you don’t, for whatever reason, do not let that stop you from fixing your finances.

Here is my recommendation, whether or not you track your spending (but you should), at least do the following:

Learn to walk before you run

Set up your accounts. Consider setting up one savings account, a checking account strictly for bill pay, and an account for your variable expenses (like groceries, gas, and entertainment). This method has worked great for my family. You can find about more about my bank account set up, here.

Halt. Stop using your credit cards immediately! Cut them up, or put them in the freezer in a ziploc bag filled with water, effectively freezing your cards. Also stop taking other loans, either from financial companies, banks, or family and friends. Stop getting into more debt!

Save now! Yes, you do have money to save (even if it starts out with a very small amount). The next most important step you can take, in the beginning, is to start a small savings account if you haven’t already. Begin by depositing into it regularly, at least 10 percent of your gross paycheck. If you can’t find the 10 percent then see the next step how. Set up a payroll deduction with your employer’s benefits department to have 10 percent automatically deposited from each paycheck to your savings account. If you don’t see the transfer of money, you don’t feel the pain. A savings account will help you bare the waves of Murphy’s – when an emergency comes up, like your car breaking down, you won’t be thrown back into debt trench or end up broke. You will have some cash to pay for that emergency, and you can use your regular paycheck for regular expenses.

Look at voluntary spending. If you can’t find 10 percent to save per paycheck, then you need to cut some things from your spending. This is where tracking your spending comes in handy, but even if you don’t, you know some of the extras you spend on — coffee, snacks, eating out, shopping for gadgets and clothes, going out – these are just a few of the examples. You don’t need to cut everything out, but if you can cut a few of them, that can add up (pay extra attention to your food budget). Then, take the money you didn’t spend on those voluntary spending items and add that amount into your savings each payday.

Start a debt snowball to get out of debt. Yes, there is debt tsunami and the the cash cascade, but those are for seasoned debt free adventurers. If you have not tried a debt snowball, it is easy. List out your debts and arrange them in order from smallest balance at the top to the largest at the bottom. Then focus on the smallest balance first, putting as much as you can into it, even if it’s just $20 extra. When the amount is paid off, celebrate (frugally)! Then take that total amount you were paying (say $30 minimum payment plus the $20 extra for a total of $50) and add that to the minimum payment on the next largest debt. Continue this process, with your extra amount snowballing as you go along, until you pay off all your debt. This could take several years (will be 6 1/2 years for us to be debt free), but it is very rewarding. By focusing on the smaller debts first keeps you motivated on your debt free journey.

Walk a steady pace

After taking those first steps, it’s time to pick up the pace. Time to start on these steps:

Start a budget (b-u-d-g-e-t). Yup, I said it. I know the word stinks like Limburger cheese. But it doesn’t need to be hard, and if you set it up right, it’s fairly simple. Here is a great link to learn about setting up your first budget.

Use the bill pay feature for your bills. As much as possible, set up your bills to be automatically paid through your bank’s bill pay feature. For those that can’t, use your bank’s online check system to make regular automatic payments. Like many of the bank’s commercials, using bill pay really can take only five minutes of your time. Now, I log on once a month to my bill pay account, set up the payments, and hit submit. Five minutes normally, ten minutes tops.

Save for your irregular expenses. Personal finance author Mary Hunt calls it a Freedom Account, it is the key to ensuring that you have smooth finances and that you stick to your budget is to take into account all your irregular expenses, such as insurance, car maintenance or repairs, gifts (think Christmas!), medical and other such things. List them out, estimate your annual spending, and begin saving for them each month. Our family saves an extra $1,000/year for increased summer camp costs. So, we put away $38/paycheck and the summer is stress free. Some banks will allow you to set up sub-accounts within your saving account for each expense and then use a spreadsheet to keep track of each. Again, this way your regular budget is used just for that, regular expenses. The Freedom Account is for the irregular expenses (just remember stress free).

Set up personal finance goals, start planning for them. When do you want to retire? How often do you want to travel? When do you want to buy that dream house? Do you want to save for your kids’ college education? Think about what you want in life, and start planning to save for them, especially once you’ve done all the above. It took our family a long time to be able to implement this step, but it did come forth. First we started with small goals like planning to pay cash for our annual camping trip. Then we were able to plan for our family’s first big vacation to Maui (the awesome memories will last a lifetime for us).

Once you’ve gotten beyond these steps, you should be past the dependency of living paycheck-to-paycheck. Now, personal finance options like investing your money for your goals become available to you. But getting past these first stages is important.

(photo credit: Glamour.com)