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Quick, how many credit cards do you have in your wallet?
You say you can’t remember exactly how many.
That’s a sure sign that you might be addicted to credit cards and to debt.
The fact is that America, as a whole has become credit card addicted. According to the most recent statistics, average credit card debt in America is $15,252 per household. Given the fact that this is an average, it's not hard to guess that many people are carrying credit card debts of $10,000 and more. And this doesn't count personal loans, auto loans, student loans or mortgages. In fact, when you add it all up, American consumers owe $11.52 trillion in debts.
If you haven't already created a household budget it’s important that you do so. There are numerous budgeting tools and apps available many of which are free. The one that we like the best is Mint.com. This is a free financial management tool that will track your spending to help you develop a budget and then even send you email alerts if you overspend in any of your categories. Mint is very easy to use, too. All that's required is that you type in the numbers of your savings and checking accounts, credit card accounts, investments, auto loans and so forth. Mint will then display all of your financial information together in one easy-to-read graphic.
Create an emergency fund
Since you will no longer have that magic plastic to fall back on in the event of an emergency, you'll need to create an emergency fund. Most financial experts say that your fund should be the equivalent of at least three months' of living expenses but six months is better. Naturally, you won't be able to create this fund overnight. Your goal should be to save at least 10% of your income each month. Do this and you should be able to build an emergency fund in less than nine months. If you find you have trouble saving money, open a savings account and then arrange to have money automatically taken out of your checking account and deposited into it each payday. You might also want to open a second savings account to cover a one-time expense such as that automobile maintenance bill you know is coming up in a few months. All you'll have to do is set aside a small portion of your paycheck every month and when that expense surfaces, you will be prepared to pay for it without wrecking your budget.