(Article by Elizabeth Kountze from Kiplinger Magazine, January 2005)

Our reporter gets off on the right foot

When I began my first full-time job as a reporter with Kiplinger's a year ago, I applied for my first credit card. There was no doubt in my mind that I would pay it off in full every month.

But in my first year of fending for myself financially, I didn't live up to my good intentions. By the last week of each month, my checking account was empty. With no savings aside from the $80 I put every month into a 401(k) account, I used the credit card to get by until the next paycheck. One year later, my balance was $2,280.

I've never liked budgets, and the idea of balancing my checkbook induces an anxiety attack. Although I'm no shopaholic, I love a great pair of heels. And I can always justify hopping on a plane to visit friends.

But it was clear from my credit-card bill that I had to learn how to live within my means. At first, I couldn't even face working it out on paper. I simply set a goal of slashing my balance by $1,000 in two months, and limited my weekly spending to $25. But it soon became clear that the "cold turkey" approach was unreasonable. I was putting so much toward the credit card that my spending limit was too strict. I was coming up short -- and resorting to the card again.

I finally decided to try Family Financial Network's Quick and Easy Budget Kit because it seemed manageable. It still took three painful hours to break down my expenses and track my spending by using my credit-card and debit-card statements. I found that in my worst month I had spent 30% more than my earnings. It was alarming to see how much I had paid for discretionary items -- travel, dining out, gifts and clothing -- but until I broke it out into those categories I could not see what the problem was.

I created a new spending plan that slashed my spending in each of those categories to a level that I hoped I could live with. I cut projected outlays for travel, clothing and personal-care items by nearly half. I resolved to save $100 a month on recreation and gifts.

I wrote down monthly limits for each category, then tracked my credit and debit spending online to monitor how close I was to each cap. By the third week, my dining-out allotment was depleted. When friends invited me to a restaurant, I offered to cook for them instead. My new fondness for home cooking helped lower my monthly food expenses from $415 to $295 ($110 for groceries and $185 for dining out).

I ended up spending $250 less than I had allotted, which went straight to the credit card (current balance: $1,900). It was the first time I'd ever saved any of my take-home pay, and it felt really good.

I haven't continued to track things as carefully, but I have the spending caps in my head. Now that I know I'm capable of doing it, I'm determined to pay off the credit card by saving at least $150 a month.