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You've gotten your budget under control. You've clipped and used those coupons. You've stopped charging on your credit cards. You can see the light at the end of the tunnel.

The question now becomes, how to use those extra several hundred dollars a month to contribute to your own financial freedom. Certainly we all want new toys and fun experiences, but a more intentional approach to budgeting that money can help out in the long run. Here are some ideas.

GET OUT OF DEBT

Debt is the enemy of financial freedom and credit card debt is the most insidious of all. Getting rid of all your non-mortgage debt is a great goal to have.

Here is the way that I recommend: Let's say for simplicity that your minimum payments on your five credit cards total $400 a month and you have $500 a month that you can dedicate to debt reduction. You pay the minimum on all the cards except for the one with the highest interest rate. You pay the extra $100 on that card until you pay it off. You then apply that extra money to the next highest until you're done.

While you are in the pay-it-off mode, you may be able to transfer balances or persuade some of your creditors to lower their rates. These days with interest rates coming down thanks to an economic slowdown and the actions of Mr. Greenspan and friends, banks might be even more willing to lower rates than in the past. After all, people all over the country are using my method and no bank wants to be the highest-interest creditor who gets paid off first or the victim of your transferring your balance to a lower-interest card.

Be careful of those 2.9% for three-month deals. Their rates are often very high after the first few months and they penalize you mightily if you are even one day late on their often very short grace periods. Besides, too much switching around may make you unattractive as a prospect for credit.

Some suggest paying off the smallest balance first. If that way keeps you motivated, fine with me. Just pay them off.

ESTABLISH A RESERVE

Even while you are paying off debt, you will want to put money into a reserve. Some financial experts recommend having a reserve of six months' expenses. That may not be possible or necessary for everyone, though it is a good goal. If you don't have a reserve, start with what you can do each month.

It is best to put this money in a separate account that is not too easy to get to. You may want to not have an ATM card linked to that account and may want it set up so that both spouses have to agree to a withdrawal. It definitely should not be in the market because your water heater may not be considerate enough to wait until the end of a stock downturn to go out.

BECOME AN INVESTOR

Small, regular investments add up. Your investments don't have to be in the stock market if that is not what is best for you.

You don't have to have huge chunks of money to become an investor. Many mutual funds will accept small accounts and even more will allow you to invest small, regular amounts through payroll deduction or bank account withdrawal.

If you have access to a 401(k) or a 401(b), use these payroll deduction plans to become an investor.

SAVE FOR A GOAL

Now that you are becoming financially free, you can begin to save for major purchases to be made in cash. Maybe you want a new household of furniture or a newer car. Those are great goals to save for.

ENJOY YOUR MONEY

Now that you have a little more money, put some aside for enjoyment. Don't feel that you have to deny yourself every pleasure so you can put huge sums into investment or whatever.

Personally, I prefer to buy toys that endure rather than fleeting experiences if I have to choose (new speakers for my stereo rather than tickets to every concert).

You probably have gotten to the point where you have more money than month, rather than more month than money, through some good planning. Extend the process and you'll be surprised how you will thrive.

Copyright © 2001 by Larry Wiener