When the bills start piling up and creditors start calling, you might want to crawl under a rock until your circumstances improve. Unfortunately, ignoring the problem by leaving mail laying around unopened and letting the answering machine screen incoming calls will only make your situation worse. Putting off addressing financial issues costs you more money in interest and finance charges while robbing you of your peace of mind.

You could wait to win the lottery or pray for some other financial windfall to make your debts disappear, however facing the issues head on will empower you to find real, practical solutions. Using basic problem-solving techniques, you can start improving your financial outlook today -- step by step:

Step 1) Define the Problem!

The most important step in the problem-solving process is identifying the problem. Even though you cannot solve a problem without knowing exactly what the problem is, many people try to do just that. When asked about their financial situation, most will say, "The problem is I need more money." They jump immediately to attempting to solve a problem they have not yet clearly defined.

In order to gain clarity about your overall situation, gather all the facts and figures you need to answer the following questions:

What is your net worth?
What is your current income?
What are your expenses?
Exactly how much do you owe?
What is your credit rating?
What interest rates are you paying on mortgage and loan balances?
What interest rates are you paying on credit cards?
When are your payments due?
Are your expenses higher than your income?
How much money do you need?
By when do you need it?

Answering these questions may be the last thing you want to do, however most people experience a sense of relief when they finish. You might even find things are not as bad as you imagined.

New Jersey residents Tom and Claire agreed to share their problem solving experience as an example. After calculating they realized they needed an additional $400 per month to pay off the credit cards they used to charge last year's vacation.

Step 2) Brainstorm all solutions!

Just write down everything that comes to mind. Do not judge or critique your ideas because that could interrupt your creative flow. Exercise your brain by letting it reach for new possibilities.

Here are the results of Tom and Claire's brainstorming session:

Frank owes us $50.
Sell the extra fishing gear.
Have a yard sale.
Offer to work a few extra shifts.
Ask for a raise.
Reduce unnecessary expenses.
Submit medical bills and other expenses for reimbursement.

Step 3) Pick a solution!

Now you can go over your list and cross things off that do not seem practical. Choose the solution that makes the most sense right now. With money problem-solving, you may decide to act on more than one solution as long as the options you choose do not take you in different directions.

Tom and Claire decided to try all of their solutions except selling the extra fishing gear. Even though they were not using the poles and tackle, Tom admitted he was not ready to let go of the gear just yet.

Tom promised he would ask Frank about the $50 at their next meeting. He would offer to pick up extra shifts at work and ask his boss for a raise after he successfully completed his current project. Claire said she would make Tom's lunch at home every day and cancel her weekly manicures to help reduce expenses. She also agreed to be responsible for submitting medical claims and other expenses for reimbursement. Together they set a date for their big yard sale.

Step 4) Take action!

By this stage of the process you will have the momentum flowing in your favor. Now follow through on the solution or solutions you chose. If you find yourself overwhelmed with all the action items, go back over your list and prioritize. In regular problem solving you would focus on one solution because scattering your efforts by trying to follow through on too many ideas at once can hamper your effectiveness. Tom and Claire were able to divide up their action items; neither of them tried to accomplish everything in one day.

As you are taking action, keep your purpose in mind. Chances are some of the action items are things you thought about doing a long time ago but just never got around to crossing off the list. Criticizing yourself or spending time thinking about how you "coulda, shoulda, woulda" will prevent you from experiencing the satisfaction of achieving positive results.

Step 5) Evaluate!

Did the problem get solved? Celebrate your success if it did. Use this experience to strengthen your commitment to utilizing your problem solving skills in other areas of your life.

If your solution or solutions did not work, you must not have correctly identified the problem. Remember, identifying the problem is the most important step. Most people will want to go back to brainstorming more solutions which will inevitably lead to more frustration. Instead, go back to step one, and focus on identifying the problem.

For Tom and Claire, their problem was solved faster than they expected. Between Tom's raise and one extra shift per week, their household income increased by $475.00 per month. By following through on their other ideas, Tom and Claire quickly paid off their credit card bills. Then, using their success as a source of inspiration, they started saving for their next vacation. They're paying cash for their trip -- to Brazil.

Author's Bio: 

Kathy Miller is a Prosperity Coach, Writer, and Inspirational Speaker. Kathy teaches practical money management skills and personal growth techniques to help people achieve their lifestyle goals. For more information visit or call (908) 647-1856.