Young, gifted and broke: you have time on your side and the power within you to rein in runaway finances - Your Money

I am 27 and a single mother of a toddler. I earn less than $30,000 a year; I'm $20,000 in debt, mainly credit-card debt. How do I get myself out of this hole and ahead of the game for once?

First give yourself credit for facing up to the specifics of your finances. And being young, you have the advantage of time on your side.

With your current level of debt, you may want to consider a professional credit-counseling service. Be sure you choose one that's a member of either the National Foundation for Credit Counseling (nfcc.org) or the Association of Independent Consumer Credit Counseling Agencies (aiccca.og). If they charge it's usually no more than $50 to set up your debt-repayment plan and $20 a month to maintain it. Then take these steps to manage your money effectively:

Track your expenses. Start by recording your spending patterns over several months. Carry an envelope with you to collect the week's receipts. If you don't get a receipt--or if you misplace it--just write down out-of-pocket expenses on the envelope itself, then tabulate all those daily expenses in a small notebook.

Analyze and adjust your spending. Once a week look at the spending patterns captured in your expense notebook. Financial planners suggest that you allocate no more than 36 percent of your gross income (salary, other earned income, child support, alimony, pension, Social Security, dividends, interest, capital gains) to debt, including mortgage and credit cards. Your credit-card payments are throwing you out of line here, so reducing that debt should be your first priority.

Make larger credit-card payments each month. Look at how you might save on household expenses. All these costs--food, clothing, child care, utilities, home repairs, entertainment, vacations and personal care--should equal roughly 25 to 30 percent of your gross income. You'll also want to allocate an additional 5 percent for life, medical and property insurance and 2 percent for transportation.

You can probably cut monthly expenses on items like telephone service and auto and home insurance. To be sure you're getting the best rates, check out LowerMyBills.com for a one-stop place to shop and compare deals. The service is free.

I have never been able to balance my checkbook. My mom doesn't know how to balance hers either. Please help us!

Balancing your checkbook is the first step toward controlling finances. It's better to know exactly how much you have in the bank than to "guesstimate." The key to doing it is keeping a meticulous check register. This means not only writing down the number, date, payee and the correct amount for each check, and the date and correct amount of each deposit, but also noting each ATM withdrawal or deposit. After each and every entry, calculate your balance. Don't forget to include banking fees, automatic withdrawals and deposits you may have set up on your account.

When you receive your monthly bank statement, study it, matching and checking off each item against the corresponding entries in your check register. On the worksheet on the back of your statement, add to the statement's ending balance all of the outstanding deposits that aren't yet recorded there, and subtract the outstanding checks. The resulting figure should equal the ending balance in your checkbook!

What's your money-management challenge? Write Your Money, ESSENCE, 1500 Broadway, New York NY 10036; or E-mail queries to yourmoney@essence.com. We can only respond to letters that are selected for publication.

Valerie Coleman Morris is an anchorwoman with CNNfn.

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