A Suze Orman exclusive

5. Free Up Cash to Pay Off High-Rate Card Debt
If you don't qualify for a low balance transfer rate, your goal has to be to get the entire balance paid off ASAP. First, if you have money in a savings account earning 2 percent, and you are paying 18 percent interest on your credit card balance, you need to cash out the savings to pay off the debt. Yes, yes, I know your savings are your safety blanket—hey, I am the biggest proponent of having an emergency cash stash—but when you are sitting on a $5,000 credit card balance at 18 percent you aren't safe, no matter how much you have socked away in your savings account. So use the money to pay off the credit card balance. And don't worry too much: if a true emergency arises, you can use your credit card to cover any absolutely necessary costs.

If you don't have any savings, then it's time to look at your 401(k). If you contribute to your company plan and your boss kicks in a free matching contribution, I want you to make sure you contribute enough to get the maximum company match. But once you've hit that limit, ask to suspend your contributions. That will increase your paycheck, and every bit of that extra income ought to go toward paying off your credit card bill. Hopefully you can polish off the balance in a few months. But if it's going to take longer, you must make sure to shift again at the end of 2005 and un-suspend your contributions so you will be eligible for next year's company matching contribution. Those payments into your retirement fund from your boss are free money you should never turn down. Resume your contributions in 2006 and then once you've hit the max, it's time for an instant replay: suspend your contributions again and use your bigger paycheck to keep whittling away at the credit card balance.

One quick DO NOT: Do not take out a Home Equity Loan or Home Equity Line of Credit to pay off your credit card debt! Any loan on your home means the lender can ultimately force you to sell it if you ever fall behind on your payments. That's because these types of loans are what is known as secured debt, i.e. a loan with collateral to secure the lender against loss. Your home is your collateral; if you screw up and don't make the payments, the lender has the right to make you sell that collateral to get its money back.

Your credit card, on the other hand, is unsecured debt. That means that even if you punk out on your credit card payments (and I am in no way advocating you ever do that) the credit card company can't force you to sell anything—your home, your car, your prized Pez dispenser collection—to get its money. So you never want to use a secured asset (your home) to pay off an unsecured debt (your credit card).

6. Deal Yourself a Better Card Hand
I wish there were rehab clinics to help heavy card users truly kick their debilitating spending habits. Instead, what I see way too often is people expending so much time and effort to get their card balances paid off, then turning around and running up new balances all over again. Total relapse.

Ultimately, the only thing that will keep you out of trouble again next December is to find the resolve not to dig yourself another deep hole.

I know that's easy to say, and excruciatingly tough to pull off. But why don't you see what you can do during the year to make holiday season 2005 less financially stressful? How about opening a holiday savings account right now, in January? Have $50 or $100 automatically transferred each month from your checking account into this savings account. Then, when December rolls around, that account—and only that account—constitutes your holiday spending budget. Not a penny more! Make yourself that promise today, and spend the rest of the year building up the strength and confidence to stick to it when those enticing wreaths begin appearing in the store windows ten and a half months from now. Shopping temperance is a challenge, no doubt, but follow my plan and you won't have to face another new year with that same old painful hangover.