Financial meltdowns often start with a small thing – the figurative straw that breaks the camel’s back.

I’ve read stories from readers about the many small things that have caused them to start reassessing their lives. They had a credit card rejected at an inopportune moment. They didn’t have enough cash to pay for the groceries in their cart. For me, it was facing a stack of bills that I didn’t have the money to pay.

For some, that figurative back-breaking straw can come with the first real sign of financial distress. For others, it takes something much more severe, and sometimes nothing will make them change their routines.

When people reach that back-breaking point, though, whatever it may be, their first instinct is usually to get their short-term finances in good shape. In other words, they want to do things so that they know they’re going to make the rent this month and that their bills are paid. Once that’s under control, medium and long-term planning can begin to take priority – how can we get out of this mess, in other words.

Today, let’s focus on that first step. What do you do when you finally reach a breaking point, realize that your finances are a disaster, and need a plan to help you get rid of some late bills and still make the rent?

The first step to take is to get those credit cards out of your wallet. If you are carrying a monthly balance on any of these cards, you need to stop using them for a bit until you get things under control.

Open up your wallet, take the cards out, and put them in a safe place so that you don’t have access to them when you’re out and about. Don’t give yourself the opportunity to add more debt load to your situation.

The second step is to assess how close you are to paying off your bills for the next month. Are you going to be able to make the minimum payment on any and all bills as they come in? Can you take care of any late bills that aren’t yet in collections?

Quite often, you’ll find that you’re not able to do that with the cash you have on hand plus the cash you’re bringing in for the month.

If that’s the case, you need to sell off some stuff. Clean out your closets and find any and all items that you don’t use that might have value.

Once you have a stack of items, hit Craigslist and offer them for sale. If you don’t find any luck there, try eBay, particularly if the items are collectibles.

The purpose of this is to turn things you’re not regularly using into enough cash so that you’re not struggling to keep your head barely above water every week. Before you can take the next steps forward, you need to be sure that you’re not late on any of your bills and that you can easily take care of your bills over the next month. Often, it takes a small boost of cash to get a person up to that point, and the easiest resources for that is found in a person’s closet.

The next step you should take is to engage in cost-cutting, but don’t do it to the point of misery. Look for obvious ways in your life to spend less, but stick to the ones that feel good when you spend less.

Many people reach this situation and then respond by diving deep into hardcore frugality. They try to avoid spending anything.

Doing that is no different than going on an all-lettuce diet. Eventually, you’re going to resent it and you’re going to “snap back,” undoing all of the progress you made.

Instead, stick to cost-cutting measures you feel good about. Every time you have to make a spending decision or consider buying something, consider the path of spending less, but only choose it if it feels like the right choice. If you always choose the cheap path, particularly if it’s not something that comes naturally to you, you will eventually have a big resentment-filled backlash against it.

In other words, choose to spend less on the things that are less important to you, and don’t cut back on the things that are important.

How do you know which is which? Try cutting back on something and decide for yourself if it’s having a real negative impact on you. If it is, go back to the way things were before the next time you have to make a similar purchase. If you feel you “have” to always do something you don’t like, frugality becomes misery – and, trust me, frugality done well is the opposite of misery. When frugality becomes misery, it becomes very easy to walk away from it – and then it becomes very easy to find yourself right back where you started.

Remember, always, that you can do this. I’ve done it. Many of the readers of this site have done it. We’ve been in financial situations that seemed overwhelmingly bad. We’ve been depressed about it and we’ve often felt completely hopeless.

It doesn’t have to be that way. You can do this. You can dig out of your financial hole. It just requires you to make some changes regarding how you use your money.

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