Ten Practical Moves to Avoid Problem Debt in 2013

To avoid your own "fiscal cliff" in 2013, I suggest you stop arguing with yourself and take 10 -- and by that, I mean 10 positive steps for a better, more prosperous new year.

Tip 1: Develop a spending plan

If you don't have a plan for your money, you will end up following someone else's plan. That's no fun! A plan puts you in control of how much you spend and on what. Trust me, plan for spending, and you will have a much richer financial life.

Tip 2: Save for emergencies

If you don't have savings, you will fail. End of story. Life can't be totally predicted, so to avoid being in a hole every time a surprise happens, you must have savings. Your goal is to save six to 12 months' worth of living expenses. Not what you earn each month, but what you spend each month. They should be different, and what you earn should be more.

Tip 3: Study up before taking on student loan debt

Starting a working career with six figures of student loan debt drastically reduces your spending options once you graduate -- that is, if you graduate and if you get a job. Be smart. Limit your student debt to what your take-home pay in your chosen career can afford. Crunch the numbers before you sign on the dotted line. Remember, it is a bill you will have to pay no matter what. If you don't have a career field in mind, don't take on any debt until you do.

Tip 4: Don't try to borrow your way out of debt

Consolidating debts into one lower payment sounds like a perfect financial move. It may not be, however. The main reason is because many people continue to add to their debt burden after the consolidation and end up with more debt than they can manage. Restructure your spending instead of your debt, and make a concerted effort to pay down what you owe as quickly as possible.

Tip 5: Never co-sign on a loan -- never, ever

You have ample opportunity to mess up your finances. Never share that opportunity with someone else. There is a reason why a professional lender won't approve this loan. So, why should you? Lend your support and encouragement, but not access to your credit.

Tip 6: Payday loans: No, no and no

You need money that you don't have, so you borrow what you need for a very large fee and a promise to pay when you are next paid. The problem, and it's a big one, is you won't have the extra money to pay back the loan when you get paid next time, either. This begins a vicious cycle of ever-increasing fees. Do without, pay something late, borrow from a friend, work part time, but don't take out a payday loan.

Tip 7: Avoid an upside-down car loan

If you need to sell your car, you need to make enough from the sale to pay off your car loan. Because vehicles depreciate so much, a large down payment will give you the freedom to sell when you want or need to sell.

Tip 8: Pay off no-interest offers as soon as you can

Having 48 months to pay means having 48 chances to let a mistake happen. One late payment, and the retroactive interest payment will make your head spin!

Tip 9: Never turn your back on a debt

As much as we would like to believe an ignored problem will go away, it doesn't. Ignoring a debt means high interest rates, large fees, a summons to appear in court, years of bad credit and a possible wage garnishment. Look that debt in the eye, and get help if you don't know what to do now, not later.

Tip 10: File bankruptcy only as a last resort

Bankruptcy is a viable choice only after all other reasonable options have been exhausted. It may not get rid of all your debts, but it will ruin your credit and job prospects, and you'll have to wait from three to seven years before you are eligible to file again. Think of bankruptcy like a financial nuclear weapon. You may be worse off from the fallout than you were before.