A good rule of thumb for saving is to try to save enough each year to supply you with one month's income. This means you are saving 1/12 or 8.3% of your monthly income.

This will allow you to build your emergency fund by one month every year. After only six years you will have a six-month supply of emergency cash. Then you can continue to extend your "coverage-period" or you can divert monthly payment into other savings or investments.

Most people find that "billing" themselves for savings and investments is a good way to put your savings on auto-pilot. If an amount is taken automatically from your bank account each month, it is easier to handle than if you wait until end of month and try to save from what you have left over. (How often do you have anything left over?)

So where is best place to keep your emergency fund? Probably not a place where you can have easy access to it - too tempting. Definitely not as cash in cookie jar - too unsafe (and no interest). And probably not in 5 year CDs - too restrictive. You may want to avoid CDs altogether so that you are not charged an early withdrawal penalty when you can least afford it.

Savings accounts are OK, but usually pay very little interest. If a savings account is your choice, open one at a bank that you don't regularly use. Also don't get a checking account to avoid temptation to spend "just a little" bit here and there.

Or look for a money market account that pays a reasonable interest rate. You may want to consider a money market account that only invests in tax-free securities. This way you won't have to worry about paying taxes on your interest.

Then set up an auto-withdrawal from your regular checking account or direct deposit amount from your pay check right into this new account. Adjust your budget to accommodate having less money each month and forget about it.

You can also give your emergency fund a boost now and then by putting "windfall" money into to it. You know "free-money"; birthday gifts, inheritances, insurance settlements, escrow overages, rebates, tax refunds, etc.

Your emergency fund becomes your own financial insurance policy. And if you never use it you will have that much more money to play with when you retire. Or even retire early with extra money you have saved.

Sometimes credit card can lead a person into living a lifestyle that is beyond their means. If a person gets in habit of dining out two to three times a week and these meals are paid for by credit card, card balance increases quickly. Often additional expense was not planned or budgeted. People can even end up spending more each month than actually earn.

This can continue as long as credit card balance is below limit and person makes their regular monthly payments. But as soon as credit limit is reached, many credit companies will increase credit limit and give person more room to get into debt. I have personally seen a credit card limit expanded by $10,000 within three months.

This cycle can continue until person is required to make a minimum payment that is more than they can afford. Now not only do they have to cut back on lifestyle they have grown accustomed to over years, but they also have to either increase their income or cut out things they enjoyed before increasing their lifestyle with their credit card.

Also what happens if person is suddenly out of work or has to take a pay cut or lower paying job. That's right, credit card bills keep coming. And many people rely on remainder of their credit limit to supplement their income until they are working again or can find a better paying job.

We have seen this cycle in America increase average credit card balances each year and eat up equity in many people's homes. Home equity loans are used as credit cards to live a lifestyle that is beyond people's means. Or to purchase toys they really can't afford to buy let alone keep and use.

Or home equity money is used to "pay off high interest credit card debt" as ads suggest. But then people continue habit of living off their credit cards and get right back into debt again.

So what is answer to America's growing debt problem? Abolish credit cards? Nationally imposed credit limits?

How about a little old fashioned self-discipline? I know is not in style anymore but it is still best policy.

Bottom line: pay off your credit card balance each month. Don't buy something now and expect big end of year bonus to pay off your credit card. Even if you do get it, you will probably spend it on something else.

Don't fall into habit of living off your credit cards. If you have $1000 of disposable income to spend each month, whether through a credit card or in cash, only spend $1000. Don't try to make up for extra expense this month by assuming you can catch up on your credit card payment next month. It won't happen.

If you have developed bad credit habits, cut up your credit cards, or only keep one for emergencies and resolve to pay off balance each month. Then create a plan to get yourself out of debt and stick to it.

You can relieve stress, avoid family conflicts and sleep better at night knowing that there are no credit card wolves howling at your door.