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Before you begin tackling your debt snowball, there’s one thing you absolutely have to do: build up a little security blanket. Why? Because as soon as you start handling your finances with purpose, Murphy’s Law will take effect and you’ll find yourself needing to tap into your rainy day fund for one reason or another.

According to financial expert Dave Ramsey,

“An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen.  This beginning emergency fund will keep life’s little Murphies from turning into new debt while you work off the old debt. If a real emergency happens, you can handle it with your emergency fund. No more borrowing. It’s time to break the cycle of debt!”

In an economy where personal bankruptcies rose 9% in 2010 – reaching their highest level since a revamp of the bankruptcy law took effect in 2005—and 70% of American families are living paycheck to paycheck, we have to be extra intentional when it comes to living like no one else. But how do we accomplish this baby step? These are some of the steps I took:

1. Call your credit card providers and request a reduced interest rate.

I called my providers and went from an average of 22.12% APR to 9.98% in less than 5 minutes. This tactic saved me a few dollars on my monthly payments, which allowed me to throw more cash into my emergency fund. Something else that helped was cashing out all of my rewards tied to my credit cards; instead of saving the rewards for a megalomaniac vacation I had been planning since the dawn of man, I elected to receive the cash option, thereby scoring a $600 check and halfway funding my rainy day buffer. NOTE: Don’t close your credit card accounts until you’ve paid off the balance in full. If you do close them and there remains a revolving balance, there may be repercussions, i.e. a rise in your interest rate.

2. Take stock of your household bills and ask providers for discounts.

I ended up saving $40 on a bundle deal for my cable, TV, and phone because of a 6-month promotion. And a quick call into my mobile provider uncovered 10% savings on my monthly bill just because I’m a member of our state PTA. Score! I also frequent the same car mechanic and always ask for “the Courtney special”—it’s not much, but the manager typically gives me 5-10% off my regular oil changes just for asking!

3. Clip coupons.

Because of couponing, my last visit to the grocery store netted me a 74% savings over what my bill should have been! When I realized how much money I could save by paying attention to specials, seasonal promotions, and double and triple couponing, I started shopping with purpose. Now I faithfully buy the Sunday paper, print coupons from Coupons.com, and compare grocery circulars in my area so that I know I’m getting the best deal. You haven’t lived until you’ve scored a 35₵ coupon that triples to $1.05 and received money back from the store because the item was on sale for 99₵! (Yes, it really is the little things that count. J)

4. Sell everything that’s not in use or bolted to the floor!

Who says that spring cleaning has to begin in March? Get a jump start on the New Year—and on your debt-free plan—by making money on things that you no longer use. I put my dust-collecting treadmill on Craig’s List and sold it in 24 hours. I purged my son’s and my closet and sold our gently-used clothes to consignment shops and resale stores in my area, altogether netting about $214. I sold so much stuff, my son thought he was next!

5. Score part-time or contractual work.

You’d be amazed at what type of work you can do from home or after the kiddos have gone to sleep to help you earn extra money. As a marketing writer by nature, I used my skills to ghost write leadership books, edit manuscripts, write articles for a local magazine, and revise rèsumès and in doing so, been able to throw extra cash at my emergency fund. Don’t know where to get started? Try these sites:

1. http://www.craigslist.org/
2. www.snagajob.com
3. www.sologig.com
4. www.project4hire.com
5. www.allfreelance.com
6. www.guru.com
7. http://www4.jobirn.com/?q=find+jobs

6. Pay with cash and cut up those credit cards!

A recent study shows that when you swipe plastic, you end up spending 47% more than when forking over cold-hard cash. There is a deep psychological tie when you pay with greenbacks, so test yourself this week and pay for gas, food, and miscellaneous all with cash money. You can’t get out of a hole by digging out the bottom, so stop the bleeding and cut up those credit cards!

TODAY’S BITE-SIZED TO-DO:

Take 2 minutes to read “The Truth about Credit Card Debt.” Then gather your bills and start making phone calls one by one, asking if there are any current promotions or discounts for loyal customers.  Buy a Sunday paper and clip those coupons!  Clean out those closets and have a garage sale, or put items up on Craig’s List. Think about your hidden talents and how they can help you make money. Is it baby-sitting? A pastry chef for bridal showers? A seamstress? Do everything you can to save that initial $1000 because this step will help to catapult you to your end goal.

In the next step, we’ll fuse your laser light focus and gazelle intensity, and start putting some muscle behind that debt snowball!

Oh, and in case you missed the first two installments . . .

Step 1: How I paid off $93,000 in less than 3 years

Step 2: Budgeting

SOMETHING FUN:

Take 60 seconds to see what your money future could look like by age 65. Based on your numbers today, your financial future just may surprise you. According to the path I’m on, I should have 12 times as much as the average American by age 65. (Makes me want to clip more coupons!)
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