For most Americans, the cycle of debt can seem never-ending. They're never quite out of the hole and are living month to month, just one emergency away from financial disaster.

A recent study by the National Bureau of Economic Research found that 51 percent of Americans would be unable to come up with $2,000 cash in case of an emergency. Yet, the average American household carries thousands of dollars of debt.

New graduates and young families face an uphill battle. The national unemployment rate remains near 9 percent and these young citizens' limited credit histories and work experience mean difficulties landing jobs.

Seniors are facing a different, yet equally as difficult, challenge. Despite good, long credit histories, they've found their retirement plans have dwindled, interest rates have spiked, and their future plans have been soured.

In these situations, it's easy for debt to pile up.

The first rule of debt management today comes from the old adage, "Don't count your chickens before they're hatched." This means don't spend money that you don't already have. Don't plan on a raise in the future or a stock to soar. What you have now is what you have. Rampant foreclosures in today's market are partially due to some buyers counting their chickens before they hatched. As the economy tanked, interest rates rose and jobs disappeared, these homeowners found they couldn't really afford the properties they'd purchased.

Living within your current chicken count means living within your means. This goes against the current American mindset of "what payment can I afford?" rather than "what can I afford to buy with cash right now?" Take a survey of highway billboards over the last decade and you're likely to see a steady switch from total costs advertised to monthly payment amounts. This mentality has led our society into a cycle of debt.

This mounting debt makes it even more difficult to live within your means. When you already have debt, you can't start at square one. You'll have to budget even tighter to pay off your debt without taking on any more.

1. Calculate Debt: How much do you really owe? What are your monthly payments, minimums, and interest rates? You'll want to pay off the higher interest rate loans first. Get rid of any unused cards that charge yearly fees. Refinance and negotiate lower interest rates on cards and loans.

2. Accountability: Record every purchase. Using cash makes it too easy to overspend. Instead, use a debit card which you can track with online banking. Monitor where and when you spend your money. At the end of this first month, add up expenses by category (e.g. grocery/household, clothes, entertainment, gasoline, energy costs, rent/mortgage, etc.).

Recording purchases will show you if there's a particular area where you overspend. It will also show you the true picture of what it costs to run your household. What is the basic amount of money you need to survive and pay all your bills?

3. Prepare a monthly budget: Now that you've seen what your spending habits have been in the last month, make a list of your "necessary" expenses. It's time to funnel funds away from recreation and entertainment and towards the principal on your debts. Pay for necessities first, then debts, then have fun with what is leftover.

4. Have a plan: Discipline is key to sticking with a plan. Decide ahead of time what you are allowed to spend on each category. If you have a particularly hard time sticking to a budget, then use the jar method. Put the budgeted amount of money in jars, one for each category. When the money is gone, it's time to quit spending.

Getting out of debt means having a plan and sticking to it. Being debt-free must be your priority. Yes, we all want to take vacations, buy new clothes, and visit the trendiest restaurants. Going into or staying in debt to do so isn't what the American Dream was meant to be. Be victorious in the small daily battles of spending. Keep your eye on the prize of being debt-free. Your future self will thank you.

Published: July 13, 2011

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Carla Hill, M.A., works on the Realty Times staff as Managing Editor for our online publication. She also is Producer for the real estate news channel, seen daily on RealtyTimes.com and on video newsletters nationwide.