Personal finances have always been a fundamental part of our lives, with a direct bearing on our sense of well being.  As important as it is to have our financial situation under control, so many of us have not been given proper training.  With our lives being so busy, it can be hard to take the time to learn what we should know to stay on a healthy financial course.

The issue of personal finances is even more acute in the throes of a severe recession.  For those who have lost jobs, we hope that you had a chance to save for bad times.  If not, as is commonly the case, unfortunately, you must make difficult choices about how to cut living costs and generate some extra income to last until better times come– and they will come.

A first step is to summarize your actual monthly expenses– things that are essential and not luxuries.  Rent, utilities, (not cable TV), food (not eating out), basic insurance (don’t drive uninsured), clothes, an allowance for medical costs, etc.  Search online for the best prices in auto insurance, as you might save quite a bit over your existing policy premiums.  you need to realize what the bad news is in your situation, and try to stay within your budget.  That may require more discipline than some people are used to applying to personal finances.

Buying clothes from a thrift store, shopping at the 99 Cent Store (for food too!) are just two easy ways to save quite a bit on basic costs.  Rent a $3.99 video instead to spending $10 each on tickets at the movie theatre.  Selling items on Craig’s List or other similar places can generate a bit of cash.  You might be surprised what you can sell, and every little bit helps improve your personal finances.

If you are driving a nearly new car with high monthly payments that extend for multiple years, consider selling the car.  In some cases you could apply several months of payments to pay cash for an older, but still functional clunker.  This won’t work for everyone, as it assumes you have the cash for the new/old car.  Another option to help improve the personal finances for a 2-car family is to sell the car with the highest monthly payments and get around on public transportation and a single car for the family.

A major piece of the personal finances puzzle is credit card spending.  The interest rate on many cards is over 15%, and sometimes pushing 20%!  The plastic card is very easy to use, because you don’t feel the pain immediately as when you pay cash.  Credit cards have a place, although some experts have suggested we all melt down the cards.  Try to place a limit on credit card purchases that is no greater than what you can afford to repay every month.  One of the best investments you can make is to pay down the credit cards.  Even small payments to reduce the balance each month will add up over time.

By paying down the credit card balance you free up potential credit capacity for use in a true financial catastrophe.  Better to pay off the cards and build a cash savings buffer, but get that card balance down if you want to take concrete steps towards getting your personal finances in order.

If your card balances are quite high (and if you have more than a couple of cards), look into the possibility of consolidating the debt.  That means you obtain a larger loan at a lower interest rate and pay off the high interest rate card balances.  Unfortunately the lending environment is not great for such loans, and they do depend on your having pretty good credit.  You’ll probably want to work with a debt counselor or loan broker; find one through referrals that you can trust.  Watch out for scams where they promise to wipe out your debt; some actions can damage your credit reputation (and thus, your personal finances) for years into the future.

Discuss tips and techniques for saving money with others in your situation.  Find a local group of folks dedicated to being smart about personal finances; your friends or people from your church might want to meet once in awhile to trade ideas.  There are some finance forums online that might be worth participating in as well.  Be open to learn new things and don’t be afraid.  Good times will return.