I ran across an interesting post called "How the Red Flags of Debt Can Save You" on a blog called the DebtFree blog.  I think what is interesting here is that the author recognizes that most spending arises from emotional buying decisions - i.e. a new car when the current vehicle works fine or a desire for a new plasma TV right before the Super Bowl.

In the 20 years I have been in bankruptcy law practice, friends and colleagues often ask me what factors drive my clients into bankruptcy.  Although personal finance crises - like unexpected medical expenses, a job loss or a divorce lead people into bankruptcy, almost always there is an underlying problem.

Although most of the people I see are honest, hardworking and sincere people, very few have ever sat down to actually write out a budget.  Less than 5% of my clients use a personal finance program like Quicken or Microsoft Money to track where their money goes.  When we actually sit down to prepare a budget as required by the bankruptcy schedules, my clients are shocked to discover that they have routinely been spending more than their household income.

Expenses that you should watch carefully include the following, many of which can be trimmed or eliminated in a time of budget crunch:

• car insurance
• tires, oil changes and routine maintenance done by a dealer
• medical expenses not reimbursed by insurance
• cable TV
• monthly cell phone expenses
• recreation/entertainment
• dry cleaner
• cigarettes
• lottery tickets

Do not forget to include in your monthly budget expenses that arise once or twice a year.  Once you have a budget, you will know what you need on a monthly basis and you can start thinking about a debt reduction plan.   Another interesting blog to check out is the No Credit Needed Network blog, which is an on-line community where members track their debt reduction plans and goals anonymously but publicly using a neat charting application.  Another blog I like is called, appropriately enough StopBuyingCrap.com - where you can vote about whether various purchases are frivolous or appropriate (i.e. was that widescreen monitor a wise purchase??

Maybe you will find that bankruptcy does make sense - or maybe, a part time job for 8 or 9 months might be enough to get you out of significant debt.  The point here - you cannot know if you do not have a handle on your numbers.

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