If you cannot meet your monthly expenses, it's time to severely tighten your belt. First, you'll need to review your budget in light of your expenditures. If your income is falling short, you'll need to adjust spending radically and immediately. If you absolutely cannot squeeze your expenses sufficiently to cover all of your debts, you may want to work with a credit management company who would tailor a payment program to your needs.

Finding a Credit Management Company

If you need help resolving debt, credit management agencies will work directly with your creditors to establish a payment plan. Many will consolidate your payments, collect the money from you, and pay your bills. It's crucial that you do some preliminary research to make sure you find a reputable agency. Contact the National Foundation for Consumer Credit for more information specific to credit management.

Look for one that tailors a solution to your problems, rather than one that takes the easiest or most profitable solution — one that would benefit the agency and the creditors. If they have more than 50 percent of their clients on debt management programs, they're not trying hard enough to find individualized solutions.

You also want one that has debt management training programs that will help you establish healthy financial habits. Also, shop around for an accredited agency with trained and certified counselors. If you feel strong-armed, or unheard, trust your instincts. Your credit history is an asset you need to protect.

Avoid High-Risk Borrowing

You've all seen the commercials on television suggesting that it's easy for anyone who suffers a calamity to call a phone number to acquire a quick $10,000 to cover her escalating bills. Anyone in this situation is already in over her credit head, i.e., a high-risk borrower who has had trouble paying her debts and will most likely continue to default on future payments.

The lenders who offer loans to high-risk borrowers charge them exorbitant interest rates and steep penalties for late payment. The effective annual interest rate on high-risk loans is usually over 100 percent per year, e.g., $15 to borrow $200 for two weeks (the typical length of a payday loan) equates to an annual interest rate of 459 percent! Sure, they may throw money your way, but it's a lifeboat full of holes. Here are three very important reasons to avoid high-risk borrowing:

1. The lenders charge exorbitant interest rates. You'll rack up interest charges that will quickly double, or even triple your debt.

2. They have you over a barrel, and they determine the terms: variable rates versus fixed rates on mortgages; the highest interest rates on credit cards.

3. They frequently charge hefty upfront charges.

Increasing Income

If you've cut expenses down to the bone and still cannot meet your debts, it's time to look for a second job. Use your creativity to come up with a list of part-time jobs you could seek (or create) to supplement your income — bartending, babysitting, dog walking, freelance typing, interior decorating, personal shopping, cleaning, gardening, garage sale organization, or plain old errand running. Do whatever it takes to pay down your debt and maintain a solid credit rating. Everyone falls on hard times, but it's up to you how you navigate the territory. Keep in mind the long-term effects, and choose the high road.

If you've done all of your homework, your credit card debt will be paid down, your credit reports will be clean, your FICO score will be at its peak, and you'll be well on your way to regaining control of your finances and building a brighter future for yourself and your children.