Dont incur new debt.

Ok, so you want to be debt free. The first step is not to incur any new debt.

Well, thats easy to say, but how do you do it? Emergencies come up, and you dont have the cash to pay for them. So you have to put it on your credit card, getting deeper into debt.

This is a vicious cycle that you need to get out of. The deeper you get into debt, the deeper the hole that you are digging for yourself. You have to stop charging things. So what do you do about emergencies?

Build up a cash reserve - the first step to ending the debt cycle.

You need to build up a reserve of money for emergencies. If you dont have a savings account already, open one now. If for some reason that is not possible, you will have to find a place to stash your emergency cash, where you will not see it too much or be tempted to spend it.

How much should you have in this reserve? Experts say you should have between 3 and 6 months worth of expenses saved up. That is, however much it would take for you to live on for that amount of time, if you had no money coming in.

For most people, this is too much pressure to put yourself under if you are just starting a reserve. Instead, just shoot for $1,000 at first. Or even $500. This should be enough to cover minor emergencies that come up, even if it is not enough to live on for 3-6 months. At least, its a lot better than nothing.

Getting the money for your reserve.

So where are you going to come up with the money to put in the emergency reserve? I will cover that in another article, but for now, here are some ideas. Sell something. Take on a second job (part-time). Cut back on something.