When you spend more money than you make each month you are bound to have money problems very quickly. The bad part is that most of us never realize we are spending that much until it's too late.

How many times have you used the credit cards to buy a TV, school clothes and supplies, fixed the car, or any number of things and not realized that you just exceeded your monthly income. You may have even realized it but thought there is always next month.

Credit cards are the biggest culprit but they aren't the only way to spend more than you make. Things like payday loans or car title loans also come to mind. Paying $15 to use $100 for a week doesn't seem too bad. However, when you consider that you are paying almost 400% in interest over a years time these loans make interest on credit cards look like a great deal.

Normally, installment loans have a lower interest than either credit cards or payday loans but they can still cause problems if you aren't positive that you can make the payments each month.

I consider a house payment and the purchase of a car the only real legitimate reasons for paying interest. Very few people have the means to make these purchases with cash. If you aren't careful you can still get yourself into trouble by buying or renting more house that you can afford or having car payments that don't fit your budget.

I just recently received an email from a lady stating that her and her husband wanted to buy a new car but really didn't know if they could afford it. This family probably saved themself a lot of headaches just by asking that question. I wrote back showing her how they could determine if they could afford the car or not.

My answer to her question was to have her develop a budget, listing all of the other bills and expenses they have, and then see what's left over. I also reminded her that she should consider the extra costs like insurance, maintenance, etc.

Over the years I have seen people with as little as $500 a month income manage their finances very well while someone else with $5000 income can't make it last the entire month. It all boils down to planning. If you plan your bills and purchases each month with the goal of not exceeding your income, you can make it on almost any income.